Bank Sarasin & Co.Andreas Knörzer, Head Sustainable Investment

3./4. September 2001

SUSTAINABILITY- A concept for

increasing enterprise valueFIDIC 2001 Conference

Bank Sarasin & Co.

• founded in 1841• independent Swiss Private Bank• specialized in investment advisory and asset management• 10 partners with unlimited personal liability• 800 employees• main office in Basel• offices in Zurich, Geneva, Lugano and London• Euro 1.7 billion (total assets about Euro 27 billion) are

managed according to sustainability criteria

Organization Chart Bank Sarasin & Co.

PrivateBanking

InstitutionalBanking

InvestmentFunds

Logistics

Board ofAdministration

CEO

Group Executive Board

CFO

Contents

1. Sarasin Sustainable Investment

2. Sustainablity Concepts

3. Research and Investment Process

4. Product Concepts

5. Products & Performance

6. Benefits of Sustainable Investments

1. Sarasin Sustainable Investment

Market leader in terms of quality• Dedicated Sustainability Research and Asset Management since 1989• 14 international and interdisciplinary professionals with an average of

7 years’ experience• Sophisticated and competent research & assessment process

Market leader in terms of quantity • € 1.7 billion (of total group assets of about € 27 billion) are

managed according to sustainability criteria (market leader in continental Europe)

• Biggest provider of sustainable products in Continental Europe in both absolute and relative terms

Market Leader in Sustainability

• 1994 launch of «OekoSar Portfolio», the first eco-efficent fund worldwide

• 1997 co-manager of ethos pension foundation, in cooperation with Lombard Odier

• 1998 fund manager of «OekoVision», the equity fund of Ökobank-Versiko with very strict criteria

• 1999 launch of «ValueSar», a purely sustainability fund for international equities

• 2000 launch of «New Energies Invest» (private equity for renewable energies)

• 2001 launch of Sarasin FairInvest Universale Fund (balanced, Euro based)

Innovative Products - successful realisation

Sarasin Institutional Banking – Organizational Chart

Institutional Clients

H. R. Hufschmid

Sustainable Investment

A. Knörzer

Research

F. K. von Meyenburg

Trading

Th. Schaad

Institutional Banking

F. K. von Meyenburg

Asset Management

H. R. HufschmidG. Monson

Corporate Finance

Ch. Lubicz

Sarasin Sustainable Investment: Interdisciplinary research team

Society

FinanceTechnics

Ecology

Economy

8 sustainability analysts with different backgrounds, focusing exclusively on sustainable investment

Currently 17 employees

2. Sustainability Concepts

Our understanding of sustainability

‘Sustainable development means a development that meets the needs of the present without compromising the ability of future

generations to meet their own needs.’

(Brundtland, 1987)

Society(social analysis)

Economy(financial analysis)

Ecology(environmental

analysis)

Concepts of SRI

Exclusion criteria (e.g. Tobacco, Alcohol)

Environmentalcriteria

Environmental and social criteria

«Absolute» Sustainability(sustainable products)

«Relative» Sustainability(sustainable management)

Ethical Investment (USA, UK)

Environmental technology Fund

Eco-efficiency Fund

Sustainability Fund Sustainability Fund

(Sarasin)

3. Research & Investment Process

Research and Investment Process- Overview

IInformation gathering

IIPre-screening

(exclusion criteria)

IIIFinancial Analysis

IVSustainability assessment

VQualitycontrol

VIPortfolio

construction & Investment Procedure

Headquarters of Bank Sarasin & Co.

I. Information gathering

• General company information• Monitoring of several hundreds of newspapers through news

services • Specialized electronic media and internet• Research reports (financial and non-financial)• Company visits and management contacts• Information from specialized Swiss and foreign research

institutions, NGO‘s• (Questionnaire with a total of 140 relevant industry-specific

questions)

II. Pre-Screening

Ecological/social exclusion criteria•Generally according to clients’ preferences•Sarasin standard products:

Production of nuclear energy, armaments, automobiles,chlorine and agrochemicals, pornography, tobacco.Genetic technology is decided upon on a case to casebasis

Financial exclusion criteria•Liquidity (limited tradability)

III. Financial Analysis

Company analysis• Quantitative: P/E (absolute and relative to the market and

sector), earnings growth, PEG, CFPS, dividend yield, enterprise value/sales, margins, profitability ratios, balance sheet ratios, interest coverage, free cash flow

• Qualitative rating: Management, product range, earnings visibility, acceptance in the market, sentiment, momentum

Economic scenarios• Definition of most likely economic scenario• Forecasting horizon 3 and 12 months• GDP, inflation, interest rates, currencies, equity markets

‚absolute‘ sustainability axis

‘absolute’ sustainability of the industry and its technologies

• Contribution to environmental & social risks

• Compared to other industry sectors

‚rela

tive‘

sus

tain

abili

ty a

xis

‘relative’ sustainability of a company within an industry

• Compared to its peers («Best-in-Class»)

• How well does a company manage its environmental and social risks?

