OCTOBER 2015

Integrating ESG Issues into Portfolio Management

Russell Investments Nicki Ashton, Head of Strategic Partnerships

Russell Investments An extension of your team to help you enhance your capabilities

Top Due Diligence in Manager Research – 2014 FundFire Survey

Top ranked in Client Service 2013 - 2014 CIO Transition Management Survey

Largest Institutional Investment Outsourcer 2011–2015 Pensions & Investments

p.2

$3.17TRILLION

ASSETS UNDER ADVICE**

570 DEDICATED

INVESTMENT PROFESSIONALS*

$961 TRILLION

ASSETS TRANSITIONED IN 2014

45+ YEARS

OF EXPERIENCE*

22 OFFICES GLOBALLY*

$345 BILLION ASSETS UNDER MANAGEMENT*

12,958 MANAGER PRODUCTS

CONTINUALLY MONITORED AND RESEARCHED*

* As at 31st June, 2015

Resources committed to overseeing and driving Responsible Investment

Adam Goff Leola Ross

Susan Quintin Natalie Miller

Bob Collie Manisha Kathuria

Jean-David Larson Barry Feldman Preetee Gopee

Heather McClellan Leah Fuhlbrugge

Takeshi Osaki

Nicki Ashton Samuel Picot Samuel Faulkner

North America

Europe

Asia

Australasia

› Russell Sustainability Council (RSC) formed in 2009 when Russell became a signatory of UNPRI

› 21 professionals in 10 offices*

p.3

Mike Clark (chair) Mirella Herbu (secretary) Helma Verkouw Jubaida (Jay) Begum Dominique Dorlipo Alexandra Haggard

*Last updated: September 2014

Research of indices and universes using third-party data

Commitment to best practices in ownership and alignment of interests

Integration of ESG issues and considerations in investment process

ESG Integration at Russell

Private real estate Government bonds

Industry collaboration

Capital markets insights

ESG integration in investment process

Proxy voting and shareholder engagement

Thought leadership White papers and conference presentations

Continual capability enhancement, in partnership with our clients and others

p.4

ESG – integrating into the investment process

p.5

Manager research / Security research

Portfolio construction

Monitoring / Reporting

Active ownership

ESG Integration

Incorporating ESG factors in manager research

› Manager’s approach to assessing the financial materiality of ESG issues

› Quality of manager’s process for identifying, researching and acting on ESG issues

› Nature of third party ESG information input to investment process, and effectiveness of its capture

› Support evaluation by review of manager’s voting policy on ESG issues and engagement activity

› Membership of any Responsible Investment initiatives (e.g. UN PRI)

› Subscribe to Sustainalytics’ ESG data since 2011 › Subscribe to Trucost carbon data

p.6

Capital Markets Insights

p.7

Source: Russell 1000® Index (“Russell 1000”), S&P/TSX Composite Index (“Canada Index”), MSCI Europe (“Europe Index”) S&P/ASX Index All Ordinaries (“Australia Index”), TOPIX Total Return Index (“Japan Index”), Russell Global Index (“Russell Global”)

Benchmark scores

Case study – Australian Responsible Investment ETF

p.8

ESG AND INCOME TILT

Each company remaining in the index universe is assigned a score based on two criteria: 1.ESG score provided by Sustainalytics; and 2.Composite Yield Score (derived per the existing Russell Australia High Dividend Index methodology).

OVERLAY The index initially excludes companies that are considered by a Responsible Investment Committee (RI Committee) to be inconsistent with agreed ESG objectives.

ONGOING REVIEW

The list of exclusions and the Responsible Investment Guidelines used to determine companies that are to be excluded is regularly reviewed by the RI Committee to ensure guidelines remain relevant and representative of responsible investment & ESG practices in the Australian market. The Index is reconstituted semi-annually.

INDEX The Russell Australia ESG High Dividend Index starts with the members of the Russell Global Australia All Cap Index (a sub-index of the Russell Global Index).

PROXY VOTING

Our comprehensive Proxy Voting Policy ensures that we discharge the ownership responsibilities in a way that is consistent, and effective. Reporting is compiled by our third-party research provider Glass Lewis.

Monitoring / reporting

› Broad range of reporting and monitoring: › ESG profile › SRI mandates with excluded

industries › ESG tilted portfolios › Carbon tilted portfolios

p.9

Proxy voting and shareholder engagement

› We believe shareholders’ best interests are served by following four principles: › Transparency, Accountability, Independence, Long term value

› Russell Proxy Voting Committee sets and oversees policy › Russell employs a Proxy Service Provider (Glass Lewis & Co.) › Adherence to best practice e.g. UK Stewardship Code › Other Codes e.g. CRISA; Japan Stewardship Code › Increased engagement activities in 2014 › Integrating information from Sustainalytics

› Power of Proxy and Engagement Report publications

p.10

Commitment to best practices in ownership and alignment of interests

Summary

› Russell is strongly committed to responsible investment, supported by UN PRI signatory status

› Our institutional clients have growing ESG integration requirements › Client perspectives vary by country, and are evolving › Regulation is encroaching › ESG integration is becoming mainstream

› Corporates have real opportunities to attract investors with long-term perspectives by enhancing and communicating about their ESG performance.

p.11

www.russell.com “Russell,” “Russell Investments,” “Russell 1000,” “Russell 2000,” and “Russell 3000” are registered trademarks of the Frank Russell Company.

Thank you