CONFERENCE HIGHLIGHTS

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An investor initiative in partnership with UNEP Finance Initiative and UN Global Compact

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ASIA

1%

NORTH AMERICA

11%

LATIN AMERICA

3%

EUROPE

44%

OCEANIA

4%

AFRICA

37%

OVER

400

PARTICIPANTS

FROM

25

COUNTRIES

PARTICIPATION BY

good” or “excellent”

Now in its seventh year,

PRI in Person

is the responsible investment

industry’s leading conference, providing opportunities for signatories

and potential signatories to meet, collaborate and learn from their

peers and other thought leaders.

Supplementing this year’s conference was an extensive array of side

events to help delegates get the most out of their visit to South Africa,

including interactive

Principles in Practice

sessions for those new to

responsible investment,

ESG Investor Briefings

exploring how African

companies are integrating and operationalising sustainability within

their organisations,

site visits

to the mining operations of Lonmin

and Impala Platinum, and

workshops

on the new PRI Reporting

Framework.

TO LISTEN TO RECORDINGS AND WATCH VIDEOS FROM THE CONFERENCE, PLEASE VISIT THE PRI WEBSITE

http://www.unpri.org/pri-in-person-2013-cape-town/sessions/

TO SEE PICTURES FROM THE CONFERENCE, PLEASE VISIT THE PRI WEBSITE

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ASIA

1%

NORTH AMERICA

11%

LATIN AMERICA

3%

EUROPE

44%

OCEANIA

4%

AFRICA

37%

OVER

400

PARTICIPANTS

FROM

25

COUNTRIES

PARTICIPATION BY

good” or “excellent”

PRI IN PERSON 2013

AT A GLANCE

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“Africa. Home to six of the world’s 10 fastest-growing economies and

projected to account for one-fifth of the world’s population by 2050. Yet

perhaps nowhere else is the role of the global investment community in

driving social transformation and economic development the subject of so

much debate.

We are proud to bring PRI in Person to South Africa this year and to connect

you with one of our largest and most advanced country networks, made

up of more than 40 signatories and chaired by the Government Employees

Pension Fund (GEPF).”

Wolfgang Engshuber, Chair, PRI Advisory Council

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Pravin Gordhan, South Africa’s finance minister, framed the task faced by the investors assembled at PRI in Person in Cape Town.

“How can the PRI convert …

words and codes into actions

and behaviours that make a

concrete difference?” How can

PRI signatories translate their

commitment to responsible

investment principles into

new and better approaches to

investing?

In a wide-ranging keynote address at the start of the 7th annual PRI conference, Gordhan spoke to many of the challenges faced by what he described as the responsible investment movement: balancing short-term profit with longer-term stewardship; social inequality; the threat of climate change; corporate corruption and mismanagement; Africa’s urgent need for poverty alleviation and investment in infrastructure.

But where Gordhan was diplomatic, the next speaker,

Sharan Burrows, was blunt. “The system is sick,” said the general secretary of the International Trade Union Confederation.

“The global economy is no more

stable than it was six years

ago … The underlying causes

of the [financial] crisis remain

unaddressed.”

“Even if you dismiss stagnant demand, inequality and income distribution, human and labour rights, social unrest or climate change, you must acknowledge that just the spectre of the risk of any one requires your attention,” she said.

“Modern portfolio theory has

failed and we need a dedicated

approach to inclusive growth.”

PLENARIES

A CALL FOR PATIENT CAPITAL

While Burrows was uncompromising in her critique, she was optimistic about the central role of pension funds in directing their capital to address these challenges. She called for that capital to be deployed patiently, over the long-term, with engagement, and productively – that is, into infrastructure, green growth and small and medium-sized enterprises.

“The PRI principles remain a

strong floor for sustainability

across all areas of ESG and you

have enormous authority to

effect change. But you must be

more activist in your approach …

So much more can be done.”

The need for institutional investors to adopt long-term investment strategies and in particular to increase portfolio ‘exposure’ to infrastructure projects has become central policy priority at the international level, Burrows reminded delegates, pointing to the last G20 Summit in St Petersburg, but also to the OECD, the Financial Stability Board (the forum through which G20 commitments on financial reform are to be implemented) and the European Commission. The G20 High-Level Principles of Long-Term Investment Financing by Institutional Investors set out preconditions to long-term investment for governments and investors to observe as well as specific requirements regarding the governance of asset owners, the accountability of asset managers, transparency and reporting along the entire investment chain.

