United Nations Principles for Responsible Investment UNPRI Initiative

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 longterm investment returns 1

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 2

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 3

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 4

Mandatory requirements § After a one year grace period, signatories must: – Complete the PRI reporting framework – Pay the annual fee • AUM under $1 bn - £ 800 5

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 6

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 7

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 8

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 9

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 10

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 [7 X 3 stars = 70%] and the three highest additional indicators [3 X 3 stars = 30%] 11