RepRisk, Zurich, Switzerland (www.reprisk.com). RepRisk® is a registered trademark. 1

Philipp Aeby

RepRisk AG

www.reprisk.com Phone +41 43 3005440

Email aeby@reprisk.com

Managing Reputational Risk

in Portfolios

TBLI Europe

London, Nov 10, 2011

RepRisk AG, Zurich, Switzerland (www.reprisk.com). RepRisk® is a registered trademark. 2

Our Mission is to help our Clients

achieve long-term Success

through Transparency and

Risk Management

RepRisk AG, Zurich, Switzerland (www.reprisk.com). RepRisk® is a registered trademark. 3

RepRisk Database

• monitors controversies and environmental, social and governance (ESG) risks

• includes more than 20`000 companies and 4`500 projects, growing daily

• based on thousands of independent sources such as news websites, print media and NGOs

• covers 13 languages and since 2006

• updated daily and screens an unlimited universe

Online Tool

• comprehensive research

• customized watchlists

• tailored alert service

Company Reports

• daily updated PDF reports

• detailed risk analysis

• available on webshop

Data Feed

• Customizable data

• Easy integration into

processes and databases

About RepRisk AG

RepRisk AG, Zurich, Switzerland (www.reprisk.com). RepRisk® is a registered trademark. 4

What are ESG Risk?

Note: In particular, all principles of the UN Global Compact are addressed.

Employee Relations Community Relations Environmental

Footprint Corporate Governance

Supply Chain (Environmental, Social, and Legal Issues)

Human Rights Abuses, Corporate Complicity

Impacts on Ecosystems and Landscapes

Overuse and Wasting of Resources

Corruption, Bribery, Extortion, Money Laundering

Health and Safety Issues Waste Issues

Violation of International Standards

Impacts on Communities

Global Pollution (including Climate Change)

Poor Employment Conditions

Executive Compensation Local Pollution

Local Participation Issues

Social Discrimination

Animal Mistreatment

ESG

Controversial Issues

Freedom of Association and Collective Bargaining

Forced Labor

Child Labor

Discrimination in Employment

Violation of National Legislation

Product-Portfolio Related Risks

Products (Health and Environmental Issues)

Controversial Products and Services

Misleading Communication, e.g. “Green washing”

Fraud

Tax Evasion

Anti-competitive Practices

RepRisk AG, Zurich, Switzerland (www.reprisk.com). RepRisk® is a registered trademark. 5

The Case for ESG Risk Management

1. Compliance risk :

Exclude or engage with companies that violate internal standards (Norm-based

investors)

2. Financial / Investment risk:

Incorporate ESG risk to increase risk-adjusted return (markets are inefficient with

respect to information on environmental and social risk)

3. Reputational Risk:

Protect the reputation of the asset owner and asset manager by excluding companies

that violate international standards

RepRisk AG, Zurich, Switzerland (www.reprisk.com). RepRisk® is a registered trademark. 6

How to Assess Reputational Risk?

1. Company-based information

2. Independent sources: print and online media, non-governmental organizations

(NGOs), governmental bodies, newsletter, blogs

3. Audit reports

RepRisk AG, Zurich, Switzerland (www.reprisk.com). RepRisk® is a registered trademark. 7

How to Quantify Reputational Risk

The Reputational Risk Index RRI

identifies controversial companies to

avoid financial, compliance and

reputational risks

Calculation based on

i) source

ii) severity

iii) novelty

iv) number and timing

of news

RepRisk AG, Zurich, Switzerland (www.reprisk.com). RepRisk® is a registered trademark. 8

RepRisk AG, Zurich, Switzerland (www.reprisk.com). RepRisk® is a registered trademark. 9

Example for Quantification of ESG Risk:

BP’s Risks Peaked in 2008 but Materialized in 2010

RepRisk AG, Zurich, Switzerland (www.reprisk.com). RepRisk® is a registered trademark. 10

Case Study Vedanta

Niyamgiri Bauxite Mine

Displacement of indigenous peoples,

violent clashes with security forces,

environmental damage. Violation of

OECD standards

Rejection of the project in August 2010

Divestments from asset managers and

pension funds, unwanted business

relationship for banks

RepRisk AG, Zurich, Switzerland (www.reprisk.com). RepRisk® is a registered trademark. 11

Case Study Massey Energy

US mining company with many issues

USD 20 mio fine from EPA

Upper Big Branch Mine explosion, 29

dead

Controversial mountain top removal

processes

Excluded by banks? Pension funds?

New parent company Alpha

Natural Resources reached RRI

of 75 in July 2011

RepRisk AG, Zurich, Switzerland (www.reprisk.com). RepRisk® is a registered trademark. 12

A Reputational Risk Cockpit for Your Investments

An Indicator to screen your portfolio

Time series, peers, geography, issues

Summary of relevant information

RepRisk AG, Zurich, Switzerland (www.reprisk.com). RepRisk® is a registered trademark. 13

Your Questions