Burrows called for a recasting of the asset owner-asset manager relationship, giving “primacy to the former”, wide-scale investment in climate-related assets, and the elimination of the abuse of labour in developing countries, found in so many companies’ supply chains.

“If observed and implemented

effectively, the G20 Principles

could make a difference in

helping workers’ pension fund

shift further, and as appropriate,

toward long-term investment

strategies.”

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It was a sentiment that resonated with the 400-plus asset owners, investment managers and service providers gathered in Cape Town’s International Convention Centre. In the 10 years since outgoing PRI executive director James Gifford first began work developing the Principles, they have gained enormous traction within the investment community. But, as the crisis showed all too clearly, there is a fundamental instability at the heart of the world’s financial markets.

Paul Clements-Hunt, founder of the Blended Capital Group, and the former Head of the UNEP Finance Initiative – one of the PRI’s UN partners – blamed a corrosion in the culture of finance, as relationship banking gave way to an unhealthy obsession with transactions, and now to an obsession with trading.

“The culture in financial investment has corroded over the last 25 years in terms of globalisation and super computers, and the dominance of data replacing wisdom in the market,” he said.

“The PRI can pat itself on the

back after the first ten years

… but the next 10 years will be

hugely challenging.”

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VALUE, VALUES OR BOTH?

Jay Youngdahl, a trustee of a US pension fund, the Middletown Works Hourly and Salaried Union Retirees Health Care Fund, made the case to place values at the centre of the PRI’s mission. He railed against the “obscene financialisation of the global economy,” what he described as “the cult of money” flowing to the finance sector, and the related increase in inequality.

He questioned whether responsible investors shouldn’t be more concerned about social issues, such as lay-offs in the name of shareholder value, and asked whether what he described as the “values-free” approach of the PRI is appropriate in the face of issues such as climate change.

“If responsible investment

is based on a strategy of

‘shareholder primacy’, we should

be concerned,”

he warned, noting that the idea “is under ferocious attack, as it seems to exclude or marginalise all other stakeholders ... Few outside of the finance industry or the wealthy favour shareholder primacy.”

But there are risks for responsible investment and ESG integration if it is perceived to stray too far towards ethics, argued Erika Karp, former Head of Global Sector Research at UBS Investment Bank and now CEO of Cornerstone Capital, a boutique sustainable finance investment banking boutique based in New York. “The integration of ESG into corporate behavior doesn’t need to be about ideology, but about pragmatism,” she said. “It doesn’t need to be about values; it should be about value.”

Glenn Silverman, chief investment officer of Investment Solutions, a South Africa-based multi-manager, spoke in favour of integrating ESG issues into investment management, and the belief of his firm in the “concept of higher values” when managing “what is widows’ and orphans’ money”. But he also cautioned that returns must come first. “If we were to give our clients a less-than-competitive return, we wouldn’t have a business.”

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TAKING A LONGER-TERM VIEW

Responsible investment advocates argue that, over time, a failure to properly address ESG issues will imperil those returns. “If a sufficiently long-term investment perspective is taken, will all issues of values become relevant to

financial value, or will there still be some things that are not addressed?” asked Rob Lake, an independent responsible investment advisor.

Certainly, the short-term pursuit of profit at all costs is a fundamental cause of market instability and can lead to the mispricing of assets and entire markets. Some investors will, of course, have perfectly legitimate short-term objectives, speakers agreed, but not only will ESG issues – many of which play out over long time horizons – inevitability be of less relevance to short-term investors, near-term profit maximization is often at the expense of longer-term value protection.

“Long-term investing for me is about how we create the alpha of tomorrow,” said Diane Radley, CEO of South Africa’s Old Mutual Investment Group. “Short-term alpha is not acceptable if it compromises long-term beta.”

So how might investment management be better orientated towards a longer-term perspective?

“The issue of long-termism”

Karp said, “has to be driven from

the top, [into] every piece of

the capital markets, and every

incentive structure that sits

within each piece… This is part

of the culture, and is about more

than the investment process,”

PRI: CATALYSING POLICY AND RESEARCH TO

COUNTER SHORT-TERMISM

Following a consultation with signatories and approval by the PRI Advisory Council, the PRI’s new Policy and Research work stream will launch two new projects in late 2013 to promote long-termism in financial markets. The first will bring together a group of signatories to “operationalise” a new generation of long-term, responsible investment mandates; the second will see the PRI establish a new platform for signatories to engage with policy makers on the creation of enabling policy environments for long-term and responsible investment. For further information contact Helene Winch, PRI’s Director of Policy and Research. (helene.winch@unpri. org)

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RETHINKING THE OWNER-MANAGER

RELATIONSHIP

For Elias Masilela, the CEO of South Africa’s Public Investment Corporation (PIC), knowledge is power, and will lead to new relationships between asset owners and their managers.