IV. Sustainability Assessment: principle

Absolute Sustainability Assessment

• The absolute environmental impact of an industry sector is assessed according to the WBCSD-criteria: energy efficiency, material efficiency, toxicity, etc.

e.g. Airlines have a high energy consumption, therefore even an efficient airline gets a low absolute rating.

• The absolute social relevance of an industry sector is assessed according to the stakeholder approach: clients, suppliers, employees, investors, etc.

e.g. The tobacco and alcohol industries endanger the health of the consumers often at the expense of the general public. This leads to low absolute rating of the whole sector.

Example industry rating: Energy

Sarasin Sustainability Matrix

Industry Rating

Co

mp

any

Rat

ing

average

average

high

low

low high

• Financial industry classes vs. sustainability classes

• It is the nature of a company‘s core activities that is decisive

• Traditional energy companies have a much higher risk exposure than renewable energy companies

Vestas

ChevronBallard Power

BPAmoco

Environmental Assessment: Life Cycle Approach

Strategy

Pre-ProductionSourcing

ProductionProcesses

Products & Services

Environmental Management

System

Environmental Assessment MatrixTargeted accomplishments in % (fictional example)

*Targets of the WBCSD

Pre-Production Sourcing

Production Processes

Products & Services

Energy Intensity

Material Intensity

Less Toxicity

Revalorisation

More Renewables

Durability

More Service Intensity

6%

14%

80% 8%

4%

17% 28%

50% 46%

55%

38%

12%

65% 56%

25%

25%

12%

35%

35% 52% 40%

ElementsCriteria*

Strategy

Suppliers/Shareholders/General Public

EmployeesClients/

Competitors

StakeholderManagement

System

Social Assessment: Stakeholder Approach

Social Assessment MatrixTargeted accomplishments in % (fictional example)

10%

25%

25% 15%

15%

52% 15%

85% 49%

20%

17%

5%

80% 16%

20%

12%

66%

10%

Building-upof Relations

Cultivationof Relations

Terminationof Relations

Examined phases

Suppliers

General Public

Shareholders

Employees

Competitors

Clients

Stakeholder

Example company rating: Unilever (I)

Example company rating: Unilever (II)

• Environmental• mature environmental management systems with tough corporate

targets • focuses on three areas where it can make a real difference: fish,

water and agriculture• committed to buy fish only from sustainable stocks by 2005 and

cooperate with suppliers and NGO's (Marine Stewardship Council)

• Social• Various social and environmental projects in different regions of the

world are supported with 1.5% of its world wide earnings. • active in developing an understanding the need for responsible and

ethical corporate behaviour

Valuebuilder: Example

Sustainable bond research

It is also desirable to manage funds sustainably within the bond market.

• Government bonds -> Sustainable country analysis• Bonds of supranational institutions -> Sustainable institutional

analysis• Corporate bonds -> Sustainable company analysis

Sustainable country analysis

The management of natural and social resources as well as its stability affects the sustainable rating of a country

• Analysis of the quality of management of ecological, social and human resources

• Assessment of political and institutional structures

• Structure and efficient use of resources

• Absolute level of resources consumption

Example: country rating USA

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

Energy

Air

Water

Soil

Biodiversity

Average of all OECD-countries USA

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

Income

Health

Education

Cohesion

Foreign Affairs

Human Rights

Indebtedness

Environment

Social Average of all OECD-countries USA

Str

uc

ture

an

d e

ffic

ien

cy

of

res

so

urc

es

ine

ffic

ien

te

ffic

ien

t

high low

Absolute level of environmental and social resources consumption

Switzerland

USA Portugal

V. Quality Control

Company Feedback

Third Party Assessment

Quality check by external parties

Interdisciplinary Advisory Board

Internal controlling

Client Audits

4. Product Concepts

VI. Portfolio construction

Two principles of Sarasin Sustainable Investment

Index-based (tracking error)

Ecological/social criteria form basis

Weighted Sustainability portfolio

<Pure> Sustainability portfolio

Absolute «pure» Sustainability Portfolio

Analysed companies

X Companies with activitiesto be excluded

Excluded rating areas

Sarasin Fund Universe

X

X

X

Co

mp

an

y-R

ati

ng

(Su

stain

ab

ility

of

the C

om

pan

yw

ith

in t

he S

ect

or)

