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1 northerntrust.com | © Northern Trust 2017 northerntrust.com | © Northern Trust 2017 Passive Investing with Impact Having Cost Efficient Impact NORTHERN TRUST ASSET MANAGEMENT Financial Investigator - The Evolving Landscape of ESG & Impact Investing Amsterdam. May 23, 2017 Mamadou-Abou Sarr Global Head of Environmental, Social and Governance Investing

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1 northerntrust.com | © Northern Trust 2017 northerntrust.com | © Northern Trust 2017

Passive Investing with Impact Having Cost Efficient Impact

NORTHERN TRUST ASSET MANAGEMENT

Financial Investigator - The Evolving Landscape of ESG & Impact Investing

Amsterdam. May 23, 2017

Mamadou-Abou Sarr

Global Head of Environmental, Social and Governance Investing

2 northerntrust.com | © Northern Trust 2017

A Few Words About Us

3 northerntrust.com | © Northern Trust 2017

NORTHERN TRUST ASSET MANAGEMENT A leading global investment manager with a client-centric culture rooted in a fiduciary heritage.

TOTAL ASSETS UNDER MANAGEMENT

World’s 13th largest

asset manager $1.0 trillion

TOTAL AUM*

Leveraging the strength of

Northern Trust

Global network of investment

professionals with deep expertise

Demonstrated ability to thrive in

various market environments

Progressive thought leadership

and unique insights

Solving complex global challenges

with innovative solutions

Focused on placing the needs

of our clients above all else

A TRUSTED PARTNER

Institutional 74%

Active $455B

Passive $472B

Multi-Manager

$53B

Other $21B

Equity $517B

Fixed Income $463B

Other $21B Wealth & Retail

26%

Asset Class

Style Client Type

*Represents total assets managed by Northern Trust as of March 31, 2017. The above rankings are not indicative of future performance. Unless otherwise noted, rankings are based on total worldwide assets under management of $875.3 billion as of December 31, 2015 by Pensions & Investments magazine’s 2016 Special Report on the Largest Money Managers.

4 northerntrust.com | © Northern Trust 2017

ASSET MANAGEMENT EXPERTISE Investment solutions and asset allocation informed by deep capital markets analysis. Comprehensive asset

class capabilities from passive and factor-based, to fundamental active and multi-manager.

GLOBAL PRODUCT VEHICLES

Collective Funds | Common Contractual Funds (CCF) | Common Funds | Exchange Traded Funds (ETFs) | Fonds vor Gemene Rekening (FGR) Investment

Company Variable Capital (IVCV) | Managed Accounts | Mutual Funds | Separate Accounts

Factor-Based

Active

Passive

Customized Indexing

Active

Passive

Cash Management

Hedge Funds

Private Equity

Natural Resources

Infrastructure

Real Estate

ESG

Multi-Manager

Investment Advisory

Bespoke

Strategic

Tactical

Equity Fixed

Income

Alternatives Solutions Asset

Allocation

Forward-looking, historically aware investment approach

Capital Markets Expertise

5 northerntrust.com | © Northern Trust 2017

A GLOBAL LEADER IN ASSET MANAGEMENT Providing innovative solutions to meet client objectives has earned the confidence of global investors.

Worldwide Assets1

13TH LARGEST

Worldwide External Institutional Client Assets

9TH LARGEST

Sovereign Entities

2ND LARGEST

Pension Funds

5TH LARGEST

Central Banks

3RD LARGEST

Actively Managed Assets

15th LARGEST

Passively Managed Assets

4TH LARGEST

ESG Assets

13TH LARGEST

IPE TOP ASSET MANAGER RANKING

Factor Investing

Leaders in factor-based

investing since 1994

Best Smart Beta Strategies2

Liquidity Solutions

5th Largest cash manager

for external clients

Efficient Market

Exposure

Skilled management of

exposures and customized

solutions across asset classes

Innovative Product Structures

Leader in effective product structures for European investors

Common Contractual Funds

(CCF)

Fonds vor Gemene Rekening

(FGR)

ESG

25+ Years Experience

Managing

Socially Responsible Portfolios

UNPRI Signatory

Unless otherwise noted, rankings are based on Investments & Pensions Europe June 2016 Top 400 Asset Managers Survey, assets managed for external clients. 1Worldwide assets under management. 2Asia Asset Management, 2015. The above rankings are not indicative of future performance.