“To a large extent, it’s about education, and consciousness, appreciating the link between the market economy on the one side and asset performance on the other.”

And, with investment advisers “very short-term in their thinking, and not sufficiently innovative”, it is vital to educate boards of trustees about long-term investing.

“You need to start with the

owners of capital: if the owners of

capital are short-term, you can’t

expect to the agents to wake up

one morning and be long-term in

their decisions.”

“Why is the PIC able to do what it is doing today, thinking long-term… investing over a 10-20 year horizon? It’s about a principal-agent model that understands the benefits.” “For an investment manager, time horizon is merely a function of the client mandate,” said Thabo Khojane, a managing director at Anglo-South African investment firm Investec Asset Management. “It’s about what they are trying to achieve … and how they think about risk.”

And, he maintained, the longer the time horizon, the better the outcome for the client: “The reality is that, the longer the horizon the investment manager has, the more likely it is – if they’re skilled – they’ll be able to meet the requirements of the client.”

In investment management, those long time horizons depend on trust between asset owner and investment manager, argued Radley. “If I can build trust and confidence of my investors, they will have more confidence to place funds long term, with long-term goals and mandates … It’s a lack of confidence that drives short-term views.”

But, in a capitalist economy, the market and enlightened self-interest have their limits. “Somebody with a stick has to set the tone – it’s called government,” said Sandy Frucher, vice chairman of NASDAQ.

“They have to establish universal

things, like civil rights, human

rights, and respect for the

environment … and appropriate

mechanisms like good

governance and transparency.”

“The stick will, hopefully, create an even playing field that will allow investors to make intelligent choices,” he added. That point of view found resonance in the audience, with Malcolm Gray of Investec drawing an analogy with government regulation of tobacco and alcohol for public health reasons.

“We’re in a situation where the information technology out there today drives information to the point where short-termism is almost an addictive drug. Is it not time,” he asked, “for regulators to step in to drive long-termism, because it’s better for us than short-termism?”

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AFRICA REVISITED

“We believe that Africa has risen, and will continue to ascend to new heights,” asserted John Oliphant, the Principal Executive Officer of South Africa’s Government Employee Pension Fund, introducing a discussion about doing business in Africa – a session that challenged outdated perceptions about the economies and societies of the continent’s 54 countries.

“The risks facing businesses in

African markets are no more

significant than elsewhere in the

world. However, the returns are

among the highest.”

It was an opportunity identified by Arnold Ekpe when he set up the pan-African EcoBank in 1996, at a time the continent was widely considered “a basket case”. Ecobank’s approach? Invest heavily in governance. Take advantage of the diversification Africa offers. And have a long-term view. Africa is clearly looking for capital to fuel its growth – but the message was that, with the right partners, that capital is safer than might be assumed. Tshepo Mahloele, CEO of Harith General Partners, cited a Moody’s report that Africa boasted the lowest rate of default of project finance loans. Chris Hart, the chief strategist at Investment Solutions, challenged assumptions even further. In the past, Africa’s economies were highly exposed to external factors; but the

recent financial crisis left the continent relatively unscathed. “Something has clearly changed,” he said.

Improved governance is one factor, he said, and another is cellular telephony – allowing whole swathes of African society to access the market economy for the first time. He also noted that Africa’s economies are maturing – and moving away from excessive exposure to individual industries or even single commodities. As an example, he noted that Zambia’s economy held up when the copper price collapsed in 2008. “African growth is becoming multi-sectoral,” he said.

One particularly telling table ranked government indebtedness, and showed just how far Africa has come since the bad old days of the 1970s and 1980s. Now, it’s European sovereigns with the eye-watering debt to GDP ratios. Many of Africa’s worse offenders have, through economic growth, a little debt-forgiveness – and frankly – a lack of access to the capital markets, emerged from the financial crisis in good shape.

“One of the huge ironies is that 2008 was a global debt crisis – and Africa’s huge advantage is that it wasn’t creditworthy,” Hart said. “Now, we’re starting to see Zambia enter the credit market, and people are falling over themselves to invest in it. The creditworthiness of Africa is returning.”

