Liverpool, 22nd May 2014

Accentuate the Positive(s)

Presented by Neville White – Head of SRI Policy & Research

Ecclesiastical Investment Management Ltd

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Ecclesiastical Investment Management Ltd

Part of the Ecclesiastical Insurance Group founded 1887

Owned by All churches Trust – all distributable profits to good causes Top 10 UK corporate donor*

Ecclesiastical launched its first retail SRI fund in 1988 Pioneer of SRI in the UK

Suite of six ethical retail and charity funds – the ‘Amity’ range

Total Assets Under Management £2.25bn**

Award winning, experienced team with a strong retail proposition

*Source: The Guide to UK Company Giving 2013, Directory of Social Change.**Source: Ecclesiastical as at 31/12/13

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Investing Positively

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The Many Models of Socially Responsible Investing (SRI)

SRI is an umbrella term which encompasses many approaches including ethical, responsible, sustainable, and environmental, social and governance (ESG)

Positive criteria emerge after 2000 following changes to UK pensions legislation

Negative criteria ‘ethical’ adopted by faith investors applying a moral dimension to investing

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Applying negative criteria is (relatively) straightforward

Identifies moral imperatives, but adds little value to process

Does not allow investor to work for change

Does not allow engagement to raise business standards

What would a sustainable tobacco company look like?

Applying Negative Criteria to a Portfolio

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Supports construction of holistic, integrated investment methodology

Represents a ‘complete’ active strategy

Material ESG risks should be seen as core management issues

Adds value

Reduces long-term risk

Supports long-term investment horizons

Provides engagement platform for change

Dovetails with wider UK Stewardship Code responsibilities

Advantages of Applying Positive Criteria to a Portfolio

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Negative Screen

10% Threshold:

Alcohol Production Gambling Operations Pornographic or Violent Material Strategic Armaments Tobacco Production

Other Factors:

Animal Testing (cosmetics) Intensive Farming

Positive Screen

Business Practices Community Relations Corporate Governance Human Rights Labour Relations Environmental Management Healthcare Education Urban Regeneration

Positive criteria may serve as a brake on investment; e.g. no oil or mining

Our SRI Process – an Integrated Approach

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Positive Screen

Business Practices Community Relations Corporate Governance Human Rights Labour Relations Environmental Management Healthcare Education Urban Regeneration

Each stock is monitored and assessed against the nine positive criteria

Essentially we are looking for each stock to earn its place in the portfolios

The investment case and the sustainability case are given equal weight

Six areas of business behaviour (risk)

Three sustainable sectors

Identifies engagement need

BUT how do you assess the environmental, social and governance positives?

Our Nine Positive Investment Pillars

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Environmental Social/Governance Air & Water Pollution Access to Medicine

Biodiversity Affordable Healthcare

Ozone-Depleting Chemicals Equal Opportunities

Pesticides Bribery & Corruption

Climate Change Health & Safety

Resource Productivity Human Rights

Environmental Management Child Labour

Energy Labour Standards

Transport Supply Chain Management

Tropical Hardwood Community Giving

Nuclear Power Community Initiatives

Mining & Quarrying Corporate Governance

Waste & Toxic Chemical Management Diversity

Water Management Executive Remuneration

Unlike negative criteria, positives can be subjective and challenging

Materiality, and risk weighted factors of primary importance

Evaluating Environmental, Social and Governance (ESG) Positives

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EIM employs Sustainalytics as its principal ESG data research provider

One of several distinctive ESG providers that analyse ESG risk (EIRIS; MSCI etc.)

