1. Responsible Investments Antti Savilaakso Nordea - Director of Responsible Investments Finsif - Chairman Email: antti.savilaakso@nordea.com mobile: +358 40 591 5791antti.savilaakso@nordea.com Twitter: @AnttiSavilaakso

2. Agenda What and how much? PRI signatories and GSIA numbers Why? Walk through on different motives How? Few comments on ESG and Risk/Return improvement Climate

3. Traditional financial analysis ESG issues Responsible Investment, ESG, Ethical, Green,… 3 RI

4. Principles of Responsible Investment Social Governance Environmental 1. We will incorporate ESG issues into investment analysis and decision-making processes. 2. We will be active owners and incorporate ESG issues into our ownership policies and practices. 3. We will seek appropriate disclosure on ESG issues by the entities in which we invest. 4. We will promote acceptance and implementation of the Principles within the investment industry. 5. We will work together to enhance our effectiveness in implementing the Principles. 6. We will each report on our activities and progress towards implementing the Principles. 4 Source: PRI at www.unpri.org

5. Global Sustainable Investment Alliance - Survey 5 Source:GSIA

6. Responsible investment motives Ethical/Moral Reasons Reputational Risk Management Risk/Return Improvement 6 Time 1970 19902010 Market Size

7. Business Model Focus on “what” the company does – Percentage of exposure ­ Revenue/Profit/Assets/Capital Expenditure Sustainable development – Climate Change – Depleting Natural Resources – Changing Demographics – Globalization – Health – … Controversial Activities – Weapons – Alcohol – Tobacco – Adult Content – Gambling – … Weapons Tobacco Alcohol Automobiles Banks Nuclear power Mobile phones CoalMicrofinance Renewable Energy Education

8. Corporate Responsibility Focus on “how” company operates with stakeholders

9. ESG Research 9 Corporate Responsibility Business model

10. Ethical Funds Corporate Responsibility Business model Exclusion 10

11. Best-In-Class Corporate Responsibility Business model Inclusion 11

12. Thematic Corporate Responsibility Business model 12

13. Engagement Corporate Responsibility Business model 13

14. Nordea – “Stars” -Fund Corporate Responsibility Business model 14

15. Ethical/SRI performance studies are inconclusive Defining ethical / responsible / SRI compliant company varies considerably ESG integration strategies can lead to sizable abnormal returns (Alphas): Eco-efficiency (Derwall et al., 2005) Employee Relations (Statman and Glushkov, 2009; Edmans, 2011) Community Relations (Kempf and Osthoff, 2007, Statman and Glushkov, 2009) Customer Relations (Gruca, 2005, Fornell 2006) Corporate Governance (Bhiraj 2001, Ashbaugh 2004) Best in class strategies (Kempf and Osthoff, 2007; Statman and Glushkov, 2009) High ESG rated companies are less volatile (Di, 2014) Responsible Investors are more sticky (Gruber, 1996) Successful ESG investment requires specific skills (Gil-Bazo et al., 2009) Risk/Return Improvement Overview on ESG Alpha findings 15

16. Emerging Stars - Performance 16

17. 5+1 Climate Approach Background: Internal survey, no consensus on methods 1. Engage with policy makers 2. Engage with companies 3. Carbon footprint 4. Integration with portfolio management 5. Stars Portfolios +1. Divestment 17

18. 1. Policy level Position Global framework Two degrees target Price on carbon Nordea Group is a member of Climate Leadership Council (CLC) Investor risk and pricing on carbon Nordea Asset Management is a member of Institutional Investors Group on Climate Change (IIGCC) NAM signatory to investor statement together with around +350 other investors NAM is a fee paying member together with +90 other investors To lobby and do collaborative company engagement 18

19. 2. Engagement with companies Nordea RI analysis meets +200 companies annually, rest of the investment teams (+150 professionals) meet hundreds more. Climate/carbon risks are Are relevant to systematically identify for every company Have to be managed accordingly Preferably as other business risks with normal risk management protocols Carbon reporting has to take place +50% of listed comps in the Nordics/Europe considerably less outside has to be accurate and follow the best practice and conventions preferably 3 rd party audited 19

20. 3. Carbon footprinting Key in understanding carbon risk in large institutional portfolio’s Put carbon footprint in front of client and in between client and portfolio manager Discussing carbon is part of our societal role as large financial institution RFP with key providers, now partnering with Trucost Founding signatory the Montreal Pledge Commitment to footprint all equity portfolio by Sep of 2015 The first asset manager and among the first investors in the Nordics Beware of the footprinting methodology challenges! Missing information results to estimation Scope 1+2+3 and double counting Financed Emissions and “handprint” Fixed Income and multi-assets portfolio’s 20

21. 4. Integration “½ of the carbon footprint can be mitigated without a dent in tracking error” RI team helping to identify “stranded assets” and helping portfolio managers to manage it Factor portfolios researched Tool to helping portfolio managers to minimize tracking error Climate and Environment fund established since 2007 Now actively promoted 21

22. 5. Stars Portfolios Carbon/Energy important part of the stars analysis Acknowledgement Policy Management systems Efficiency measures and capex Performance Reporting and goal setting Heavy carbon emitters without matching approach likely to be not-investable Carbon footprints for all portfolio’s well below benchmark 22

23. +1. Divestment “Divestment is an outcome of carbon analysis, not a strategy of carbon management” Regardless of the outcome, the discussion will not go away Would be naïve for any investor, particularly asset management, to think it does not matter Nordea’ s divestment decision done and is currently being applied >90% of revenue from coal mining with “sanity check” mechanism 23

24. http://esg.nordea.com “… ESG integration should be seen as a risk management exercise” “… Sasja Besik nominated to Young Global Leader 2011” “… Responsible investment gives new opportunities” “… the sustainable profile makes it easier for our customers to compare funds” “… through the new external blog we can communicate with our customers and comment on global trends on an daily basis”