“The pension fund industry should look at how it can access this market in a disciplined and profitable manner,” said Ekpe. “You have to take a long-term view,” he repeated, “and look at Africa beyond the news. You have to look at the real Africa.”

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INEQUALITY IN THE SPOTLIGHT

Certainly, left to its own devices, modern capitalism has done little to reduce inequality – with the super-rich continuing to accumulate wealth post-crisis, even as incomes for the majority, at least in OECD countries, stagnate or decline in the face of continuing austerity. For many responsible investors, concern about inequality might seem self-evident – but it’s a relatively new addition to the industry’s agenda. David Wood, the director of Harvard University’s Initiative for Responsible Investment, explained why responsible investors should care.

Income inequality encourages rent seeking and political capture, as the rich seek to consolidate their power. It can encourage high-risk behavior among those in the middle seeking to join the elite, and – perhaps most importantly – it contributes to instability, representing a symptom of fundamental societal weaknesses.

According to the audience, investors might respond by putting pressure on governments to raise minimum wages, increasing ‘impact investments’ in poor communities, or lobbying for the better regulation of finance. And perhaps, the PRI’s Director of Policy and Research Helene Winch

suggested, they might want to explore the relationship between a country’s Gini coefficient – a measure of its income distribution – and its chance of sovereign default.

MAKING AN IMPACT

Inequality is only the latest addition to a laundry list of ESG issues with which responsible investors are grappling. But, said the PRI’s Gifford, in his closing remarks, investors are better equipped than ever to address them.

“We’ve got the architecture in place,” he said, in terms of the work the PRI has done on transparency, accountability and reporting, and in setting up networks and support to help signatories implement responsible investment across all asset classes.

The challenge now is to show that practicing responsible investment makes a tangible difference.

“For the next 10 years, it’s all

about impact … We have to be

able to demonstrate impact … on

risk mitigation, alpha generation,

of shareholder engagement

and, ultimately, we have to

demonstrate impact in terms of

aligning investment with the goals

of society.”

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LIQUIDITY TRAP: WATER SCARCITY

TESTS INVESTORS

Whether there’s not enough of it, or far too much, or whether its quality is too poor, or someone else has a better claim on it, it’s not difficult to see how water can pose a risk to companies. But, as a packed breakout meeting on water scarcity heard, investors are struggling to put numbers to that risk.

Nordea’s responsible investment team has been looking at water risk since 2008, said Sasja Beslik, its head of responsible investment and governance.

“As investors, we ask the

question, how does it impact your

stock price? We aren’t able to

answer that properly.”

He blamed a lack of information from companies and a lack of benchmarks to compare data against – but also a lack of clarity from the investment community: “Companies aren’t clear what the investment community is expecting from it.” And this is against a complex governance backdrop. “Water is a human right,” he noted, meaning that, in certain circumstances, “you can’t put a price on it.”

Investors and companies appear to be talking past each other when it comes to water risk. Veronique Menou, head of thematic research for MSCI ESG Research, presented research that showed that, in the electric utility sector at least, investors are failing to assign any premium to companies with sophisticated water management strategies in place.

And most companies that are addressing water risk are focusing their efforts on their direct water use, although, in many cases, those risks are dwarfed by water exposures in their supply chains, she added.

Both companies and investors have a long way to go on water risk, said session chairman Piet Klop, senior advisor for responsible investment at PGGM. But the discussions that are ongoing – including within the PRI’s own engagement working group on water risk – “are a step in the direction towards metrics for water risk that are meaningful … comparable across companies, aggregated all the way up to the stock level … and are as transparent as you can get.” The objective: to get to a figure for “Business Value at Water Risk”.

BREAKOUT PANELS

WHO KNOWS WHAT GOOD EMPLOYEE

RELATIONS ARE WORTH?

It’s pretty much a consensus view: employees are a company’s most valuable asset. But what on earth are they worth? Turns out nobody knows – but, from a valuation point of view, that may not be the point.

At an event held in South Africa, mining is often front of mind, and Anna Pot of Dutch investment giant APG found that, on a series of company visits she carried out last week, “even the most conservative economists or analysts explained that labour relations and dynamics in the labour force is the main issue for the mining sector – and the economy as whole.”

And there’s certainly a lot of research analysing the importance of employee relations to corporate performance:

“The question is, can we put a

number on it? We came to the

conclusion that it’s not possible.”