Quantitative and qualitative data; controversies monitor; peer group ranking; ESG ratings

Provides first stage ‘data dump; and materiality analysis

Secondary research conducted in house including engagement

Research, Research, Research

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SRI Company Example – Boustead Singapore

Long established high end engineering company

Overlooked due to its complexity

Exposure to global energy and water infrastructure spending, industrial property

Attractive business model

Company and management stability

Strong balance sheet and order book

Deep value play on 12M Forward PE of 15.8X and yield of 2.7%

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Boustead Singapore – Green Tech Leader

International water & wastewater engineering specialist

800 industrial and municipal treatment plants in 58 countries Wastewater treatment & safe return Municipal – providing clean drinking water Industrial – improving resource efficiency

Water treatment solutions for all processes

Disinfection Deionisation Membrane Degasification

Engineers water solutions for oil & gas, chemicals, power generation, electronics, food & beverage and tourism sectors

Leaders & award winners in green building design and operation

Health and safety leaders and award winners Championing H&S with suppliers and contractors

Strong sustainability play: water & treatment theme

Business Practices Community Governance

Education Environmental Healthcare

n/a n/a Human Rights Labour Relations Urban Regeneration

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Monitoring the Direction of Travel - Statoil

Originally a regional oil company

Strong management, leaders in health safety & carbon capture

Low human rights and environmental risks

Business changed direction

Seeking to exploit oil sands, arctic drilling and diversify geographic exposure across Africa

Dramatically changed risk profile of company

Whilst still a ‘best in class’ option, disinvested from Amity Funds

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Engagement Case Study

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Investing in Bullion – is it Ethical?

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Mining and extractives avoided as part of failing positive criteria tests

Fund managers had appetite to invest in an ETF bullion fund for diversification reasons

Ethically, bullion could be viewed as ‘benign’ i.e. a store of value

But we asked – where does the gold come from and is it ethical?

c40% of supply is recycled

c15% is artisanal or illegal

Investing in Bullion – is it Ethical?

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The rise and rise of Gold ETFs

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Unique Characteristics of Gold

Investment

Store of Value 50% Jewellery

10% Industrial

Fuelling Conflict

Dirty Gold

Multiple Participants

15% Artisanal Mines

Mainstream Mines

Traceable

Toxicity

Human Rights

Corruption

Waste

Pollution

Parallel Currency

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We engaged intensively with the World Gold Council

The only investor to engage with the WGC on conflict free gold

Industry increasing its efforts around eliminating the worst practices

Kimberley rejected as a model as gold is not easily identifiable

Industry started from scratch on a new verification and accreditation standard

Conflict Assessment

Company Assessment

Commodity Assessment

Gold – Accentuating the Positive

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EIM led investor engagement with WGC on global conflict-gold standard

Held two seminars for investors in London to outline the Standard

Offered advice on draft Standard

Concluded Gold ETF could be held given the contribution of engaging

Engagement and informed contribution significantly added value to our investment

We, most importantly…

Ensured high levels of due diligence and research were employed for clients investing in the Amity Funds.

Gold – Accentuating the Positive

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Thank You!

Questions and Answers

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Support Team Tel: 0845 604 4056Email: ifa@ecclesiastical.com www.ecclesiastical.com/ifa

Chris King – Regional Sales Manager+44 (0)7767 343 916chris.king@ecclesiastical.com

Ecclesiastical Investment Management Limited (EIM) Reg. No. 2519319.  Registered in England at Beaufort House, Brunswick Road, Gloucester, GL1 1JZ, UK.  EIM is authorised and regulated by the Financial Conduct Authority (FCA No. 527473).

This presentation has been prepared by Ecclesiastical Investment Management Limited for Financial Advisers, other intermediaries and other investment professionals only. It is not suitable for private individuals.

This document has been produced for information purposes only and as such the views contained herein are not to be taken as an advice or recommendation to buy or sell any investment or interest thereto. A full explanation of the characteristics of the investments is given in the Key Investor Information Document (KIID). Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are unless otherwise stated, Ecclesiastical Investment Management own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all-inclusive and are not guaranteed as to accuracy. There is no guarantee that any forecast made will come to pass. The value of any investment, and the income generated from it may fall as well as rise and will be affected by changes in interest rates, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which it invests. Past performance should not be seen as an indication of future performance.