Cécile de Lasteyrie

October 2012

Dexia AM SRI country analysisOne step ahead…

Human Capital Natural Capital Social Capital Economic Sustainability

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1. SRI country analysiso Objective & Frameworko Norms-based Analysiso Best-in-Class Analysis

2. Conclusion

SRI country analysisAgenda

Dexia AM SRI Country Analysis - October 2012

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Country SRI Analysis

• Why we believe it is relevant to analyse countries through an SRI analysis: Countries are concerned by ESG challenges Countries that keep in mind the next generations interests are keen to perform better Investments only based on financial assessment is not enough in actual context

• How can a relevant analysis be done? Compliance with recognized international norms is a first indicator of level of sustainability Has to be completed with an in depth analysis of how a country manages its wealth


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Country SRI Analysis

1 - Compliance with recognized international norms Non compliant countries are excluded

Countries show their commitment to ESG issues: Check that countries sign and ratify a selection of 18 international conventions Check on Democracy and Political Freedom through Freedom House Index

2 – A best in class analysis on relevant criteria A countries wealth is composed of its capitals

Natural Human Social Economic

Our best in class approach scores countries on their ESG strategy and performance. Comparison is then done to identify the investable SRI universe that is sent to the financial analysts

Framework


Cabie Isabelle (DAM)

PROPO A measure of countries commitment to ESG issues et prévoir -> pour les 2 points :Check that...Check on...

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Country SRI AnalysisFramework

Country SRI Universe

Best-in-Class AnalysisAnalysis countries’ ability to manage their human, natural, social and economical assets in order to ensure sustainable welfare

Norms-based AnalysisCheck countries' compliance with major international treaties and conventions

A « Must Have » for all SRI ManagersInitiated by Dexia AM in 2005

AUS AUSTRALIA EST ESTONIA JAP JAPAN POL POLANDAUT AUSTRIA FIN FINLAND KOR KOREA POR PORTUGALBEL BELGIUM FRA FRANCE LAT LATVIA ROM ROMANIABGR BULGARIA GER GERMANY LIT LITHUANIA SVK SLOVAKIACAN CANADA GRE GREECE LUX LUXEMBOURG SLV SLOVENIACL CHILE HUN HUNGARY MAL MALTA SPA SPAINCRO CROATIA ICE ICELAND MEX MEXICO SWE SWEDENCYP CYPRUS IRE IRELAND NLD NETHERLANDS CH SWITZERLANDCZE CZECH REPUBLIC ISR ISRAEL NZD NEW ZEALAND TUR TURKEYDEN DENMARK ITA ITALY NOR NORWAY UK UNITED KINGDOM

USA UNITED STATES

2012 Dexia AM Innovation:- Takes better account of whether public

finance are sustainable- Looks at the economic fundamentals

behind countries’ economic activity


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• Labour Rights IC138 - Minimum age C182 - Worst forms of child labor C29 - Forced labor C105 - Abolition of forced labor C87 - Freedom of association and protection of the right to organize C98 - Right to organize and collective bargaining C111 - Discrimination (employment and occupation) C100 - Equal remuneration

• Human Rights International Covenant on Civil and Political Rights International Covenant on Economic, Social and Cultural Rights International Convention on the elimination of all forms of racial discrimination International Convention on the elimination of all forms of discrimination against women Convention against torture Convention on the rights of the child Participation in the Ottawa Convention (Anti-personnel landmines)

Norms-based Analysis

• Adherence to and compliance with 18 major international treaties such as:

• Exclusion of the country if… …the government has not ratified one or more international conventions …there is case of proven and repeated breaches of one or more conventions by governments, even if all

conventions were ratified• And / Or if the country is considered ‘non free’ by Freedom House•

Check country’s compliance with international treaties


• Environmental Rights Kyoto protocol (climate change) Cartagena protocol on bio-safety Convention on Biological Diversity

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Favour investments in countries that are best positioned regarding sustainable development

For each country, scoring of their ESG strategies & performance

How? Based on a capital approach Assess countries‘ ability to manage their sustainable development Complete, structured and objective analysis based on:

To ensure the present welfare without compromising the ability of future generations to ensure their own welfare, countries have

Best-in-Class AnalysisObjective & Framework


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The management of sustainable development:

Dexia AM SRI Country Analysis - October 2012.

