Active Earth Investment Management

Combining performance and sustainability

TBLI Conference Europe 2011

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Combining performance and sustainability

Who target high-quality risk-adjusted returns that meet Responsible Investment criteria

Using a powerful investment methodology and system platform (SEVMA*)

Which fully integrates sustainability risks and opportunities out of economic conviction

* Sustainable Enterprise Value Multiple Analysis

We are a team of experienced investment professionals:

Performance

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Simulation results for Global Absolute Fund – June 2000 to August 2011

* Long/short equity index, source: www.hedgefund.net

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Sustainability

INVESTOR BENEFITS

We have conducted a rigorous study on the impact of sustainability integration on portfolio Sharpe Ratios

Study parameters:

Global and European long/short portfolios tested

Both broad and narrow universes

Time period – Jan 2005 to May 2011

ESG data compiled from leading providers

Methodology:

Long/short portfolio of highest/lowest SEVM’s

All SEVMs (post-sustainability integration)

Portfolios rebalanced six-monthly

Asset allocation determined by SEVM long and short hurdles

Summary conclusion:

Improved Sharpe Ratios in the majority of the study portfolios

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Quality This measure incorporates a longer-term assessment of returns and fundamental risk Price This is a consistent and conservative valuation measure, independent of funding choices Quality relative to Price This highlights which stocks offer high-financial reward relative to fundamental risk

Sustainable Enterprise Value Multiple (SEVM)

QUALITYAE Across-the-cycle returns on capital

Fundamental risk =

PRICEAE Market value of capital

Book value of capital =

SEVM Sustainable Enterprise Value Multiple = = QUALITYAE

PRICEAE

SEVMA investment methodology

SEVMA takes a longer-term view of fundamental risks and returns

SEVMA delivers high-quality asymmetric returns across the market cycle

Active Earth valuation screen of global universe

Long investments SEVMs > 1 QualityAE > PriceAE

Source: Active Earth, as at 28th of April 2011

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SEVMA – performance driven

Short investments SEVMs < 1 PriceAE > QualityAE

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Financial quality

Very high Very low

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Measuring quality – our Quality Matrix

Active Earth eligible longs

Financial quality

Very high Very low

Bu

sin

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qu

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y

Ver

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hig

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Active Earth eligible shorts

Active Earth focus on high-quality longs and shorts

SEVMA systematically measures a company’s combined business and financial quality

Active Earth’s extensive back-tests have proven that the best investment Sharpe Ratios are achieved by investing (long and short) in higher-quality companies

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Sustainability is an economic issue

There will be winners and losers in this changing economic landscape. We believe that

understanding the sustainability risks and opportunities are key to successful investing

Sustainable quality ensures continued shareholder value creation

Sustainable companies ROCE & WACC

Unsustainable companies ROCE & WACC

ROCEAE

WACCAE

%

Diminishing QUALITYAE

Enhancing QUALITYAE

QUALITYAE = ROCEAE / WACCAE

Changing investment landscape

How Active Earth integrates sustainability

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Sustainability study – long/short conclusions

INVESTOR BENEFITS

How sustainability integration affects our investment process (based on study results):

1. Circa 15% of the universe were excluded due to unacceptable changes in QualityAE or controversial industries

2. Long investment decisions are driven by a high ratio of QualityAE to PriceAE

Sustainability adjustments have a material effect on QualityAE

25-30% of actual investments decisions changed post-sustainability integration

Final investment portfolio has a lower exposure to sustainability risks and higher exposure to

sustainability opportunities

3. Short investment decisions are driven by a high ratio of PriceAE to QualityAE

This is predominantly due to our focus on looking for high-quality alpha hedges rather than

trading shorts

Sustainability integration had little effect on investment decisions

Less than 5% of actual investments decisions changed post-sustainability integration

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Sustainability study – final conclusions

INVESTOR BENEFITS

Key conclusions:

1. Material impact on investment decisions result even though only modest pricing of

sustainability risks and opportunities

2. Improved Sharpe Ratios in the majority of the study portfolios

3. Trend of sustainability impacting investment decisions expected to continue as market

awareness of sustainability issues increases and sustainability imperatives hit home –

our home!

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Appendix

Active Earth team

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Daron Sheehan

Managing Director

Over 20 years experience in the financial industry and strong investment track record

Co-founded the successful London-based global investment company Metage Capital in 1998

Andrew Dykes

Head of Investments

Over 15 years experience in the financial industry and strong investment track record

Previously launched an innovative sustainable fund at Berenberg Bank

Hon. Peregrine Moncreiffe

Director of Investment Strategy

Over 30 years experience working internationally at a senior level in global investment firms

Chairman of North Atlantic Smaller Companies Investment Trust Plc

Lindsay Whitelaw

Director

Over 20 years experience in the financial industry and strong investment track record

Co-founded the successful UK fund management company Artemis Investment Management

Nabil Chaya

Director

Over 20 years experience working internationally at a senior level in the financial industry

Former senior executive at Bank Audi with key external facing investor relations role

D. Michael Adams, Global Marketing

Craig Doran, Head of Information Technology

Kyra Sheehan, Client Services

Team of three investment analysts

Active Earth’s investment management platform

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A powerful investment platform for the unique SEVMA methodology

The SEVMA Platform is an integrated screening, portfolio construction & risk management system

Employs consistent valuation measures for stocks, sectors & countries across market cycles

SEVMA PLATFORM

Top-down (aggregates) Bottom-up (stocks)

Pre-screening N/A 15,000

Financial database construction

Sustainability database construction

Live screening 800 3,300

Sustainability integration (Q4 2011)

Historical analysis (from June 2000)

Portfolio construction and optimisation

Attribution and risk management