Corli le RouxApril 2011

Information Briefing: Annual Index Review Corli le Roux, Head of SRI IndexApril 2011

Highlights of Index evolution

Established May 2004

Fundamental principles

Enable SRI

Aspirational Benchmark

Facilitate Debate

Broad sustainability assessment

Triple bottom line

Governance

Deliberately developmental

Focus areas

Incremental thresholds

Current statistics

2004 2005 2006 2007 2008 2009 2010

Companies

participating74 58 62

72

(65

auto)

105

(103

auto)

109

(104

auto)

106

(102

auto)

Number of

constituents51 49 58 57 61 67 74

Not eligible - 1 1 - 1 1 1

Removed at

company request- - - - 1 - -

Performance by market cap

HEADLINE 2004 2005 2006 2007 2008 2009 2010

Top 40 31 32 34 34 36 34 36

Mid Cap 17 13 17 18 23 30 33

Small Cap 3 4 7 5 4 4 5

Total 51 49 58 57 61 68 74

Value proposition

Highlights imperatives of sustainability

Encourages best practice beyond compliance

Places local companies on par with international counterparts

Enhanced reputation

Enhanced stakeholder engagement

Framework for –

Risk management

Comprehensive reporting and disclosure

Engagement with investors

Recent developments

2007 – New model, international data provider, automatic universe

2008 – GEPF collaboration

2009 – Index moves to real time, Swix Index launched

2010 – Climate change introduced, local research partner, data sales launched

2011 – Higher threshold, environmental best performer level introduced

Eligibility

Base universe: FTSE/JSE All Share Index as at March 2011

Automatic assessment

2010 SRI Index constituents

Top 40

Mid Cap

Voluntary assessment

Small Cap

Ineligible if excluded from All Share at any time during process or after review

Eligibility (cont.)

Companies with structural complexities:

Holding and investment holding companies with no staff

o Policies and governance at holding level

o Subsidiary contributing most to revenue

Property funds

o Basic full assessment

o Where no employees, similar to investment holding companies

Criteria 2011: Outline

Structured along environment, society and governance (ESG)

Four areas of measurement

o Broad areas: environment, society, governance & related sustainability concerns

o Focus area: climate change

Within each area: Policy, Management and Reporting

o Policy statements and documents, strategies, undertakings, commitments – ideally publicly

available

o Management and performance: systems, implementation of systems, programs, targets,

objectives, monitoring and measuring of performance

o Reporting and disclosure: content – publicly available from 2012

Impact classification

High, medium, low

Activity-based, assessed relative to five key areas: climate change, air pollution,

water pollution, waste and water consumption

Minor amendments to clarify reporting criteria

Ensure cumulative nature of indicators

Supporting consistency of research

Criteria 2011: Environment

High impact: reporting

Removing optional coverage criteria

Text of environmental policy specified

Medium impact: no change

Low impact: reporting

Text of environmental policy specified rather than description of impacts

Policy and Reporting: Definition of “whole group” wrt coverage: >95%

Criteria 2011: Environment (cont.)

Criteria 2011: Society

No changes from 2010 criteria

Thematic approach

Core and desirable indicators

BEE

Only companies with South African operations

HIV/Aids

Only companies operating in high risk countries (including South Africa)

Criteria 2011: Governance

No changes from 2010 criteria

Thematic approach

Core and desirable indicators

Criteria 2011: Climate Change

Principles

Incremental

Risk assessment and management

No impact classification

Minor changes from 2010 criteria

Policy: Senior responsibility and Public commitment, Policy context (new)

Management: Any targets / goals

Reporting: Emissions disclosure, Scope, Methodology, Trend data (new)

Entry level threshold: Environment

Varies according to impact level, coverage and number of indicators met

Policy statement required to be public

Addressing all key areas

Distinguish between quantified and documented targets

Entry level threshold: Society

Majority of all indicators – half plus one

1/3 of indicators met must be core

One core from each of BEE and HIV/Aids (where applicable)

