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EIRIS
7 September 2009Greeneye SRI Seminar
Signatory to the
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Introduction to EIRIS
• EIRIS is an established not for profit research organization specializing in environmental, social and governance research on publicly listed corporations.
• Founded 25 years ago, EIRIS was created as a collaborative research project to assist a group of churches & charities put their principles into practice.
• Our mission is to conduct high quality research on extra-financial issues to encourage improved social and environmental performance.
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EIRiS FoundationGoverned by Trustees
Ethical Investment Research Services (EIRiS) 100% owned commercial subsidiary
Governed by Company Board
Governance of EIRIS
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A Short History
• 1983 – Founded by churches and charities interested in issues related to South Africa
• 1990 – EIRIS helps launch the UK Social Investment Forum
• 2000 – Launches Ethical Portfolio Manager
– Provides research for Norwegian Petroleum fund
– Goes global with research and sales partners across Europe, North America, Asia and Australia
• 2001 – Launch of FTSE4Good Indices, supported by EIRIS research
• 2004 – EIRIS announces the opening of offices in the US and Japan in 2005.
• 2005 – Launch of Convention Watch product
• 2006 – Launch of country sustainability ratings
• 2008 – Launch PRI & Climate change toolkits
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Our Staff & EIRIS Network of Partners
• Our 50+ staff are highly educated and come from a variety of professional and academic backgrounds
• Our analysts are frequently called upon for their expertise in methodology development, reporting standards and social & environmental best practice
• We can build customized teams according to the specific needs of the client – ensuring a high level of competency and project specific solutions
• EIRIS works with partner organisations to gain local knowledge, language skills and provide extensive additional resource
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Short-term performance vs. long-term sustainability • Increasing number of
investors concerned with ESG related risks
• Conflicts over ESG and fiduciary duty still remain (common law jurisdictions)
• Long term nature of ESG risks conflicts with short term measurement of fund manager performance
Source: www..cartoonstock.com
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Helping clients
Provision of Due Diligence services
For integration
For stock selection
For Engagement
positive screening
negative screening
tilting portfolios
Provision ESG data
& advice
Carbon profile
Engagement reviews
Sustainability report card
PRI report card
ID of risks & opportunities
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What data do we hold?
a) Coverage
Note larger coverage available on Controversial weapons and news services
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• Human rights• Labour standards• Supply chains• Indigenous rights
• Equal opps• Training• Health & safety• Trade unions
• Risk management• Specific sector risks• E.g. Access to medicine
• Military• Nuclear power• Animal testing• GMOs• etc
• Chemicals of concern• Sustainable timber• Product Stewardship• Transport
• Alcohol• Tobacco• Gambling• ‘Pro-life’
‘Sins’
SEE risk
ConventionWatch
Other involvements
Productand
process
PolicySystems
ReportingPerformance
BiodiversityClimate Change
Human rights
Customers &suppliers
Community
Employees
Board EthicsBribery &Corruption
Board Structure &
Practice
StakeholderResponsibility
Governance
Soci
al / S
takehold
er
Specifi
c conce
rns
Environment
EIRIS
criteria
= Risk / impact linked assessments
b) Criteria
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Most clients access data via EPM = flexibility
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Climate Change Toolkit
3 Products:• Carbon Profile
– To identify risks in a portfolio
• Carbon Engager– Encourage companies to address climate
change risks
• Carbon Risk factor– Quantify carbon risk
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Example Carbon Profile
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Carbon Engagement assessment
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• Score for each company on a scale from zero to 100
• Below 50 considered unmitigated risk
• Above 50 risk is considered mitigated
• Above 75 considered a ‘carbon solutions company’
Carbon Risk Factor
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Case Study
• Asset Management arm of Lloyds Banking Group• Two SRI Retail funds – SWIP Environmental
Investor and SWIP Ethical Fund • Two carbon profile reports completed on
Environmental fund • Twice as many companies in portfolio have
adopted a ‘good’ carbon strategy as benchmark• Advice on engaging with high impact companies
in portfolio
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PRI Toolkit
3 Products:• EIRisk
– To integrate ESG considerations into investment mangement
• UNGC Engager– Encourage companies to address global compact issues
• Report Monitor– Improving Corporate ESG reporting
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Case Study
• 5th largest insurance group globally• PRI signatory • Manage institutional and retail funds in
accordance with responsible investment guidelines
• Use Global Compact Engager to flag ESG risks facing companies for portfolio managers
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Breach result identifies companies with unaddressed (No evidence) Convention Watch allegations
Companies that are ‘low risk’ in all areas are identified separately
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EIRisk (ctd.)
