About the PRIJames Gifford, Executive Director PRI21 January 2010

What is responsible investment (RI)?

RI incorporates an active consideration of environmental, social, and corporate governance (ESG) factors within investment decision making and ownership practices

What is ESG?

What is responsible investment?

+

Values

-

- Performance focus +

Ethical Investment

Socially Responsible Investment

Responsible Investment

ESG is an acronym, in use globally, describing the environmental, social, and corporate governance issues

2005 Freshfields report: “Integrating ESG considerations into an investment analysis so as to more reliably predict financial performance is clearly permissible and is arguably required in all considered jurisdictions”

RI is more comprehensive approach to identifying investment risks and opportunities

ESG issues can impact investor returns especially in the long-term

Rationale for responsible investment

Strong ESG performance can result in new opportunities and reduced risks for investee firms

According to The McKinsey Quarterly (Feb 2009): 80% of CFOs and professional investors believe that ESG information can serve as a proxy for the quality of a company’s management

Investors can play an important role in promoting good corporate practice within their portfolio companies through active ownership

RI policies consistent with good governance

Company reputation can be protected

Rationale for responsible investment

The PRI is not…

About sacrificing returns to save the world

About philanthropy

About exclusion of “unethical” stocks from portfolios

A prescriptive/compliance-based standard

The PRI is…

A tool kit for integrating ESG issues into mainstream investment practices and across asset classes

Grounded in fiduciary duty

Voluntary and aspirational

A global collaborative investor network

A forum for discussion and concrete action on long-term risk issues and value drivers

A Secretariat providing practical guidance on emerging ESG issues and implementation support for signatories

Over 670 signatories, US$ 20 trillion AUM

Signatories include

CalPERS, US

BT Pension Scheme, UK

PGGM, Netherlands

PREVI, Brazil

National Pension Service, Korea

HSBC Global Asset Management

The six Principles

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.

Principle 1

“The hardest principle to implement”

According to 62% of signatories

34%Of signatories integrate RI to a large

extent

Proportion of signatories stating that some internally managed assets incorporate

integration

Principle 2

“Companies that manage social and environmental

issues and wider stakeholders likely to be

better investments in the long run”

Insight Investment

5%Of signatories fail to do any engagement activities with

investee companies

ESG issues addressed in engagement initiatives of signatories or their service providers

Principle 3

“We are systematically analysing the quality of companies’ disclosure on ESG issues”

Fortis Investments

70%Signatories have asked for

standalone CSR or sustainability reports

PREVI Signatory has been leading Brazilian investors efforts to increase number

of companies reporting on ESG issues

Requested formats of reporting ESG issue policies, practices or performance

%

The six Principles

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.

Engagement Clearinghouse

Collaborative discussions among investors

Dialogue with companies

Joint letters

Proxy votes

Public endorsement

Public policy dialogue

210 Clearinghouse posts since inception

8,804 companies sent at least one letter in 2008/9 as a result of engagements organised through the Clearinghouse:

Addressing “Acting in concert” regulations: Letters to EU Commission, Italian Consob and Spanish Comisión Nacional del Mercado de Valores

UN Global Compact: 52 investors, representing US$ 4.4 trillion of AUM wrote to 9,000 companies to encourage them to endorse the UN Global Compact

A collaboration to persuade the world’s largest companies, including Royal Dutch Shell and Heineken, to sign up to the CEO Water Mandate, a UN water sustainability initiative.

Clearinghouse activities

Implementation support

Engagement Clearinghouse

PRI in Practice

Reporting andAssessment survey

Private equity work stream

Property work stream

Enhanced Research Portal

Implementation support: Networking

PRI Academic Network

Country networks

Small Funds Initiative

Public policy network

PRI in Person

PRI Webinars

PRI and stock exchanges

Stock exchanges are becoming increasingly active in raising ESG standards among listed companies.

Recent PRI event examined ways in which stock exchanges promote sustainable business practices such as enhanced sustainability reporting requirements for listed companies and the establishment of ESG indices

Currently three exchanges are signatories to the PRI and more exchanges are considering signing

Improve your understanding and management of complex emerging issues, risks and value drivers

Gain access to a comprehensive knowledge bank of implementation support, reducing research and implementation costs

Be part of a global network of peer investors exploring and acting on ESG issues

Reputational benefits from publicly demonstrating top-level commitment to integrating ESG issues in a way that is consistent with fiduciary duty

Contribute to a more long-term oriented, transparent, sustainable and well-governed capital markets

Why join the PRI?

“I applaud the leadership of theinstitutions that have committed themselves to this undertaking, and urge other investorsaround the world to join this historic effort.”

 Ban Ki-moonUN Secretary-General

www.unpri.org

e: james.gifford@unpri.orgt: +44 (0) 207 749 5106