A capital based approach

to manage their portfolio of assets in the long term

… but also to ensure their economic sustainability

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Our analytical treeThe management of sustainable development


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Human CapitalThe management of sustainable development


THEMES EXAMPLES OF INDICATORS

Basic Labour Rights Number of labour inspectors / total workforce

Participation Total employment rate

Job quality Share of involuntary part-timers in total employment

Productivity GDP per hour worked

Basic needs Percentage of population without access to improved services - Sanitation

Preventable risk factors / Environmental health Percentage of adult population who are daily smokers

Occupational health & safety Number of accidents per 100,000 workers

Cancer Deaths from cancer

Health budget Percentage of expenditure on health in the gross domestic product

Health outcome Life expectancy at birth / total population

Medical infrastructure Hospital beds / 1,000 inhabitants

Infectious diseases Percentage of one-year-olds fully immunized of the poorest 20% households

Epidemics Number of lab-confirmed cases of H1N1 for the years 2009 and 2010

Famine / collapse of food-supply Percentage of population undernourished

Fertility management Percentage of births attended by skilled health personnel of the poorest 20% households

Financial sustainability of health system Public healthcare deficit in percentage of GDP

Education & training Percentage of graduates to the population at the typical age of graduation

Innovation Number of patents granted to residents, per million people

Labour (35%)

Health (25%)

Knowledge (40%)

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Natural CapitalThe management of sustainable development


Total environmental impact (10%)

Transportation policy (10%)

Non GG atmospheric

emissions (10%)

THEMES EXAMPLES OF INDICATORSTotal environmental impact Ecological footprint of consumption (hectares per capita)

Transportation policy Transport by mode passengers share of rail

Atmospheric concentrations Particulate air pollution in the largest cities in micrograms per m³

Emissions GDP per unit of non GHG emissions (eg. VOC, particulates)

Economical impact Estimated economic cost of particulate emission damage (in % of GNI)

Ozone layer depletion Consumption of ozone-depleting CFCs per capita

Climate change Carbon dioxide emissions (CO2), kg CO2 per $1 GDP (PPP)

Energy intensity Energy use (kg oil equivalent) per $1,000 GDP (PPP)

Dependency to fossil fuels Share of carbon fossil fuels in national energy production

Biodiversity Proportion of known species threatened with extinction

Natural habitats Terrestrial and marine areas protected to total territorial area

Freshwater Intensity of use freshwater resources as a percentage of internal resources

Wastewater treatment Population connected to public waste water treatment plants, secondary treatment

Lakes Water quality of selected lakes, total Nitrogen in mgN/litre, annual mean concentrations

Rivers & groundwater Water quality of selected rivers, annual mean concentrations of biological oxygen demand (BOD) in mg O2/litre

Raw Materials Estimated economic cost of mineral depletion (in % of GNI)

Wastes GDP per unit of waste volums (per capita)

Natural disasters, Weather disasters ... UN, World Meteorological organization, US EPA, the European Commission, World Bank, NOAA

Effectiveness of natural hazards management policy Population affected by natural disasters (average per year, per million people)

Energy & climate change (30%)

Ecosystems & biodiversity (10%)

Water consumption & emissions (10%)

Raw materials & wastes (10%)

Exposure to natural hazards &

management of disasters (10%)

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Social CapitalThe management of sustainable development


Democracy (15%)

Corruption & Rule of law

(15%)


Basic Political / Civil Rights Voice and Accountability - World Bank Index

Freedom of the Media Press Freedom Index (RSF) Score Reporters without Borders

Anti-Corruption Control of Corruption - World Bank Index

Rule of Law Rule of Law (World Bank indicator)

Government Efficiency Government Effectiveness (World Bank indicator)

