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EIRIS 7 September 2009 Greeneye SRI Seminar Signatory to the © EIRIS Introduction to EIRIS • EIRIS is an established not for profit research organization specializing in environmental, social and governance research on publicly listed corporations. • Founded 25 years ago, EIRIS was created as a collaborative research project to assist a group of churches & charities put their principles into practice. • Our mission is to conduct high quality research on extrafinancial issues to encourage improved social and environmental performance. 2 © EIRIS Governance of EIRIS EIRiS Foundation Governed by Trustees Ethical Investment Research Services (EIRiS) 100% owned commercial subsidiary Governed by Company Board 3 © EIRIS • 1983 – Founded by churches and charities interested in issues related to South Africa • 1990 – EIRIS helps launch the UK Social Investment Forum • 2000 – Launches Ethical Portfolio Manager – Provides research for Norwegian Petroleum fund – Goes global with research and sales partners across Europe, North America, Asia and Australia © EIRIS • 2001 – Launch of FTSE4Good Indices, supported by EIRIS research • 2004 – EIRIS announces the opening of offices in the US and Japan in 2005. • 2005 – Launch of Convention Watch product • 2006 – Launch of country sustainability ratings • 2008 – Launch PRI & Climate change toolkits A Short History 4 Our Staff & EIRIS Network of Partners • Our 50+ staff are highly educated and come from a variety of professional and academic backgrounds • Our analysts are frequently called upon for their expertise in methodology development, reporting standards and social & environmental best practice • We can build customized teams according to the specific needs of the client – ensuring a high level of competency and project specific solutions • EIRIS works with partner organisations to gain local knowledge, language skills and provide extensive additional resource 5 © EIRIS Short-term performance vs. long-term sustainability • Increasing number of investors concerned with ESG related risks • Conflicts over ESG and fiduciary duty still remain (common law jurisdictions) • Long term nature of ESG risks conflicts with short term measurement of fund manager performance © EIRIS Source: www..cartoonstock.com 6 Helping clients For integration Provision ESG data & advice Engagement reviews Provision of Due Diligence services For stock selection For Engagement negative screening tilting portfolios Carbon profile Sustainability report card ID of risks & PRI report card opportunities © EIRIS positive screening 7 What data do we hold? a) Coverage © EIRIS Note larger coverage available on Controversial weapons and news services 8 Stakeholder Responsibility SEE risk • Risk management • Specific sector risks • E.g. Access to medicine Board Structure & Practice Board Ethics Bribery & Corruption Convention Watch • • • • • Military Nuclear power Animal testing GMOs etc b) Criteria Other involvements • • • • Equal opps Training Health & safety Trade unions Employees EIRIS • • • • Alcohol Tobacco Gambling ‘Pro-life’ • • • • Chemicals of concern Sustainable timber Product Stewardship Transport criteria ‘Sins’ Product and process = Risk / impact linked assessments © EIRIS Community Customers & suppliers Policy Systems Reporting Performance Human rights Biodiversity Climate Change • • • • Human rights Labour standards Supply chains Indigenous rights 9 Most clients access data via EPM = flexibility 10 © EIRIS Climate Change Toolkit 3 Products: • Carbon Profile – To identify risks in a portfolio • Carbon Engager – Encourage companies to address climate change risks • Carbon Risk factor – Quantify carbon risk 11 © EIRIS Example Carbon Profile 12 © EIRIS Carbon Engagement assessment 13 © EIRIS Carbon Risk Factor • Score for each company on a scale from zero to 100 • Below 50 considered unmitigated risk • Above 50 risk is considered mitigated • Above 75 considered a ‘carbon solutions company’ 14 © EIRIS Case Study • Asset Management arm of Lloyds Banking Group • Two SRI Retail funds – SWIP Environmental Investor and SWIP Ethical Fund • Two carbon profile reports completed on Environmental fund • Twice as many companies in portfolio have adopted a ‘good’ carbon strategy as benchmark • Advice on engaging with high impact companies in portfolio 15 © EIRIS PRI Toolkit 3 Products: • EIRisk – To integrate ESG considerations into investment mangement • UNGC Engager – Encourage companies to address global compact issues • Report Monitor – Improving Corporate ESG reporting 16 © EIRIS Case Study • 5th largest insurance group globally • PRI signatory • Manage institutional and retail funds in accordance with responsible investment guidelines • Use Global Compact Engager to flag ESG risks facing companies for portfolio managers 17 © EIRIS Breach result identifies companies with unaddressed (No