Industry-Rating(Sustainability of the Products and Services)

low high

average

low

high

Sarasin Sustainability-Matrix

Investment style for a fully sustainable portfolio

• Active sustainable investment style (40 – 60 titles)• Bottom up > top down• Industry- and asset allocation influenced by Sustainability

rating• Asset allocation solely out of the defined accepted investment

universe• Title weithting according to financial attractivity (sector,

company)

Investment style for a fully sustainable portfolio

• Monthly performance control with benchmark comparison • Findings of Sarasin‘s sector- and macro research as well as

of the investment committees in Basel and London are included

• Implementation of the decisions taken within 3 days (depending on volumina)

• Tactical freedom of the portfolio manager = +/- 1%-point

Risk control

• Daily monitoring

• Monthly performance review based on SPPS data (Swiss Performance Presentation Standards) incl. analysis of difference to the composite

• Regular check of compliance with requirements

Research-Universe – Country Overview

CountriesNumber of

Companies Market cap.* in %

MSCI

Euroland 179 2‚910 85%

Europe 320 5‚333 85%

North America 162 7‘443 69%

Japan 36 796 30%

* in bn Euro

Research-Universe – Sector- & Country Overview

Number of titles – All titles

Sectors Europe

EurozoneEuropeex Euro America Asia Total

Data networks&process. 0 0 7 0 7Construction 5 5 1 0 11Healthcare 6 8 3 0 17Telecommunication 9 4 5 2 20Material 3 7 5 0 15Food & beverage 7 7 14 2 30Pharma 7 6 9 0 22Energy 18 4 17 0 39Utilities 8 11 10 2 31Electrical eng. & electronics 9 8 7 6 30Chemicals 15 9 10 1 35Durable goods 11 8 15 9 43Machinery&engineering 16 16 6 3 41Business services 17 13 17 4 51Finance 33 17 12 4 66Consumer goods 14 15 21 2 52Tourism & Leisure 1 3 3 1 8Total 179 141 162 36 518

Limitations due to exclusion criteria

MSCI Europe Anlageuniversum

Automobilindustrie

Tabakhersteller

Rüstungsgüterhersteller

Chlor- und Agrochemie

Kernenergieproduktion

Glücksspiele

InvestierbaresUniversum93%

Investment Universe

Automobile

Tobacco

Armaments

Chlorine/Agrochemicals

Nuclear Energy

Lottery

Investable Universe 93%

Exclusion criteria does not penalise

2/8/01

1996 1997 1998 1999 2000 200160

80

100

120

140

160

180

200

220

240

260

280

MSCI WORLD U$ - PRICE INDEX (EURO – Net Daily Return)MSCI WORLD AUTOMOBILES $ - PRICE INDEX (EURO – Net Daily Return)MSCI WORLD TOBACCO $ - PRICE INDEX (EURO – Net Daily Return) Source: DATASTREAM

5. Products and Performance

Broad Product Range

• Devif/Special funds

(SSI)Sarasin Sustainable Investment(SSI)Sarasin Sustainable Investment

Own Label Funds

Own Label Funds

EthosEthos ManagedAccounts

ManagedAccounts

Private EquityPrivate EquitySarasin FundsSarasin Funds

• ÖkoVision• New Energy Fund

• Auxvita

• CH/EU/WW/NA• Equities(Int. and CHF)

• Bonds(Int. and CHF)

• Ethosfunds

• Equities CH• DJ Stoxx 50• Equities Int.• Balanced

• New Energies Invest Ltd.

• Sarasin OekoSar• Sarasin ValueSar• Sarasin FairInvest• SAST BVG Sustainability

OekoSar Portfolio - Characteristics

• Globally balanced:(End of July 2001: 44.3% Equities, 47.0% Bonds, 8.7% Cash)

• Ecological analysis is based on the life cycle concept (eco-efficiency)

• Social analysis follows stakeholder approach and judges the social sustainability

• Strictly applied negative criteria

• Interdisciplinary Advisory Board of five

• One of the leading Continental European funds, with assets of more than EUR 210m (as of 31 July 2001)

OekoSar Portfolio - Performance

• Risk/return profile in Euro•Since inception 67.91%

(March 1994 – July 2001)•Performance1999 15.07%•Performance 2000 19.18% •Performance since 01.01.2001 -6.17%•Return p.a. 7.24% •Risk p.a. 7.48%

OekoSar relative to Peers

Risk free rate: 3%

... Relative to balanced eco-funds

Total Return Sharpe Ratio Total Return Sharpe Ratio Total Return Sharpe Ratio

OekoSar Portfolio 19.18 1.79 39.36 0.88 87.11 1.17

Prime Value 3.84 0.12 39.74 1.11 62.14 0.98

Julius Baer MI-Fonds Eco A -2.07 -0.59 -- -- -- --

... Relative to traditional balanced funds (global, neutral AA)

