1. ESG Integration and Wither the Sell-Side? Prof. Robert G. Eccles Professor, Harvard Business School Chairman, Arabesque Partners International Council Of Securities Association Annual Meeting 2016 May 24, 2016 Stockholm

2. Trends in the Capital Markets 2

3. 3 Sustainable Development Goals (SDGs)

4. Some Numbers 4 5,478 companies have published a sustainability report in 2015, up from 436 in 2005. 5 5 80% of studies show that stock price performance is positively correlated with sustainability. 1 1 $21.4 trillion is invested in sustainable products. 4 4 73% of the 50 largest pension funds globally have made a public commitment to sustainable investing. 3 3 79% of CEOs see sustainability as a route to competitive advantage. 2 2 (1): G Clark, A Feiner & M Viehs, From the stockholder to the stakeholder, 2015, http://goo.gl/G1dnGyhttp://goo.gl/G1dnGy (2): UNGC & Accenture, The investor study: Insights from PRI signatories, 2015, https://goo.gl/CLk3IHhttps://goo.gl/CLk3IH (3): Own calculations based on Towers Watson, The world’s 300 largest pension funds – year end 2013, 2014, http://goo.gl/DCsWkx http://goo.gl/DCsWkx (4): Global Sustainable Investment Alliance (GSIA), Global sustainable investment review, 2015, http://goo.gl/mnaSmLhttp://goo.gl/mnaSmL (5): GRI, Sustainability disclosure database, 2016, http://goo.gl/MAhrnkhttp://goo.gl/MAhrnk

5. Growth in Sustainability Reporting 5 Note: The 2015 numbers are being updated as of May 2016 Source: http://database.globalreporting.org/search

6. Investing For a Sustainable Future 6 75% of investment firm senior executives agree that sustainability performance is materially important 75% cite improved revenue performance and operational efficiency from sustainability as strong reasons to invest Half of investors won’t invest in a company with a poor sustainability track record 60% are prepared to divest if sustainability performance is poor There is a lack of communication within corporations and investment firms and between them (sustainability issues in 54% of earnings calls and shareholder meetings) Only 44% of companies and 36% of investors consider inclusion on a sustainability index as an important investment decision factor Although a sustainability strategy is considered important, only 60% of companies have developed one and only 25% say a business case has been developed Reference: G. Unruh, D. Kiron, N. Kruschwitz, M. Reeves, H. Rubel, and A.M. zum Felde, “Investing For a Sustainable Future,” MIT Sloan Management Review, May 2016

7. Pax Americana Source: BofAML’s Transforming World Atlas 7

8. A Map of Hubris & Humiliation Source: BofAML’s Transforming World Atlas 8

9. Concentration in Asset Under Management 9 Source: The top 400 asset managers (IPE, 2015), Sparking growth with go-to-market excellence (BCG, 2015)

10. Battling Short-Termism 10

11. Changing the Conversation: Long-Termism and ESG Integration 11 THE CEO FORCE FOR GOOD

12. Integrated Reporting – Definition 12 “An integrated report is a concise communication about how an organization’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value in the short, medium and long term” Source:

13. 13 Integrated Reporting – Value Creation Framework

14. Integrated Reporting – Social Infrastructure 14

15. Trends in the Asset Owner/Asset Manager Relationship 15 Asset Owners Asset Managers Policies on ESG Integration & Capabilities: Selection & Evaluation Longer-term Contracts

16. 16 Sell Side Perception Opportunities Progress Focus on the short term Quarterly earnings > long term prospects Largely clueless about sustainability ESG specialist teams by large firms Sector analysts pay more attention to material sustainability issues Buy-side interest in ESG is growing Larger firms are becoming increasingly sophisticated Asset owners evaluate managers on ESG Emerging boutique firms

17. Prof. Robert G. Eccles Professor, Harvard Business School Chairman, Arabesque Partners robert.eccles@arabesque.com Thank You!