The most appropriate context for triple bottom line (or PPP/SRI) in South Africa F Makwetla RisCura

Pension Fund are Shareholders / Asset Owners

Estimated total pretax bill for the disaster of $42 billion* Regained $60 billion in market cap, continues to trade at a 5% to 10% discount to peers (Deutsche Bank, March 2012 Environmental Considerations Image or illustrations ) *U.S. Justice Department fine has not been issued yet Photo: Lars Gange

Social Considerations Image or illustrations Photographer: Stringer/AFP/Getty Images the closure Social implications regarding fair wages and living conditions Mining analysts have speculated Lonmin may need to raise money through a rights issue to offset its losses from

l Leisurenet Enron Parmalat Rogue traders UBS – USD2 bn Societe Generale – USD6 bn Merrill Lynch – USD456 m Governance Considerations Image or illustrations

Asset Owners and Regulation

RI and Regulation … Enabling & Improving Regulation 28 Preamble “A fund and its agents have a fiduciary duty to act in the best interest of those for whose assets they are responsible. This duty supports the adoption of a responsible investment approach to deploying capital into markets that will earn them adequate risk adjusted returns for the fund’s member profile, liquidity needs and liabilities. Prudent investing should give appropriate consideration to any factor which may materially affect the sustainable long term performance of their investments, including those of an environmental, social and governance character. This applies across all asset classes and should promote the vested interest of the fund in a stable and transparent environment.” Pension funds act, 1956; Regulation 28, p. 2 Preamble “A fund and its agents have a fiduciary duty to act in the best interest of those for whose assets they are responsible. This duty supports the adoption of a responsible investment approach to deploying capital into markets that will earn them adequate risk adjusted returns for the fund’s member profile, liquidity needs and liabilities. Prudent investing should give appropriate consideration to any factor which may materially affect the sustainable long term performance of their investments, including those of an environmental, social and governance character. This applies across all asset classes and should promote the vested interest of the fund in a stable and transparent environment.” Pension funds act, 1956; Regulation 28, p. 2

Name Title PF130 Annexure B – Paragraph 16 and 17 Voting Rights: It has been argued that the voting rights attached to shares of the companies in which funds are invested should be considered an asset of the fund. Accordingly, the board of fund would be expected to apply the same fiduciary care and consideration to this asset as it does to the financial investments it makes. Indeed, there is an inclination internationally to require trustees of a fund to be more proactive in ensuring that the voting rights are utilised effectively by the asset managers in accordance with the shareholder activism obligations. In order to fulfill this obligation, and in accordance with the recommendations of King II, the board of the fund should formulate and develop appropriate voting policies and incorporate these in their mandates to the asset managers including the monitoring and reporting of the same. Such policy should also be disclosed to the beneficiaries along with the steps taken by the board of fund to monitor the effective implementation of the same by the asset managers. More on this regard is incorporated under the asset manager mandate recommendations detailed below.”

5 Principles of CRISA The code has five key principles: 1.An institutional investor should incorporate sustainability considerations, including environmental, social and governance (ESG), into its investment analysis and investment activities as part of the delivery of superior risk-adjusted returns to the ultimate beneficiaries. 2.An institutional investor should demonstrate its acceptance of ownership responsibilities in its investment arrangements and investment activities. 3.Where appropriate, institutional investors should consider a collaborative approach to promote acceptance and implementation of the principles of CRISA and other codes and standards applicable to institutional investors. 4.An institutional investor should recognise the circumstances and relationships that hold a potential for conflicts of interest and should proactively manage these when they occur. 5.Institutional investors should be transparent about the content of their policies, how the policies are implemented and how CRISA is applied to enable stakeholders to make informed assessments.

The Journey

Ten years: …range of ESG issues, and prioritization

The Journey There is a Legal imperative that funds consider ESG Where they don’t have the necessary expertise they must engage with experts Asset owners must have a path they would like to follow There is no one size fits all Decide on the issues that will drive their long term performance Have an RI policy which guides this Commit to short term goals to get to their long-term ESG goals Check that their PMA and Mandates cover their objectives, if not review mandates

The Journey…continued Once the RI policy is set, this needs to be implemented, evaluated and continuously monitored. Ensure that the Fund’s policy is communicated AM and SPs Ensure incentives with AMs and SPs are aligned with Fund’s timeframes and objectives. Don’t create confusing objectives. Asset managers are mandated to ensure best performance, and ESG is integrated into achieving that. AM need to be exploring best practices to ensure ESG covered, and Clients must create the ripples to take advantage of the low hanging fruit opportunity

Engagement with current managers Write a letter to managers indicating a requirement for raised awareness and reporting on ESG Request proxy voting policies from all managers, and see if is alligned ith the Fund’s policy Check IMA’s and mandates for implementation requirements Update IMA and mandates where necessary Request reporting from the asset managers on proxy voting implementation Request proxy voting feedback as standard practice in manager reportbacks

Disclaimer This presentation contains confidential information and is protected by copyright law. Copyright in all information, material and logos are protected by both national and international intellectual property laws. Accordingly, any unauthorised copying, reproduction, retransmission, distribution, dissemination, sale, publication, broadcast or other circulation, or exploitation of this material will constitute an infringement of such protection. The information contained in this presentation is provided 'as is' without warranty of any kind. The entire risk as to the result and performance of the information supplied in this document is assumed by the user and in no event shall RisCura be liable for any direct, consequential, or incidental damages suffered in the course of using the information contained herein as a result of the use of, or the infringement of any copyright laws. The copyright in all material of RisCura (Pty) Ltd ("RisCura") and all its subsidiaries shall continue to vest in RisCura. RisCura is an authorised financial services provider - license number: 6249

Q & A