Total Return Sharpe Ratio Total Return Sharpe Ratio Total Return Sharpe Ratio

OekoSar Portfolio No. 1 of 79 No. 1 of 79 No. 6 of 49 No. 3 of 49 No. 9 of 28 No. 2 of 28

Average -1.26 -0.42 29.1 0.57 78.14 0.89

31.12.99 – 31.12.00 31.12.97 – 31.12.00 31.12.95 – 31.12.00

31.12.99 – 31.12.00 31.12.97 – 31.12.00 31.12.95 – 31.12.00

Source: Micropal

ValueSar Equity - Characteristics

• Only equities, investing globally

• 2/3 in ecologically and socially sustainable blue chips

• 1/3 in mid-sized sustainable growth companies

• Focus on promising future sectors and technologies

• Sustainability criteria according to OekoSar Portfolio

• Asset allocation offers conservative investors an ideal risk/return ratio

• Benchmark: 50% MSCI Europe, 50% MSCI World ex. Europe

• Assets: about EUR 86m (as of 31 July 2001)

ValueSar Equity - Performance

• Performance Fund in Euro• Since inception (June 1999 - July 2001) 24.59%• Performance 2000 18.15%• Performance since 1.1.2001 -10.51%• Return p.a 10.68%• Volatility 16.27%

• Performance Benchmark• Since inception 7.37%• 2000 -6.76%• Since 1.1.2001 -7.57%• Return p.a 3.34%• Volatility 16.59%

Active Asset Management pays off(since inception of Dow Jones Sustainability Group Index)

* 50% MSCI World ex Europe and 50% MSCI Europe

80%

90%

100%

110%

120%

130%

140%

150%1

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Pe

rfo

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O (

ind

ex

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) ValueSar Equity

Benchmark

Dow Jones Global Sustainability Index

6. Benefits of Sustainable Investments

Sustainable Companies Outperform

Jensen-Alpha vs environmental rating of eco-relevant Industries

-0.15-0.1

-0.050

0.050.1

0.150.2

0.250.3

0.35

- - - + + +

Alpha

Environmental rating

Results from Sarasin Study October 1999

Performance of European SRI funds

Funds Performance as per 30.06.2001 in EURO a)

Blue Chip Funds international -1 Year -2 Years -3 YearsSarasin ValueSar Equity -0.81% 30.32UBS-Eco-Performance -5.67% 23.68% 39.07%Swissca Green Invest -11.18% 9.64%CS Global Sustainability -13.99% 2.14% 4.23%SAM Sustainability-Index Fonds b) -15.76%

MSCI Welt Aktien Index -9.75% 8.93% 32.38%

Mid / Small Cap Funds international (with large content of «classical» eco-stocks)ÖkoVision c) 12.23% 39.01% 34.60%Activest Lux Eco-Tech 0.93% 33.40% 33.47%SEB Invest Ökolux -6.63% 21.34% 20.81%KD Fonds Öko-Invest -13.80% 36.60% 55.09%Balanced Fund international (with significant bond content)Sarasin ÖkoSar Portfolio 1.02% 22.54% 24.10%Prime Value -0.45% 13.67% 25.47%MI-Fonds Eco -2.00% 5.09%

Source: Micropala) Ranked based on 1 year performance

b) Management: Bank Sarasin & Co

How sustainable is the food industry?

• Sarasin Study assessed 18 „conventional“ food companies and6 organic food producers from US, Europe and Japan

• Two different peer groups with specific environmental and social issues were identified

• The focus lay clearly on the pre-production level (i.e. agriculture), where most environmental and social concerns arise

• A backtracking found – for both groups – that the environmentally and socially most compatible companies strongly outperformed the benchmark (MSCI Food Beverage & Tobacco)

• To meet the ever increasing demands and environmental & social awareness of consumers will prove decisive for the future success of food companies

Food industry: Company ranking

80

100

120

140

160

180

200

25.07.96 25.01.97 25.07.97 25.01.98 25.07.98 25.01.99 25.07.99 25.01.00 25.07.00 25.01.01 25.07.01

MSCI World Food Beverage & Tobacco

Other conventional food companies

Most sustainable conventionalfood producers

Above average conventional companies are outperforming

Organic food companies are outperforming

0

50

100

150

200

250

300

350

400

450

02.07.98 02.01.99 02.07.99 02.01.00 02.07.00 02.01.01 02.07.01

Most sustainable organicfood producers

Other organicfood companies

MSCI World Food Beverage & Tobacco