ESG ISSUES

Environmental, Social and GovernanceFebruary 23, 2015

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ENVIRONMENTAL ISSUES

Biodiversity/land use

Carbon emissions

Climate change risks

Energy usage

Raw material sourcing

Regulatory/legal risks

Supply chain management

Waste and recycling

Water management

Weather events

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SOCIAL ISSUES

Community relations

Controversial business

Customer relations/products

Diversity issues

Employee relations

Health and safety

Human capital management

Human rights

Responsible marketing and R&D

Union relationship

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GOVERNANCE ISSUES

Accountability

Anti-takeover measures

Board structure/size

Bribery and corruption

CEO duality

Executive compensation schemes

Ownership structure

Shareholder rights

Transparency

Voting procedures

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CORPORATE VIEW ON ESG

93% of CEOs agreed with the statement - “demonstrating a visible and authentic commitment to ESG is especially important...to regain and build trust from the public and other key stakeholders, such as consumers and governments—trust that was shaken by the recent global financial crisis.”

Goldman Sachs found “research at both the corporate and university levels suggests that this next generation of employees and consumers have specific needs at work that are dramatically different from previous generations. High among these is a desire to align personal and corporate values. To attract and retain this group, we believe that companies need to provide rewards beyond financial gain.”

McDonalds is serving Fair Trade Coffee

Coca Cola is using plant-based bottles

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USING ESG FOR COMPETITIVE ADVANTAGE

Reducing Risks

Improving Performance Process innovation Product innovation

Reputation Attracting employees Attracting customers

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ESG PRACTICES AND STOCK PRICE

•More sustainable firms generally outperform less sustainable firms

•Stocks of well-governed firms out perform better than stocks of poorly-governed firms

•Good employee relations and employee satisfaction contribute to better stock market performance

•Using positive screens substantially outperforms negative screens