Entry level threshold: Governance

Majority of all indicators – half plus one

1/3 of indicators met must be core

Entry level threshold: Climate Change

Three indicators

Senior responsibility (portfolio specifically includes climate change mandate)

Public commitment to manage climate change impacts

Emissions disclosure (absolute or normalised) – public CDP submissions accepted

Best performer (BP) level

Meets

BP level in Environment

All core indicators in

o Society

o Governance and related sustainability concerns, including independent chair

All climate change indicators, except for trend data

BP level: Environment

Meet one or more of policy, management or reporting

Impact Policy Management Systems Reporting

HIGH 5 core plus 3 desirable (including ‘moves to environmental sustainability’)

6 indicators, (including quantitative objectives/targets); OR

ISO14001 OR EMAS registered.

4 core plus independent verification and 3 other desirable

MEDIUM

Policy publicly available, cover whole group plus All 5 core plus at least 1 desirable

OR 4 core plus 2 desirable

Depending on EMS coverage:6 indicators (including quantified targets) OR 5 indicators (including documented objectives and targets in all key areas); OR ISO certification or EMAS registration considered to meet all

Cover whole group including text of policy plus 1 more core and 1 desirable

LOWCover whole group plus 4 indicators, 3 of which core

Depending on EMS coverage, 4 or 6 indicators;

ISO certification or EMAS registration are considered to meet all.

Cover whole group including text of environmental policy plus 1 other

Process: Timeline overview

Review comprises second half of the year

Phase 1: EIRIS/USB review of public information – commences on 16 May

Profile mailing to companies between July and August

Phase 2: companies have three weeks to respond (EIRIS considers extensions on merit)

JSE conducts controversial engagements during September

EIRIS/USB incorporates feedback and perform QA during October

JSE conducts borderline engagements early November

Advisory Committee meets mid-November

Results announced end November

Process: Phase 1

Review of public information

Most recently available

Web sites, annual reports, etc.

Preliminary company profile compiled

General overview of business

Environmental impact classification

Assessment of public data against criteria

Profiles mailed to companies

Tranche 1: Monday 4 July

Tranche 2: Monday 25 July

Tranche 3: Monday 15 August

Process: Phase 2

Company response to preliminary profile

Respond directly on profile

o Where reporting advanced, most indicators met

o Mark up changes

o Provide evidence

Complete survey questionnaire in full or in part

o Where unsure of which information required to meet

o To extent necessary to meet ‘not met’ areas, or to improve ‘met’ areas by providing detail /

context

Process: Phase 2 (cont.)

Attach evidence

Return to original researcher

Final profiles sent with company results shortly before announcement

Borderline companies (BL)

Companies meeting most areas, failing marginally in one

Process:

JSE engages with BL company on specific area

o Three working days to respond

o JSE considers with Advisory Subcommittee

o JSE decides whether in / out

Repeat borderline issues

Number of times for BL limited by Ground Rules

Must show commitment to improve after second BL status

If not improvement by third BL status, excluded until additional criteria met

Controversial stories

Covers two elements

EIRIS news search covering specific areas

o Environmental violations, health & safety issues, major competition incidents, human rights violations, etc.

Stakeholder complaints

JSE filters for engagement

Engages with company on particular issue

Engagement will happen during course of review

Company has seven working days to respond

If excluded, re-entry criteria set

Final results to companies

Cover letter

Indicates individual company result and salient matters, e.g. relevant controversial

stories that were considered

Summary sheet

Indicates overall performance in relation to each area of measurement

Final profile

Publication of results

Public announcement

Media pack

Press release

Constituents

Best performers and consistent Best Performers

Data sales approach for 2011

Companies will be asked to opt in

Opt in companies to comment during Phase 2 on publication of confidential

information

Developments for 2012

Finalise approach to holding, investment holding and property investment

companies

May require engagement with relevant companies

Reporting criteria

From 2012, all reporting criteria must be found in public domain

Contact details

• JSE

– sri@jse.co.za

– Corli le Roux +27 11 520 7104

– Makhiba Mollo +27 11 520 7022

• EIRIS

– jse@eiris.org

– Charlotte Hine – Project Leader