evidence) Convention Watch allegations Companies that are ‘low risk’ in all areas are identified separately 18 © EIRIS EIRisk (ctd.) As well as generating a result and a score for each company, the EIRisk policy will come with a secondary policy identifying High/Medium/Low risk companies based on combination of issues: Same result but different risk level – may want to treat them differently Company name Sector EIRisk rating Total score Risk level Co A Mining Risks mitigated 23 High Co B Mining Some weak areas 10 High Co C Media Some weak areas 2 Low 19 © EIRIS 20 © EIRIS Convention Watch • Covers 5 main issue areas (reflecting UN Global Compact) • Enables investors to identify allegations of company breaches of the spirit of international conventions on human rights, labour standards, the environment, corruption and landmines • Quarterly reports • Available on paper or though EIRIS EPM software • 2,800 companies researched + bespoke • Each company with allegations is contacted for their response • Transparent methodology and thorough research process using a wide range of sources 21 © EIRIS Case study: ATP • Danish state pension fund 4.5 Million members, assets approx €40 Billion • Recently established ethical committee • International norms-based approach • Seeking severe or repetitive allegations – Do the allegations represent one-off issue or management failure? • Combined approach: exclusions and watch list 22 © EIRIS How is this applied at ATP? • Quarterly EIRIS reports • Internal analysis – examples: – Watch list 1: Single issue (acceptable) – Watch list 2: Varied repeated issues i.e. 1 addressed, 1 not addressed (acceptable) – List 3: Repeated breaches i.e. 2 not addressed (unacceptable) • May disagree with EIRIS assessment • Ethical committee approval – Case by case evaluation and final decision • Exclusions made on unacceptable cases 23 © EIRIS Using EIRIS Research Screening Governance Engagement 24 © EIRIS © EIRIS Screening 25 Engagement = Active Ownership 26 © EIRIS Governance • Social, environmental and (SEE) issues relate to corporate governance © EIRIS – Increased interest in how board manages risk and reputation – Association of British Insurers (ABI) guidelines: assessing the board – SEE risk: impact on long-term profitability – Investors want disclosure on risk management – SEE risk affects share price 27 Public Client List includes: Over 100 Institutional clients + index providers, HNW individuals and charitable organisations ACT Pension Fund AEGON Asset Management AIB Investment Managers Allianz Global Investors France AMP New Zealand ASB Community Trust ATP Australian Conservation Foundation AXA Investment Managers Bank fuer Kirche und Caritas Bank of Ireland Asset Management Bansabadell BI Management (BankInvest) BlackRock Boston Common Asset Management Brewin Dolphin Bristol Zoo British Ecological Society Brown Shipley Investment Managers CajaMadrid Capital International Cats Protection League Cazenove Fund Management Chiswell Associates CIS Co-operative Bank Credit Suisse Dalton Nicol Reid Etica F & C Asset Management Fauna & Flora Federis Gestion d’Actifs FIDH FRR FTSE Geographical Association HSH Nordbank Inhance Investment Management Insight Investment Invesco Perpetual Johannesburg Stock Exchange (JSE) Joseph Rowntree Charitable Trust KBC Asset Management Kleinwort Benson L&P Financial Trustees Legal & General Investment Management Legg Mason Investment Council Lupus Alpha M & G Investment Management Macif Gestion Martin Currie Investment Management Merrion Investment Managers Methodist Church Central Finance Board Mondrian Investment Partners Morgan Stanley Nataxis Asset Management New Star Asset Management New Zealand Superannuation Fund • • • • • • • • • • • • • • • • • • • • • • • • • • Newton Investment Management Nomura Asset Management Norwegian Government Pension Fund Norwegian Red Cross Oxfam Pen-Sam PKA Plan International Prosecur Red Cross Australia Robeco Institutional Asset Management Royal Geographical Society Royal London Asset Management Santander Gestion de Activos Schroders Investment Management Scottish Widows Investment Partnership Setanta Asset Management Souls Fund Management St. Patricks Missionary Standard Life Investment Management Strathclyde Pension Fund Suntrup Portfolio Management Union Investment Unipension World Vision WFF 28 © EIRIS EIRIS USP Expert, Independent & Holistic Research Expert: Clear methodology designed with relevant stakeholders & centralised quality control © EIRIS Holistic & Flexible: EPM – data on wide range of issues Enabling Rankings, Screening & Engagement Independent: - Owned by EIRIS Foundation - Derives no income from corporate consultancy. 29 Contact details Stephen Hine Head of Responsible Investment Development 80 - 84 Bondway London SW8 1SF tel: 44 (0) 20 7840 5716 (direct) 44 (0) 20 7840 5700 (switchboard) fax: 44 (0) 20 7735 5323 web: www.eiris.org 30 © EIRIS