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CHALLENGES AND THE

FUTURES

OF ESG INVESTMENT

IN EMERGING MARKETS

9// 16 // 2010

BLOOMBERG L.P.ESG DATA ANALYSTMIHO KUROSAKI

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TABLE OF CONTENTS

» MARKET OVERVIEW – KEY PLAYERS

» INVESTOR AWARENESS

» ESG DATA USERS

» DISCLOSURE TREND

» FURTHER STEPS

2

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MARKET OVERVIEW>>>>>>>>>>>>>>

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ESG MARKET TREND OVERVIEW 4

Regulatory

Exchange ESG guidelines

Government reporting guidelines

Carbon regulationInvestor Awareness

UN PRI ($18+tr); CDP ($64 +tr)

Sell-side ESG Research and SRI funds

Research, Ratings, Data ProvidersAdvisors and Initiatives

Sustainability assurance firms

CSR Consultants

UN Global Compact

Market

Peer groups CSR activities

ESG data disclosure

Customer awareness on sustainability

Emerging Market

Environmental, Social and Governance data needs are being driven by multiple influencing factors across the globe

>>>>>>>>>>>>>>

INVESTOR AWARENESS

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UN PRI 6

2

10

2

1

2

1

6

15

4

3

0

5

3

1

2

1

6

17

4

2

ChinaHong Kong

IndiaIndonesiaMalaysiaPakistan

SingaporeSouth Korea

ThailandVietnam

Year on Year change in UNPRI signatories in Asia

2010

2011

Geographic map of UNPRI signatories

» 940 Signatories Globally

» 46 Signatories in Asia Emerging Market

» HK is Growing

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CDP7

0

10

20

30

40

50

60

70

80

0

100

200

300

400

500

600

200320042005200620072008200920102011

Assets (US$ trillions)N

umbe

r of S

igna

torie

s

Number of SignatoriesAssets (US$ trillion)

CDP INVESTOR SIGNATORIES & ASSETS OVERTIME

Asset Managers;

37%

Asset Owners;

34%

Banks; 23%

Insurnace; 5%

Other; 1%

2011 SIGNATORY INVESTOR BREAKDOWN

CDP signatories are increasing its numbers and assets over time.

Source: CDP

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SELL-SIDE8

SELL-SIDE RESEARCH REPORTS FOCUSED ON SUSTAINABILITY IN EMERGING MARKET

Strongest Sustainability

Embracing Sustainability

All rights reserved, Bloomberg Professional Service

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BUY-SIDE9

SRI funds and Environmentally Friendly funds93 funds in Asia EM ex AU and JP on Bloomberg

As of 9/2

Low carbon emissions

All rights reserved, Bloomberg Professional Service

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ESG DATA AND RESEARCH PROVIDER 10

Environmental investment focus

Manages Domini Social Index

Strong Governance Service

RMG acquired several strong ESG specialist providers before being acquired themselves by MSCI

ESG & Economics firm

Carbon Data & Analysis

North AmericanESG Research

EuropeanResponsible Investment

Global governance research

New Entity

TR recently acquired Asset4 and Point Carbon, reflecting a continued trend of mainstreaming

The past two years has seen significant consolidation amongst Tier I ESG research shops and mainstream data providers

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ESG USER & DATA ANALYSIS11

NO. OF UNIQUE USERS INCREASED BY 48% SINCE 09-2010

NO. OF FIELDS USED INCREASED BY 150% SINCE 09-2010

0

500

1,000

1,500

2,000

2,500

Sep-Oct 2010

Nov-Dec 2010

Jan-Feb 2011

Mar-Apr 2011

No. of Unique Users

No. of Users

Consistent growth in unique users and ESG data in the last 3 quarters

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

Sep-Oct 2010

Nov-Dec 2010

Jan-Feb 2011

Mar-Apr 2011

No. of Fields Used

No. of Field UsedSource: Bloomberg Professional Service

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ESG USERS IN ASIA12

15%

1%

1%

1%

1%

1%

2%

2%

2%

3%

3%

3%

3%

4%

4%

4%

4%

4%

5%

10%

27%

OTHER

SOUTH KOREA

TAIWAN

RUSSIA

ITALY

SPAIN

SCOTLAND

BRAZIL

NETHERLANDS

CHINA

GERMANY

AUSTRALIA

SINGAPORE

HONG KONG

INDIA

CANADA

FRANCE

SWITZERLAND

JAPAN

ENGLAND

UNITED STATES

15% in total

ESG data users in Asian growing markets accounts for 15%

Source: Bloomberg Professional Service

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USERS BY POSITION AND INDUSTRY13

Analyst48%

PM10%

Risk7%

Trader7%

Business Manager/S

upport6%

Other6%

Executive Officer

4%

Salesperson

4%

Market Data/Techn

ology2%Investment

Banking2%

Structurer1%

other3%

ESG Users by Position

Investment Advisors/Money Mgrs

25%

Broker Dealers -Regional

22%

Corporations

10%Outsourcin

g9%

Broker Dealers -

Global8%

Banks -Regional

6%

Banks -Global

6%

Hedge Funds

5% Universities3%

Government

Agencies2%

other4%

ESG Users by Industry

*Market includes China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, Taiwan and Thailand