6 northerntrust.com | © Northern Trust 2017

NORTHERN TRUST APPROACHES TO INTEGRATING ESG

1

Benchmark to

Sustainable and

Responsible

Investing Indices

2

Custom ESG

indices designed

by Northern Trust

and MSCI ESG

Research

3 Engineered

Equity strategy

4 Client-directed

screens

Engagement

7 northerntrust.com | © Northern Trust 2017

Down To Business

8 northerntrust.com | © Northern Trust 2017

ESG INVESTING IN EUROPE EuroSIF conducts studies every two or three years, where it asks investors about their sustainable

investing strategies and calculates CAGR for different types

Data from the 2016 EuroSIF report

20,269.00

58,961.00

353,555.00

1,900,040.00

3,275,930.00

3,633,794.00

6,853,954.00

98,329.00

145,249.00

493,375.00

2,646,346.00

4,270,045.00

5,087,774.00

10,150,595.00

0 2000000 4000000 6000000 8000000 10000000 12000000

Impact Investing

Sustainability Themed

Best-in-Class

ESG Integration

Enagagement & Voting

Norms-based Screening

Exclusions

2015 2013

9 northerntrust.com | © Northern Trust 2017

THE STRUCTURE OF ESG INVESTMENTS

Impact

& Thematic

Best-in-class screenings or tilts based on ESG ratings or their

components

Norms-based exclusions (UN Compact Principles, ILO Guidelines, etc.)

Values-based exclusions (Tobacco, Alcohol, Weapons, Pornography, Nuclear, etc.)

Scale of Implementation

Evolution of SRI: Complexity, Availability of data, Concentration

10 northerntrust.com | © Northern Trust 2017

IMPACT INVESTING OR IMPACTFUL

INVESTMENTS

11 northerntrust.com | © Northern Trust 2017

HOW TO IMPLEMENT THIS?

Determine Values

Assess Portfolio Risk

Establish Goals

Implement

What would

your client like

to achieve?

What is the

greatest ESG

risk in your

client’s

portfolio?

Investment

and impact

performance

goals & time

horizon

Strategy

selection and

implementation

12 northerntrust.com | © Northern Trust 2017

DETERMINE VALUES: UN SUSTAINABLE DEVELOPMENT GOALS 17 SDGs were established in 2015. UN also defined 169 targets to orient the world on a path towards

sustainable development over the next 15 years

Source: https://sustainabledevelopment.un.org

13 northerntrust.com | © Northern Trust 2017

ASSESS PORTFOLIO RISKS: “TRAGEDY OF TRACKING ERROR” Higher ESG impact goes hand in hand with higher active risk (tracking error)

As of March 31, 2016. Source: Northern Trust, MSCI. For illustrative purposes, we create a frontier of 25 portfolios

that each minimizes tracking error for a given level of Carbon Intensity reduction (starting with zero reduction and

ending with 95% reduction. No other constraints were applied.

-100%

-90%

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

0.0% 0.2% 0.4% 0.6% 0.8% 1.0%

Ca

rbo

n In

ten

sity R

ed

uctio

n (

%)

Ex Ante Tracking Error (%)

14 northerntrust.com | © Northern Trust 2017

ESTABLISH GOALS Approached to ESG investing vary depending on the overall investment strategies

Prepared to take

active risk Avoiding the worst Generic ESG

Willing to keep

passive exposure Selecting the best

Specific

themes/targets

15 northerntrust.com | © Northern Trust 2017

IMPLEMENT: TARGETING SDGS PASSIVELY

• Choose a fund with a comprehensive

approach to engagement to target

numerous goals

• Look for index funds which deliver

targeted impact without impeding

performance

16 northerntrust.com | © Northern Trust 2017

Optimization • Market-cap of index will be

at least 50% of parent

• Sector/ Country weights

Carbon emission exclusions • Top 10% of securities with high

emissions*

Potential Carbon exclusions • Constituents ranked by potential

carbon emission and high

emitters are eliminated until

potential emission is 50% of the

benchmark*

ESG Universe

MSCI Custom Low Carbon

Leaders ex REITs 10/50 Index

MSCI Emerging Markets Index

(832 securities)

Excluding REITs

Carbon

emission

reduction

Potential

Carbon

reduction

NT Emerging Markets

Low Carbon Optimized

Equity Index Fund

CASE STUDY 1: TARGETING CLIMATE ACTION WITH A PASSIVE SOLUTION

* See Appendix 1 for more details on carbon risks

17 northerntrust.com | © Northern Trust 2017

NORTHERN TRUST ESG FUNDS AND STRATEGIES: CARBON INTENSITY Carbon Intensity reduction is one of the key impact areas; it is a target of the Low Carbon Indices and

strategies, but to a certain extend can be an outcome of ESG indices and strategies

Source: Northern Trust, MSCI, as of 21 Oct 2016. Tracking Error is ex-ante using GEM2 Risk Model

