ESG Integration Shorex Wealth Management Forum Geneva, December 6th, 2012 Marc-Olivier Buffle, PhD

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SAM at a Glance

Investment boutique focused exclusively on Sustainability Investing since 1995

Develop and manage investment solutions for institutionals, as well as retail funds

EUR 9.2 billion total assets (30.09.2012)

Joint venture with S&P Dow Jones to power the DJSI (since 1999)

Unique access to companies. In 2012 > 30% of the total world capitalization responded to SAM sustainability questionnaire

Member of Robeco, with approximately 100 employees in Zurich, Switzerland

Servicing a global and diversified client base

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SAM Investment Philosophy

SAM fundamental investment philosophy is based on the premise that overarching sustainability megatrends such as demographic change, resource scarcity, pollution, and climate change shape the competitive landscape in which companies operate by introducing long-term sustainability risks and opportunities.

The impact of sustainability megatrends -term business and

financial outlook is under-researched, leading to market inefficiencies, which give SAM a competitive edge over mainstream asset managers who do not consider these sustainability factors.

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Global Trends and Public Awareness

The Economist, 26. November 2010

Newsweek, 06. June 2011

Michelle Obama - Newsweek, 22. March 2010

National Geographic, April 2010

-Kofi Annan, Former Secretary General of the UN

Time, January 2011

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Global Risks Landscape

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Demographics, Resource Scarcity, Pollution, Climate Change, Scarcity of Arable Land

Investment Opportunities

Clusters Wind Solar Natural Gas Power Infrastructure Storage

Clusters Distribution &

Management Advanced Treatment Efficiency & Metering

Clusters Basic Materials Innovative Materials &

Technology Material Efficiency Recycling & Waste

Management

Clusters Transportation Reconstruction Building Infrastructure Agriculture

Clusters Nutrition Health Care Personal Care Activity

New Energy & Efficiency

Water Resources Materials & Resource Efficiency

Climate Change Solutions

Health & Wellness

From Global Trends & Risks to Opportunities

Source: SAM Research

Cluster Production Factors Producers Processing/Logistics Packaged Food &

Beverages

Agribusiness

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Recognition of Sustainability as Strategically Significant by Firms

Source: MIT SLOAN Management Review, Winter 2012

Poll among 3000 Executives

70%

Investors?

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Holcim Experience with Corporate Sustainability

Source: Adapted from Holcim Group Support, 2012

Compliance Reputation Risk Mitigation Integration into Business

TIME & COMPETITIVE ADVANTAGE

Regulatory compliance, legal license to operate

Societal license to operate,

recognition by regulators

Identifying and avoiding risk,

identifying opportunities,

providing societal value

Brand differentiation, new markets, products &

services, outperforming competitors, maximizing societal and shareholder

value

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SAM Definition of Corporate Sustainability

A company s capacity to prosper in a competitive and ever faster changing

global business environment by managing and anticipating current and

future economic, environmental and social risks and opportunities

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SAM Corporate Sustainability Assessment

Economic Dimension Corporate Governance

Code of Conduct, Compliance

Risk & Crisis Management

Customer Relationship Management

Innovation Management

Social Dimension Talent Attraction & Retention

Human Capital Development

Occupational Health & Safety

Stakeholder Engagement

Human Rights

,,,

Environmental Dimension Climate Strategy

Water related Risks

Environmental Management System

Environmental Performance

Product Stewardship

E S

E (G)

Assessment: ~3000 Companies annually (58 sectors) > 30 trillion $ total MCap 3 dimensions / 20 criteria / 130 questions > 1000 data points/firm

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Integration of Intangible Criteria into Valuation

Economic Criteria - Corporate governance - Risk & crisis management - CRM - ...

Revenues

Environmental Criteria - Operational eco-efficiency - Climate strategy - Product stewardship - ...

Social Criteria - Human capital development - Stakeholder engagement - Supply chain management - ....

Costs

Investments

Capital Structure

Risk premium

Earnings

Invested Capital

Weighted Ave. Cost of Capital

Return on Invested Capital

Financial Valuation

Liabilities

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SAM Research Capabilities

SAM Indexes Cooperation with S&P Dow Jones Indexes

SAM Asset Management Theme Equity Strategies Core Equity Strategies Clean Tech Private Equity

SAM Sustainability Services Company Benchmarking

SAM Publications Sector Studies Sustainability Studies

Robeco Robeco Products

3rd Party Cooperation Research Cooperation Product Cooperation

SAM Research Industry Expertise Sustainability Expertise Financial Expertise

Corporate Sustainability Assessment

Methodology Development

Industry and Sector Studies

Fundamental Company Analysis

and Modeling

Investment Recommendations

Sustainability Foresight

& Insight

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What Is ESG / Sustainability Investing? the Elephant in the Room

It creates returns!