But, she added, it doesn’t mean it doesn’t matter. “It’s a very valuable metric for quality of management.”

It’s an old complaint among responsible investment

advocates: investors often discount ESG issues that can’t be quantified, while embracing more conventional factors that also defy quantification. “Quality of management is factor number one for active equity investors,” said Jean-Philippe Desmartins, head of ESG research at Oddo Securities in France.

So, back to employee relations: both Oddo and APG are tackling the human resources (HR) valuation conundrum by coming up with a series of metrics or questions for their analysts and fund managers to ask, helping them to build up a picture of employee relations.

These include whether a head of HR sits on the executive committee, the percentage of staff covered by collective bargaining agreements, or the number of strike days or worker accidents.

Nonetheless, more can be done. Frank Fox, head of occupational health at miner Anglo American, said that investors should ask more questions of companies, and companies should disclosure more of their HR data – and Pot quoted figures from Bloomberg that only 23% of companies disclosed figures on employee turnover, for example.

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TIME FOR A PUSH ON SUSTAINABILITY

LISTING STANDARDS?

What’s the biggest contribution a stock exchange could make towards building sustainable capital markets? Simple: introduce sustainability disclosure standards into their listing requirements. And what is the chance of any one exchange taking a lead here? About zilch, say’s NASDAQ’s Sandy Frucher.

Such a move would be “a breach of our fiduciary trust, because we’d probably destroy our listing business,” NASDAQ’s vice-chairman told a side event here in Cape Town today.

“Listing is a global business,” he said, and if a company didn’t like one exchange’s rules, it would simply go elsewhere. So exchanges – including those collected in the Sustainable Stock Exchanges initiative – have mostly focused on voluntary actions, with varying success.

Sonia Favaretto of Brazil’s BMF&BOVESPA said around two-thirds of companies on her exchange had met a recommended comply-or-explain disclosure standard. On NASDAQ, a similar effort had only seen 20% sign-up. The answer, argued Frucher, is a “global standard”, introduced by IOSCO, the International Organization of Securities Commissions. “If the exchanges could find common ground on this, we could push the regulator,” he argued.

Such common ground might be hard to found. Favaretto noted exchanges – and companies – in different regions of the world are at different stages when it comes to sustainability disclosure. “We’re far from there,” she said, referring to a universal standard.

Step forward the investors. “Investor groups have to demonstrate that transparency on social and environmental issues is a real concern,” said Frucher.

“The investment community has

a terrific opportunity to pressure

us and the regulators.”

As part of the Sustainable Stock Exchanges Initiative, the PRI is coordinating an engagement between 34 investors and 30 of the world’s largest stock exchanges to improve the ESG disclosure standards of listed companies.

TO GET INVOLVED, PLEASE CONTACT THE PRI CLEARINGHOUSE TEAM

[email protected]

OTHER PANELS

■ INTEGRATED REPORTING ■ EMERGING MARKET DEBT ■ ANTI-CORRUPTION ■ INTEGRATED ANALYSIS

■ IMPACT INVESTING AND ACCESS TO FINANCE IN SOUTH AFRICA

■ MINING IN AFRICA ■ DIRECTOR NOMINATIONS

■ DIVESTING FROM TOBACCO STOCKS ■ LATEST ACADEMIC RESEARCH

PRI: SUPPORING SIGNATORIES TO ENGAGE

The PRI’s Clearinghouse is the world’s leading global platform for collaborative engagement activity, providing signatories with a private forum to engage with

companies and policy makers on ESG issues. Nearly 400 signatories have been involved in at least one collaborative engagement since the platform was launched in 2006.

The PRI is inviting all signatories to join several new engagements in late 2013 on fracking, employee relations, water risks and labour standards in the global food and beverage sector.

TO LISTEN TO RECORDINGS FROM THE CONFERENCE, PLEASE VISIT THE PRI WEBSITE http://www.unpri.org/pri-in-person-2013-cape-town/sessions/

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“From the issues that define responsible

investment to the practicalities of ESG

integration, PRI in Person 2013 provided

a venue for discussion, debate and

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“From the issues that define responsible

investment to the practicalities of ESG

integration, PRI in Person 2013 provided

a venue for discussion, debate and

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RINGING IN THE CHANGES

With a ring of a handbell in Cape Town, PRI Executive Director James Gifford declared – after an exhaustive two-year gestation – the PRI’s new Reporting Framework formally launched.