Benchmark MSCI Emerging Markets

Portfolio NT EM Low Carbon Leaders

CO2 Intensity

(t/USD million sales) 312.47 157.54

Total Potential Emissions Intensity (t/USD million mkt cap)

13,715.31 5,385.27

49.6% reduction

60.7% reduction

0.76% Tracking Error

18 northerntrust.com | © Northern Trust 2017

CASE STUDY 2: PROMOTING SUSTAINABLE CITIES WITH PASSIVE FUND

Source GRESB and Northern Trust 2017

Global Rank

Number Companies %

Weight Northern

Trust/GRESB

Index

5 41 26.28% 30.21%

4 36 23.08% 39.63%

3 23 14.74% 14.13%

2 30 19.23% 16.02%

1 26 16.67% 0.00%

TOTALS 156 100% 100%

19 northerntrust.com | © Northern Trust 2017

HAVING IMPACT WITH ENGAGEMENT Climate

Change

Pollution &

Waste Mngt

Water Bribery &

Corruption

Conduct &

Culture

Cyber

Security

Diversity Human

Rights

Labour

Rights

Supply

Chain Mngt

NO POVERTY ■ ■ ■ ■

ZERO HUNGER ■ ■ ■

GOOD HEALTH/WELL-BEING ■ □ □

QUALITY EDUCATION □ ■

GENDER EQUALITY □ □ ■

CLEAN WATER/SANITATION ■ □ □

AFFORDABLE & CLEAN ENERGY □ ■

DECENT WORK & ECONOMIC GROWTH □ ■ □ □

INDUSTRY, INNOVATION & INFRASTRUCTURE ■ ■ ■ ■

REDUCED INEQUALITIES ■ ■ ■

SUSTAINABLE CITIES & COMMUNITIES ■ □ ■

RESPONSIBLE CONSUMPTION & PRODUCTION □ □ ■

CLIMATE ACTION □

LIFE BELOW WATER □ ■

LIFE ON LAND □ ■ ■

PEACE, JUSTICE & STRONG INSTITUTIONS □ □ ■ ■ ■

PARTNERSHIP FOR THE GOALS ■

□ Direct ■ Indirect

Source:

Source: Hermes EOS, Q1 2017

CONCLUSION

Ultimately with ESG there is no one way for

investors to make an impact

• MAXIMIZING INVESTOR IMPACT ON PUBLIC COMPANIES

CAN TAKE MANY DIFFERENT FORMS – ENGAGING AS

AN INVESTOR CAN HAVE MORE IMPACT THAN

SCREENING OUT

• IN CHOOSING THE SPECIFIC FORM IT IS IMPORTANT TO

DEFINE HOW NARROW OR HOW BROAD, AND HOW FAR

FROM THE MAIN BENCHMARK YOUR CLIENT IS

COMFORTABLE TO BE

• THERE ARE COST EFFECTIVE SOLUTIONS THAT

OPTIMIZE INVESTOR IMPACT TAKING THE

CONCENTRATION CONSIDERATIONS INTO ACCOUNT

21 northerntrust.com | © Northern Trust 2017

Appendices

22 northerntrust.com | © Northern Trust 2017

Graphics

What’s this layout for?

Plain slide without a text box –

used for inserting graphics e.g.

pies, bars or images

APPENDIX 1. DISTRIBUTION OF CLIMATE RISKS BY SECTORS

Source: MSCI, Northern Trust. As of 31st May 2016

• Carbon intensity represents carbon emissions

normalized by $MM sales

• Carbon intensity is concentrated in Utilities, Materials,

and Energy

• Total potential emissions are normalized by $MM

market cap

• Energy and Materials sectors own the bulk of fossil fuel

reserves that contribute to total potential emissions

0%5%

10%15%20%25%30%35%40%45%50%

% Sector Contribution to Carbon Intensity

% Sector % Emissions Intensity

0%

10%

20%30%

40%

50%

60%

70%

80%

% Sector Contribution to Total Potential Emissions

% Sector % Reserves Intensity

23 northerntrust.com | © Northern Trust 2017

NORTHERN TRUST ESG FUNDS AND STRATEGIES: CARBON INTENSITY Carbon Intensity reduction is one of the key impact areas; it is a target of the Low Carbon Indices and

strategies, but to a certain extend can be an outcome of ESG indices and strategies

Source: Northern Trust, MSCI, as of 21 Oct 2016. Tracking Error is ex-ante using GEM2 Risk Model

Portfolio Benchmark Tracking

Error

Portfolio

Index CO2

Intensity

(t/USD

million

sales)

B’mark CO2

Intensity

CO2

Intensity

Reduction

Portfolio

Total

Potential

Emissions

Intensity

(t/USD million

mkt cap)

