United Nations Principles for Responsible Investment (UNPRI) Initiative What is responsible investment? Explicit acknowledgement of the relevance of environmental, social and governance factors in investment decisions How is it different from conventional investing? Creation of sustainable, long-term investment returns not just short-term returns Investors must realize that well-functioning social, environmental and economic systems are critical to long- term investment returns

Six Principles of the UNPRI Incorporate ESG issues into investment analysis and decision making processes Be an active owner and incorporate ESG into ownership policies and practices Seek appropriate disclosure on ESG issues by the entities in which one is invested Promote acceptance and implementation of the Principles within the industry Work together to enhance effectiveness in implementing the Principles Report on activities and progress toward implementing the Principles

Why become a signatory? Publicly demonstrate SU’s commitment to responsible investment Provides a framework for integrating ESG issues into investment decision-making and ownership practices

Signatory categories Asset owner – Pension funds, foundations and endowments are in the asset owner category Recognition of ESG issues as a method of reducing risk and generating sustainable financial returns

Mandatory requirements After a one year grace period, signatories must: Complete the PRI reporting framework Pay the annual fee AUM under $1bn - £800

Recommendation to the board SHORT TERM: Embed the principles in your investment policy statement Request more reporting on proxy/engagement by managers LONG TERM: Create a committee to research the implications (benefits/drawbacks) of becoming a UNPRI signatory Provide a recommendation within 18 months

What is involved in completing the framework? The framework consists of 12 modules It is only mandatory to complete a module if more than 10% of your AUM is in that asset class Each module contains mandatory and voluntary report indicators Mandatory to report, mandatory to disclose; these are made public Voluntary to report, voluntary to disclose; signatory can decide to make responses public Mandatory to report, voluntary to disclose

Reporting outputs Responsible investment transparency report The mandatory indicators and voluntary indicators that the signatory has agreed to make public Assessment report Confidential report demonstrating how the signatory has progressed in its implementation of the Principles and relative to peers PRI report on progress Showcases the progress and activities of the signatory base as a whole

Assessment report Designed to provide feedback to signatories Is still in a ‘pilot’ stage; subject to change Summary scorecard provides an overview of the aggregate score for each module and the median score Ranges from A+ to E The A+ band was created for signatories scoring above 95% in a module The E band is for those who do not implement responsible investment activities for an asset class Those who demonstrate active participation, but are in the early stages of developing processes are in a different band

Assessment report, cont. The indicator scorecard summarizes scores for each core and additional assessed indicator within each module Ranges from (no stars) to (three stars) Each signatory’s module score will fall in four broad ranges to be assigned based on their score in a specific module >95% = Band A+ 76% - 94% = Band A 51% - 75% = Band B 26% - 50% = Band C 1% - 25% = Band D 0% = Band E

Assessment report, cont. The maximum score (100%) for each module will be based on the ‘core’ indicators and on the highest scoring ‘additional’ indicators. For example: 12 indicators; seven core, five additional – score is based on the core [7X3 stars = 70%] and the three highest additional indicators [3X3 stars = 30%]