The new framework will deliver a step-change in responsible investment transparency and accountability, with around 800 of the PRI’s asset owner and investment manager signatories required to report by the end of March 2014 or face delisting. For the first time, a subset of their responses to the Framework will be made public.

The new approach will see signatories report to objective indicators – in contrast to the PRI’s previous signatory survey, which relied to a large degree on self-assessment of their activities. This is designed to allow beneficiaries, clients and other signatories to make their own judgements about how a signatory is implementing the six PRI principles. Commenting on the launch, Wolfgang Engshuber, Chair of the PRI’s Advisory Council, said calls for the global investment community to be more transparent about how it is responding to the governance and sustainability challenges that define our era have grown louder since the financial crisis.

“The PRI has responded with the launch of this new

Framework,” Engshuber said, “which will enable institutional investors to demonstrate how they are embedding material ESG factors into their processes and working to strengthen the governance of companies and the market as a whole.”

Fiona Reynolds, PRI’s Managing Director, said robust reporting on responsible investment activities such as ESG integration, voting and stewardship was essential if the financial services industry is to win back the trust of its stakeholders.

“This information will improve the dialogue between companies and investors about the real drivers of long-term performance, risk and return, and help asset owners more effectively evaluate and select managers, ensuring the investment chain functions effectively for clients and beneficiaries.”

“There’s going to be a wealth of information created by the R&A framework,” said Eric Wetlaufer, of the Canada Pension Plan Investment Board. “There will be great opportunities for consistency of comparison across a large number of managers, and there will be great opportunities for insights into what’s making a difference, as we’ll be able to get some performance information.”

REPORTING FRAMEWORK LAUNCH

At the launch event, the PRI’s Head of Reporting and Assessment Lorenzo Saa walked delegates through the new process and the outputs it will generate.

A number of signatories gave their verdicts. Cecile Churet

of Robeco SAM described it as a “milestone” and praised the level of engagement by the PRI, describing the process as “very signatory-driven”.

Reporting is not only about external audiences: it can also prove an invaluable exercise internally. Jon Duncan, head of sustainability research and engagement at South Africa’s Old Mutual Investment Group – which only became a signatory in 2012, said his involvement in piloting the framework in 2012 helped “build a network within our business on responsible investment”.

And it’s also proved valuable to more experienced signatories. Marcel Jeucken, managing director of responsible investment at Dutch investment giant PGGM, said the methodology has “helped us improve our own reporting”.

But the new framework is of wider significance. It also provides a means to hold the PRI accountable – to show its six principles are helping to move the dial in terms of responsible investment. “This is very important for the credibility of the initiative,” Jeucken added.

Anna Hyrske (Ilmarinen Mutual Pension Insurance Company), Daniel Simard (Bâtirente) and Beth Richtman

(CalPERS) also endorsed the new Framework.

From October 1, PRI signatories will

begin reporting against the new

Framework, which seeks detailed

information about their responsible

investment policies and practices

across asset classes via more than 220

indicators in 12 modules. An average

signatory will need to complete 5

modules and 75 indicators. Their

responses will be published on the PRI’s

public website in an RI Transparency

report.

www.unpri.org/areas-of-work/reporting-and-assessment/reporting-framework/

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2008 2009 2010 2011 2012

* 2013/14**

34 72

165 241

782

NUMBER OF SIGNATORIES PUBLISHING THEIR PRI REPORTS

* Framework under development - voluntary pilot ** Estimated Accountability of the PRI Initiative Assessment of signatories Disclosure and transparency for signatories

A public Report on Progress will be produced from the aggregate results of the 2013/14 reporting cycle

REPORT ON PROGRESS

PUBLIC RI REPORTS (FROM 2013)

Consisting of “mandatory to disclose” indicators, these reports will be publicly available on the PRI website

RI TRANSPARENCY REPORTS

Private assessment reports will be piloted for signatories based on their responses to the 2013/14 reporting cycle

ASSESSMENT REPORTS

THE PILOT IN

NUMBERS

40%

More than

40%

of eligible signatories completed the pilot

VOLUNTARY

More than

1k

individual items of feedback and other indicator-specific suggestions were

received The new Framework was well received by most signatories,

with 90%

of respondents

stating it captures their responsible investment practices to a large or moderate extent

More than

70%

of respondents believe the new Framework is an improvement on the PRI’s previous reporting survey

THE REPORTING

FRAMEWORK IN

NUMBERS

Total number of indicators in the Framework:

224

Average number of indicators that each signatory will need to complete:

75

52%

Mandatory to disclose Total number of modules:

12

Average number of modules that each signatory will need to complete:

5

THE PILOT IN

NUMBERS

40%

More than

40%

of eligible signatories completed the pilot

VOLUNTARY

More than

1k

individual items of feedback and other indicator-specific suggestions were

received The new Framework was well received by most signatories,

with 90%

of respondents

stating it captures their responsible investment practices to a large or moderate extent

More than

70%

of respondents believe the new Framework is an improvement on the PRI’s previous reporting survey

THE REPORTING

FRAMEWORK IN

NUMBERS

Total number of indicators in the Framework:

224

Average number of indicators that each signatory will need to complete:

75

52%

Mandatory to disclose Total number of modules:

12

Average number of modules that each signatory will need to complete:

5

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SIDE EVENTS

ESG INVESTOR BRIEFINGS

In collaboration with the PRI, the Johannesburg Stock Exchange (JSE) and the Government Employees Pension Fund (GEPF) co-hosted an ESG Investor Briefing for delegates in Cape Town to showcase eight constituents of the JSE’s Socially Responsible Investment (SRI) Index, each with a unique take on sustainable business.

■ Food and clothing retailer Woolworths International presented its Good Business Journey, integrating sustainability across all product lines, featuring aspects such as life cycle analysis and supply chain management, and noting cost savings and efficiencies achieved over time.

■ Coal miner Exxaro Resources featured its top-down implementation approach, within the particular context of the extractive industry, which requires strong systems and innovation such as a gradual move toward supplying renewable energy sources.

■ FirstRand Bank reflected on the role financial services play in sustainable development and demonstrated its approach through an analogy to the military strategy of the historical warrior king of the Zulu nation, Shaka Zulu. ■ Allied Electronics (Altron) highlighted its integrated

five capitals model through which it identifies material issues to manage and report against.

■ Standard Bank expounded the group’s cross-implementation strategies and its stakeholder engagement process. Food producer Tongaat Hulett

presented its inclusive farming and employment retention strategies, highlighting success in social elements such as job creation and development of independent black small scale farmers.

■ The CEO of Old Mutual elaborated on the company’s recently introduced Responsible Business approach. ■ Anglo American concluded the day by presenting

the group’s value drivers and long-term strategies on sustainability.

“Supporting enhanced interaction

between companies and investors

with regard to ESG imperatives

‘said Corli le Roux, Head of SRI

Index and Sustainability, Strategy

& Public Policy Division at the

JSE’ is a key pillar in the JSE’s

continued efforts to promote

sustainability and transparency.”

Questions from the audience for each company were insightful, demonstrating understanding of company- and sector-specific ESG issues. Attendees commented that it was a productive and thought-provoking day, with a unique opportunity for investors to directly engage with a number of companies simultaneously on ESG matters. The value of the transparency demonstrated by the presenting companies was lauded.

“The success of days like these

lays a good foundation for

continuing and expanding on this

work, and the JSE looks forward

to seeing PRI signatories continue

their support and participation.”

For more information about the JSE, please refer to www.jse.co.za, or contact us on [email protected]

PRESENTATIONS AVAILABLE AT http://www.jse.co.za/HowToInvest/ JSE-Showcase-Presentations/JSE-ESG-Investor-Briefing.aspx

In May 2004, the Johannesburg Stock Exchange (JSE) launched the pioneering Socially Responsible Investment (SRI) Index to guide corporates on incorporating

sustainability into business policies and practices and enable responsible investment in constituent companies. The SRI Index has progressed significantly over its nearly 10 year existence. While the criteria continue to reflect a broad spectrum of sustainability considerations across global principles of best practice (incorporating issues peculiar to South Africa such as Black Economic Empowerment (BEE), skills development, local economic development and HIV/AIDS), its deliberate evolutionary approach has seen a shift in focus from identifying impact and setting policy, to greater disclosure across management and performance. Further, from a fully voluntary assessment, the Index now annually assesses the public reporting of all companies in the FTSE/JSE All Share Index.

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Fiona Reynolds, PRI Managing Director, welcomes Julie Moret, Director, Investment Risk–ESG at Franklin Templeton Investments, to the PRI during a new signatory signing ceremony in Cape Town. Nearly 200 new signatories joined the PRI between July 2012 and June 2013.