B’mark Total

Potential

Emissions

Intensity

(t/USD

million mkt

cap)

Total

Potential

Emissions Reduction

NT EM Custom ESG MSCI Emerging

Markets 1.00% 300.38 312.47 3.9% 8,082.45 13,715.31 41.1%

NT World Custom ESG MSCI World 0.34% 206.67 206.71 0.0% 2,218.40 2,766.58 19.8%

NT Europe Custom ESG MSCI Europe 0.80% 168.81 173.37 2.6% 3,260.24 4,604.33 29.2%

NT EM Low Carbon

Leaders MSCI Emerging

Markets 0.76% 157.54 312.47 49.6% 5,385.27 13,715.31 60.7%

NT Quality ESG MSCI World 1.28% 127.97 206.71 38.1% 574.55 2,766.58 79.2%

NT Quality Low Carbon MSCI World 1.03% 40.76 206.71 80.3% 466.83 2,766.58 83.1%

24 northerntrust.com | © Northern Trust 2017

IMPORTANT INFORMATION This material is directed to eligible counterparties and professional clients only and should not be relied upon by retail investors. This presentation is intended only for the exclusive

benefit and use of our clients. Northern Trust and its affiliates may have positions in, and may effect transactions in, the markets, contracts and related investments described herein, which

positions and transactions may be in addition to, or different from, those taken in connection with the investments described herein. The information in this presentation reflects prevailing

market conditions and our judgment as of this date, which are subject to change. Past performance is no guarantee of future results. All material has been obtained from sources believed to

be reliable, but the accuracy, completeness and interpretation cannot be guaranteed. This presentation is for your private information and is intended for one-on-one use with current or

prospective clients of Northern Trust. The information does not constitute investment advice or a recommendation to buy or sell any security and is subject to change without notice

Issued by Northern Trust Global Investments Limited (NTGIL). NTGIL is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Registered in

England 03929218. Registered Office: 50 Bank Street, London E14 5NT.

Northern Trust Asset Management is composed of Northern Trust Investments, Inc., Northern Trust Global Investments Limited, Northern Trust Global Investments Japan, K.K., NT Global

Advisors, Inc., 50 South Capital Advisors, LLC, and personnel of The Northern Trust Company of Hong Kong Limited and The Northern Trust Company. For Asia Pacific markets, this

material is directed to expert, institutional, professional and wholesale investors only and should not be relied upon by retail clients or investors.

Northern Trust Global Investments Japan, K.K. is regulated by the Japan Financial Services Agency. The Northern Trust Company has a branch in China mainly regulated by the China

Banking Regulatory Commission, People’s Bank of China and State Administration of Foreign Exchange. The Northern Trust Company of Hong Kong Limited is regulated by the Hong Kong

Securities and Futures Commission. In Singapore, Northern Trust Global Investments Limited (NTGIL), Northern Trust Investments, Inc. and The Northern Trust Company of Connecticut

(NTCC) are exempt from the requirement to hold a Financial Adviser's Licence under the Financial Advisers Act and a Capital Markets Services Licence under the Securities and Futures Act

with respect to the provision of certain financial advisory services and fund management activities. In Australia, The Northern Trust Company of Hong Kong Limited (TNTCHK) is exempt

from the requirement to hold an Australian Financial Services Licence under the Corporations Act. TNTCHK is authorized and regulated by the SFC under Hong Kong laws, which differ from

Australian laws.

Important Information Regarding Hypothetical Returns- Where hypothetical portfolio data is presented, the portfolio analysis assumes the hypothetical portfolio maintained a consistent asset

allocation (rebalanced monthly) for the entire time period shown. Hypothetical portfolio data is based on publicly available index information. All information is assumed to be accurate and

complete but is not guaranteed.

Hypothetical portfolio data contained herein does not represent the results of an actual investment portfolio but reflects the historical index performance of the strategy described which were

selected with the benefit of hindsight. Components of the hypothetical portfolio were selected primarily utilizing actual historic market risk and return data. If the hypothetical portfolio would

have been actively managed, it would have been subject to market conditions that could have materially impacted performance and possibly resulted in a significant decline in portfolio value.

As of 03/31/17, Northern Trust Corporation had assets under management totalling $1.0 trillion. For purposes of compliance with the Global Investment Performance Standards (GIPS®), we

have defined our firm as Northern Trust Asset Management Services, a subset of Northern Trust Asset Management, and includes those investment products managed by NTI, NTGIL,

NTGIJ, and TNTC that are distributed through national channels. As of 03/31/2017 Northern Trust Asset Management Services had assets under management totalling $804.5 billion.