It lowers volatility

It raises alpha!

It has impact!

It reduces risks!

It communicates!

It shuns vice!

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Defining Objectives & Core Beliefs: Sustainability Investing Framework

Investment Policy

Risk

Man

agem

ent &

Rep

ortin

g Asset Allocation

Manager Procurement & Monitoring

D) Impact Promote Sustainability Themes Quantify/demonstrate ESG impact Create socio-economic impact Proxy voting Dialogue and Engagement

A) Financial Alpha Lower volatility Less drawdown Better return/risk profile

C) Ethical Avoid controversial industries Avoid negative headlines Avoid reputational risk

B) Communication Fulfill fiduciary duty Produce ESG report Meet UNPRI Assume responsibility as shareholder

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Sustainability Investing Solution Set E

SG

Inte

grat

ion

Investment Policy Asset Allocation & Manager Procurement

Private Equity Clean Tech / Growth Infrastructure

Real Assets Real Estate Timber / Forestry Commodities

Fixed Income Sovereign Credit Emerging Markets

Hedge Funds Equity & Credit

Equity Themes Indexes Low Vol / Beta Emerging Markets Fundamental & Quantitative

Risk Management Active Ownership

Reporting & Communication

Governance

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A) Financial Perspective: Sustainability Research as Added Value for Investors

SAM sustainability data is likely to have predictive power for stock-selection, reflected in the positive information ratio (0.5) of the portfolio consisting of sustainability leaders Added value is generated by selecting sustainability leaders and avoiding sustainability laggards Value creation tends to be consistent and stable for the entire time period

Source: SAM The graph does not represent returns of an actual portfolio. It depicts returns of sustainability investments as rated by SAM. Results are shown gross of fees. Results would be reduced by application of fees and expenses incurred in the management of the account. Returns shown do not represent the results of actual trading but were achieved by retroactive application f a model with the benefit of hindsight. If the strategy had been in existence during this time periods, actual results could have been different, and potentially lower than the hypothetical results that are presented.

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A) Financial Perspective: Out-performance of Sustainability Leaders (Harvard)

Leading Sustainability Companies out-performed significantly over the long term Sustainability Leaders out-performed on ROE and ROA during the time period

Source: Eccles, R. J., Ioannou, I., and Serafeim, G. 2011 The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance. Harvard Business School Working Paper. Past Performance is not an indication of future results. The graph does not represent returns of an actual portfolio. It depicts returns of sustainability investments as rated by SAM. Results are shown gross of fees. Results would be reduced by application of fees and expenses incurred in the management of the account. Securities are chosen based on sustainability assessment questionnaires submitted by the issuers.

Evolution of the stock price performance of $1 invested in the 90 component Market Capitalization-weighted portfolios

Evolution of $1 of assets invested in the 90 component Low and High- Sustainability portfolios based on Return-on-Assets

Low sustainability: adopted sustainability more recently High sustainability: adopted sustainability policies early on (i.e. in the early 1990s when CSR was still at nascent stage) VW = value-weighted (Market Capitalization Weighted) EW = equal-weighted

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B) Communication Perspective: External Reporting and/or Internal Monitoring

CalPERS first stand alone Sustainable Investment Report in 2012

Sustainability is Essential is one of PPGM s investment beliefs. PGGM publishes a RI AR Its RI Policy is based on six pillars:

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C) Ethical Perspective: Defining an Exclusion Approach

Avoiding or selecting companies or sectors that engage in a variety of activities, such as:

Socially Destructive Weapons Tobacco Pornography Alcohol

Environmentally Destructive Oil extraction Mining

Economically Destructive Gambling

Socially Constructive Labor welfare and rights Diversity and inclusion Risk Management

Environmentally Constructive Supply clean/potable water Sustainable global food supply Sustainable energy supply

Economic Impact Corporate Citizenship & philanthropy Transparency Stakeholder engagement

Avoiding companies with single negative incidents in the area of E, S or G

Avoiding companies that refuse to enter into engagement discussions with shareholders