Market Efficiency / Business environment Regulatory Quality (World Bank indicator)

Domestic Fairness Gini index

International Fairness Total Official Development Assistance in percentage of GNI

Inter-generational Fairness Public social expenditure as a percentage of GDP

Internal Security Number of crimes per 100,000 inhabitants

External Security Total armed forces in proportion of the population

Governance (30%)

Fairness (25%)

Peace (15%)

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Economic SustainabilityThe management of sustainable development


Indebtedness (20%)

Inflation (5%)

Budget deficit (20%)

Health of the financial system

(20%)International

competitiveness - Balance of

payment (20%)

Economic positioning

(10%)

Foreign dependency

(5%)


Government indebtedness Total government debt as a percentage of GDP

Household indebtedness Gross debt to income ratio of households

Corporate (non financial sector) indebtedness Private sector debt as a milion of GDP

Inflation Average annual change in consumer price index since 1990

Central government budget deficit Net lending / net borrowing as a percentage of GDP, surplus (+), deficit (-)

Health of the banking system World Bank's Bank capital to assets ratio

Real estate bubbles Share of Gross rent, fuel and power in household total consumption expenditures

General Balance of payment Current account balance of payments as a percentage of GDP

Current account Eurostat Current account balance (% of GDP)

Capital account Net foreign direct investment inflows (% of GDP)

Level of diversification of the economy Gross value added - Financial intermediation, real estate, renting and business activities - Percentage of total activity

Exposure to external economic shocks Exports to PIIGS as a proportion of total exports

Foreign economic dependency Net International Investment Position

Foreign energy dependency Energy imports in proportion of the total energy production

Foreign food & water dependency Freshwater imports in proportion of the total freshwater consumption

Foreign raw materials dependency Copper imports in proportion of the total copper consumption

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How do we assess?The management of sustainable development


The assessment is made on country’ policies and performances & country specificities to ensure a fair and accurate comparison.

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2012 Countries scores (as of 30th August)The management of sustainable development


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1. SRI country analysiso Objective & Frameworko Norms-based Analysiso Best-in-Class Analysis

2. Conclusion

SRI country analysisAgenda


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Conclusion

Dexia AM has developed a unique SRI analysis for countries based on 2 steps: Norm based Best in class analysis

Rich analytical tree A complete analytical tree enabling to assess globally a country’s sustainability Added value from capital based approach: human, social, natural and economic

sustainability

Dynamic and prospective scoring model Basis of both relative levels and trends

– not only compare indicators from a country to another– also looks at the evolution of indicators

Offering a unique multi dimensional approach enabling a relevant sustainability assessment for countries.

© Dexia Asset Management Alternative Investment Business UnitSeptember 2012 [email protected]

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SpainDexia Asset ManagementLuxembourg SASucursal en EspañaCalle Ortega y Gasset, 2628006 MadridTel.: + 34 91 360 94 75

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GermanyDexia Asset ManagementLuxembourg SAZweigniederlassung DeutschlandAn der Welle 460422 FrankfurtTel.: + 49 69 7593 8823

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United Kingdom Dexia Asset Management Luxembourg SALondon Branch200 Aldersgate13th FloorEC1A 4HD LondonTel: +44 2074707345

© Dexia Asset Management Alternative Investment Business UnitSeptember 2012 [email protected]

Disclaimer

This document is published purely for the purposes of information, it contains no offer for the purchase or sale of financial instruments does not comprise investment advice and it is not confirmation of any transaction unless expressly agreed otherwise. The information contained in this document was obtained from a number of different sources. Dexia Asset Management exercises the greatest care when choosing its sources of information and passing on this information. Nevertheless errors or omissions in those sources or processes cannot be excluded a priori. Dexia AM cannot be held liable for any direct or indirect damage or loss resulting from the use of this document. The contents of this document may be reproduced only with the prior written agreement of Dexia AM. The intellectual property rights of Dexia AM must be respected at all times.

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Cécile de Lasteyrie

Economy & Finance

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