As well as generating a result and a score for each company, the EIRisk policy will come with a secondary policy identifying High/Medium/Low risk companies based on combination of issues:
Company name
Sector EIRisk rating
Total score Risk level
Co A Mining Risks mitigated
23 High
Co B Mining Some weak areas
10 High
Co C Media Some weak areas
2 Low
Same result but different risk level – may want to treat them differently
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Convention Watch
• Covers 5 main issue areas (reflecting UN Global Compact) • Enables investors to identify allegations of company
breaches of the spirit of international conventions on human rights, labour standards, the environment, corruption and landmines
• Quarterly reports• Available on paper or though EIRIS EPM software• 2,800 companies researched + bespoke• Each company with allegations is contacted for their
response• Transparent methodology and thorough research process
using a wide range of sources
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Case study: ATP
• Danish state pension fund 4.5 Million members, assets approx €40 Billion
• Recently established ethical committee• International norms-based approach• Seeking severe or repetitive allegations
– Do the allegations represent one-off issue or management failure?
• Combined approach: exclusions and watch list
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How is this applied at ATP?
• Quarterly EIRIS reports• Internal analysis – examples:
– Watch list 1: Single issue (acceptable) – Watch list 2: Varied repeated issues i.e. 1 addressed, 1
not addressed (acceptable)– List 3: Repeated breaches i.e. 2 not addressed
(unacceptable)
• May disagree with EIRIS assessment• Ethical committee approval
– Case by case evaluation and final decision
• Exclusions made on unacceptable cases
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Using EIRIS Research
Screening
EngagementGovernance
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Engagement = Active Ownership
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Governance
• Social, environmental and (SEE) issues relate to corporate governance– Increased interest in how board
manages risk and reputation – Association of British Insurers (ABI)
guidelines: assessing the board– SEE risk: impact on long-term
profitability – Investors want disclosure on risk
management – SEE risk affects share price
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Public Client List includes: Over 100 Institutional clients + index providers, HNW individuals and charitable organisations
ACT Pension Fund AEGON Asset Management AIB Investment Managers Allianz Global Investors France AMP New Zealand ASB Community Trust ATP Australian Conservation Foundation AXA Investment Managers Bank fuer Kirche und Caritas Bank of Ireland Asset Management Bansabadell BI Management (BankInvest) BlackRock Boston Common Asset Management Brewin Dolphin Bristol Zoo British Ecological Society Brown Shipley Investment Managers CajaMadrid Capital International Cats Protection League Cazenove Fund Management Chiswell Associates CIS Co-operative Bank Credit Suisse Dalton Nicol Reid Etica
• Newton Investment Management• Nomura Asset Management• Norwegian Government Pension Fund• Norwegian Red Cross• Oxfam• Pen-Sam• PKA• Plan International• Prosecur• Red Cross Australia• Robeco Institutional Asset Management• Royal Geographical Society• Royal London Asset Management• Santander Gestion de Activos• Schroders Investment Management• Scottish Widows Investment Partnership• Setanta Asset Management• Souls Fund Management• St. Patricks Missionary• Standard Life Investment Management• Strathclyde Pension Fund• Suntrup Portfolio Management• Union Investment• Unipension• World Vision• WFF
F & C Asset Management Fauna & Flora Federis Gestion d’Actifs FIDH FRR FTSE Geographical Association HSH Nordbank Inhance Investment Management Insight Investment Invesco Perpetual Johannesburg Stock Exchange (JSE) Joseph Rowntree Charitable Trust KBC Asset Management Kleinwort Benson L&P Financial Trustees Legal & General Investment Management Legg Mason Investment Council Lupus Alpha M & G Investment Management Macif Gestion Martin Currie Investment Management Merrion Investment Managers Methodist Church Central Finance Board Mondrian Investment Partners Morgan Stanley Nataxis Asset Management New Star Asset Management New Zealand Superannuation Fund
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Expert, Independent &
Holistic Research
Expert:
Clear methodology -designed withrelevant stakeholders& centralised quality control
Holistic &Flexible:
EPM – data on wide range of issuesEnablingRankings, Screening &Engagement
Independent:
- Owned by EIRIS Foundation- Derives no income fromcorporate consultancy.
EIRIS USP
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Contact details
Stephen Hine
Head of Responsible Investment Development80 - 84 BondwayLondon SW8 1SF
tel: 44 (0) 20 7840 5716 (direct)
44 (0) 20 7840 5700 (switchboard)fax: 44 (0) 20 7735 5323
web: www.eiris.org