1. Ulrika Hasselgren, MD, Head of Responsible Investment
SUSTAINABLE & RESPONSIBLE INVESTMENT Swedish Institute Management Program
Ulrika Hasselgren, MD, Head of Responsible Investment
18 May 2016

2. The Global Leader in Corporate Governance & Responsible Investment
ISS uniquely delivers comprehensive solutions that enable institutional investors to apply their corporate governance views, identify environmental, social and governance risk, and manage their complete proxy voting needs on a global basis

3. End-to-end Governance & Responsible Investment Solutions: A one stop shop for investors
RI & Voting Policy
Governance & ESG Data, Research & Analysis
Dialogue & Engagement
Proxy Voting
Securities Class Action
Reporting & Disclosure
Meet global stewardship codes, PRI requirements, through RI, voting & engagement disclosure service
Develop policies that offer a credible, sustainable approach and an established process through Policy service
Experience, Expertise & Service
Integrate Governance and ESG into investment process and decisions through data, research, analysis, screening & scoring services
Exercise active ownership through securities class action service
Exercise active ownership
through voting services
Exercise active ownership through company & stakeholder dialogue service

4. SRI… What is it?

5. SRI is…
719,000,000

6. Alternative Investment Sustainable Investment
SRI is…
Tobacco
Fossil fuel
Voting
Water
ESG
Alternative Investment
UN PRI
Renewables
Sustainable Investment
Best-in-class
Labour standards
Cluster munitions
CSR
Integration
Human rights
Ethical investment
Impact investing
Exclusion
Engagement
Positive Scoring
Child labour
Norms
Sustainable Forestry
Corporate governance
UN Global Compact
Environment
Microfinance
Thematic investment
Stewardship

8. SRI brings together all of the approaches that combines investors’ financial objectives with their concerns about environmental, social and governance (ESG) issues.

9. Strategic & tactical allocation
Investors & SRI
Equities
Fixed
Income
Alternative
INVESTMENT PORTFOLIO
SRI
Strategic & tactical allocation

10. Sustainable & Responsible Investing (SRI) is growing
SRI Covers 30% of Total Managed Assets Globally
Growth of SRI Assets by Region , $ Billions
2012
2014
Growth
Europe
$8,758
$13,608
55%
United States
$3,740
$6,572
76%
Canada
$589
$945
60%
Australia/NZ
$134
$180
34%
Asia
$40
$53
32%
Total
$13,261
$21,358
61%
Source: GSIA 2014 Global Sustainable Investment Review

11. Sustainable & Responsible Investing (SRI) is growing
7 main strategies have evolved
Growth of Strategies
2012
2014
Growth
Negative/exclusionary screening
$8,280
$14,390
74%
ESG integration
$5,935
$12,854
117%
Corporate engagement & Shareholder action
$4,586
$7,045
54%
Norms-based screening
$3,038
$5,534
82%
Positive/best-in-class screening
$999
$992
-1%
Impact/community investing
$86
$109
26%
Sustainability-themed investing
$70
$166
Source: GSIA 2014 Global Sustainable Investment Review

12. Strategic & tactical allocation
Investors & SRI
Alternative
Strategic & tactical allocation
Fixed
Income
Equities
Main SRI strategies
Negative/exclusionary screening
ESG integration
Corporate engagement & Shareholder action
Norms-based screening
Positive/best-in-class screening
Impact/community investing
Sustainability-themed investing

13. Rationale behind different SRI strategies
Main strategies for SRI
Negative/exclusionary screening
ESG integration
Corporate engagement & Shareholder action
Norms-based screening
Positive/best-in-class screening
Impact/community investing
Sustainability-themed investing

14. Different objectives – different approaches
Investment opportunities
Risk management
Mission-based
Value vs. Values?

15. Implications Depending on Approach0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Left to Invest
Zimbabwe
Embryonic stem cell research
Fast food
Sudan
Exploitative consumer debt
Anti-christian Organisations
Nuclear Power
Iraq
Conventional Weapons
Abortion
Burma
Child Labour
Alcohol
ABC weapons
Pornography
Tobacco
Note: Highly illustrative example

16. Important to set clear goals & objectives

17. Drivers of SRI development
Asset
owners
Civil society
SRI
Asset
managers
Companies

18. Public pressure...

19. Regulation and market pressure to ”do more”

20. Even the Pope...

21. In the spotlight…
Henry M. Paulson Jr. (Ex CEO Goldman Sachs, NY Times, June 2014)
“We’re staring down a climate bubble that poses enormous risks to both our environment and economy… This is a crisis we can’t afford to ignore. … We can see the crash coming, and yet we’re sitting on our hands rather than altering course.”

22. Sustainable & Responsible Investing (SRI) is growing
7 main strategies have evolved
Growth of Strategies
2012
2014
Growth
Negative/exclusionary screening
$8,280
$14,390
74%
ESG integration
$5,935
$12,854
117%
Corporate engagement & Shareholder action
$4,586
$7,045
54%
Norms-based screening
$3,038
$5,534
82%
Positive/best-in-class screening
$999
$992
-1%
Impact/community investing
$86
$109
26%
Sustainability-themed investing
$70
$166
Source: GSIA 2014 Global Sustainable Investment Review

23. Risk management, yes!
Financial risk, yes!
Other risks or opportunities… environmental, social, ethical… ?

24. What Are Investors Looking For
Risks & Opportunities
Governance & Management
Environmental Dimension
Ethical Dimension
Dimension
Social

25. How do investors find out about these ”other risks or opportunities…”?

26. David Gait, Senior Portfolio Manager, Stewart Investors
“Investment in good quality management teams with the vision, and the ability, to manage successfully the environmental, social and governance risks and opportunities facing their companies.”
David Gait, Senior Portfolio Manager, Stewart Investors

27. Investor Example

28. More than 70% of all institutional capital has some kind of SRI policy
Example: SRI in Sweden
Quite mature SRI market and a majority of the investors have been active for more than ten years
More than 70% of all institutional capital has some kind of SRI policy
However… most important incentive is reportedly that “SRI can reduce the risk of negative publicity”

29. Example: SRI in Sweden
Seventh AP Fund (AP7)
Swedish state pension fund AP7 a first mover with its SRI policy and strategy implemented in 2001
Norm-Based Screening developed for AP7 by founders of Ethix SRI Advisors in year 2000 in response to the Swedish parliament’s requirement for all state pension funds to ”take environmental and ethical considerations into account without harming the overall goal for high returns”

30. Example: SRI in Sweden Norm-Based Screening
Involves the assessment of a company against certain minimum standards of business conduct
Standards are based on international norms generally understood to be internationally recognized, even if not universally applied or adopted, and they are dynamic
Once a screen has identified companies or assets that potentially violate these norms or standards, investors either engage with company through shareholder dialogue or divest from the company

31. AP7s role as an active owner/investor
What are the environmental, social or governance risks or opportunities facing the company?
Should they take any action?
Risk flag? Engage through dialogue? Divest?
Is collaborating with other investors / stakeholders relevant?
Any other action? File a resolution?
How to vote at the Annual General Meeting?

32. Engage and/or divest
Monitor progress
Go, no current issues

33. Thank you! Ulrika.Hasselgren@issethix.com
Responsibility, Trust & Transparency
Keys to a profitable & sustainable business
Thank you!