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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