Source: Bloomberg Professional Service

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ESG DATA ANALYSIS 14

Correlation analysis between ESG Disclosure Score and P/E

All rights reserved, Bloomberg Professional Service

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Carbon Analysis ToolCarbon Analysis Tool

SCREENING SAMPLE» Emerging Market» ESG disclosure Score > 20

BEST IN CLASS SAMPLE» High disclosure score» Low employee turnover» Decreasing GHG over period» High independent director

ESG INVESTMENT STRATEGY15

All rights reserved, Bloomberg Professional Service

Cha

lleng

es a

nd F

utur

es o

f ES

G in

vest

men

t in

EM

>>>>>>>>>>>>>>

MARKET

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GRI REPORTING 17

Source: GRI, Sustainability Reporting Statistics 2010

# of Sustainability report is growing

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REGIONAL DISTRIBUTION18

Source: GRI, Sustainability Reporting Statistics 2010

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ESG GEOGRAPHIC COVERAGE19

Coverage increased 3,500 to 5,000 from 2009 to 2011

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DISCLOSURE SCORE MAP 20

Large amount of ESG data is disclosed mostly in EuropeEmerging markets, such as India and China still have room to grow

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RELATION MAP 21

05

101520253035404550

1 10 100 1000

Aver

age

Dis

clos

ure

Scor

e

Number of companies (Logarithmatic)

Japan

India

China

PhilippineSouth Korea

Average Disclosure Score and # of companies with ESG data

Taiwan

HK

Singapore

Sphere size: Disclosure Score

Source: Bloomberg Professional Service

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MOST USED ESG DATA22

E32%

S13%

G40%

R9%

D4%

CDP2%

Total HITS in Asia

Most widely used fields are Governance Fields

Top Data Field Name

1 % Independent Directors2 Size of the Board3 Board Meeting Attendance %4 Board Average Age5 Board Duration6 ESG Disclosure Score7 Number of Independent Directors8 CO2 Intensity9 Number of Board Meetings for the Year

10 Verification Type11 Environmental Awards Received12 Number of Employees - CSR13 Total Energy Consumption14 % Women in Management15 CEO Duality16 Environmental Fines17 Number of Environmental Fines18 CO2 Intensity per Sales19 Total CO2 Emissions20 Community Spending

*As of 09/05/2011

Source: Bloomberg Professional Service

>>>>>>>>>>>>>>

ADVISERS AND INITIATIVES

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ASSURANCE TO DATA/REPORT24

Source: GRI, Sustainability Reporting Statistics 2010

Sector N Y Total

Basic Materials 21.68 46.12 24.68

Communications 19.79 44.76 22.86

Consumer, Cyclical 24.94 43.91 26.68

Consumer, Non-cyclical 23.20 43.85 25.45

Diversified 17.78 48.18 21.49

Energy 19.71 48.46 23.84

Financial 20.50 42.35 23.34

Industrial 24.49 44.10 26.29

Technology 23.08 44.56 25.11

Utilities 24.21 45.54 29.86

Grand Total 22.67 44.70 25.27

Source: Bloomberg Professional Service

Externally Assured GRI ReportsCSR reports with external assurance have higher disclosure score

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UN GLOBAL COMPACT 25

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

China Hong Kong

India Indonesia Malaysia Pakistan Philippines Singapore South Korea

Thailand Vietnam

non-communicating CommunicatingSource: UN Global Compact , Participants and Stake holders

Significant number of non-communicating companies in Asia

>>>>>>>>>>>>>>SUMMARY

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/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / /

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SUMMARY - TRENDS IN THE MARKET

TRENDS IN THE MARKET

» Guidelines on ESG reporting in Singapore, India and Hong Kong from exchange.

» Numbers of Investment managers in Asia became signatories of UNPRI.

» ESG data users are increasing in Asia.

» Number of sustainability reports are growing.

» Report content is less in Asia than the rest of the developed nations.

» Less than 50% of sustainability report have External assurance

IMPLICATIONS

» Number of sustainability reports will be growing in emerging markets

» Investment managers as well as asset owners will be seeking best way to comply UN PRI assessment.

» More demand in ESG data and analytical tools.

» Leaders in Asia will start looking at the content of the report. Followers will focus on publishing

» Having external assurance may improve the quality of the report

27

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>>>>>>>>>>>>>>FURTHER STEPS

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SUPPLY CHAIN RISK29

Investors have started looking into supply chain and relationshipsESG performance in Suppliers directly affect company’s reputation as well as financial performance

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ESG VALUATION MODEL30

Source: valuation model (beta), Bloomberg Professional Service

Investors try to quantify ESG performance and apply it to P/L valuation model.We will relate ESG financial profit and loss to the company’s EBIT How material will the ESG factors be on profitability

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CONTACT:

MIHO KUROSAKI