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ATTENDING ORGANISATIONS

27four Investment Managers

Absa Capital Alternative Asset Management Absa Small Business Provident Fund Action on Smoking and Health Australia Ltd Actis LLP

Adveq Management AG Africa SIF

Africa Strategic Impact Fund African Development Bank

Alberta Investment Management Corporation Alexander Forbes

Alliance Trust

Alquity Investment Management Limited Alternative Prosperity (Pty) Ltd

AMP Capital Investors Anglo American

Anglo American Platinum Ltd AP1, AP2, AP3, AP4

AP3 - Third Swedish National Pension Fund APG Asset Management

Arabesque Asset Management Ltd Arisaig Partners

ASISA Atlantic

ATP - The Danish Labour Market Supplementary Pension Australian Council of Superannuation Investors

Avior Research Aviva Investors Baillie Gifford & Co BB DTVM

Bench Marks Foundation BFA Consulting

BlackRock

BlackRock Investment Management Bloomberg LP

Bloomberg News BM&FBOVESPA BofA Merrill Lynch BPF Schilders

CAER - Corporate Analysis. Enhanced Responsibility. CAISSE DES DEPOTS

Caisse des Dépôts et consignations - CDC

California Public Employees’ Retirement System CalPERS California State Teachers’ Retirement System CalSTRS Canada Pension Plan Investment Board

CBUS Superannuation Fund CDP

Ceres

Church of Sweden Citigroup CLSA

Comité syndical national de retraite Bâtirente Co-operative Tradeka Corporation

Coronation Fund Managers CPP Investment Board Danske Bank

Davis Global Advisors Delsus Limited Deutsche Bank DNB

Ecobank EIRIS Ltd

Element Investment Managers Environmental Business Strategies ESG Analytics Inc.

Eskom Pension and Provident Fund Ethix SRI Advisors

Etica SGR Ernst & Young F&C

F&C Asset Management Fidelity Worldwide Investment Finance in Motion

FMO

Folketrygdfondet (Norwegian Government Pension Fund Norway) Folksam LO Fondförsäkrings AB

Fonds de Réserve pour les Retraites Fourth Swedish National Pension Fund Franklin Templeton Investments FTSE

FTSE Group

Futuregrowth Asset Management Genesis Analytics

GES

Gjensidigestiftelsen Global Reporting Initiative Gold Fields

Golden Mean Capital Partners Governance for Owners LLP

Government Employees Pension Fund of South Africa Government Pensions Administration Agency GraySwan Financial Services

Hampshire College Harith General Partners Henderson Global Investors

Hermes Equity Ownership Services Ltd Hermes Fund Managers

Hermes GPE HESTA Super Fund HOOPP

HSBC HWB

IF Metall Finans AB IFC

Ilmarinen Mutual Pension Insurance Company Imara Asset Management

Incofin Investment Management Independent

Industriens Pensionsforsikring A/S Inflection Point Capital Management ING Investment Management

Initiative for Responsible Investment at Harvard University International Corporate Governance Network

International Finance Corporation (IFC) International Integrated Reporting Council International Trade Union Confederation Investec Asset Management

Investment Solutions ISS / MSCI

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Itau Unibanco

Johannesburg Stock Exchange (JSE) JSE Limited

Kagiso Asset Management Kigoda Consulting KLP

Legae Securities

Legal & General Investment Management Limited Mazi Visio Manco Pty Ltd

Metal & Engineering Industries Funds MFS Investment Management

Middletown Works Hourly and Salaried Union Retirees Health Care Fund

Mineworkers Providnet Fund MN

Momentum Manager of Managers MSCI ESG Research

NasdaqOMX National Treasury Natixis Asset Management Nedbank

Neuberger Berman

New Zealand Superannuation Fund Newton Investment Management Nordea

Nordea Investment Management Nordea Private Banking

Norwegian Ministry of Finance Nykredit Realkredit Group Oasis Group Holdings Oddo Securities Old Mutual Old Mutual Namibia

Ontario Teachers’ Pension Plan Osmosis Investment Management Ownership Capital

PAI Partners PensionDanmark PGGM Investments PGGM N.V.

Pharmaceutical injuries insurance PIMCO

PKA

Prescient Investment Management

PREVI - Caixa de Previdência dos Funcionários do Banco do Brasil PRI Association

Principal Officers Association Principles for Responsible Investment Prius Partners

Provincial Government Western Cape Provincial Planning & Treasury Provincial Treasury EC Prudential Portfolio Managers Public Investment Corporation (PIC) RegCharles Finance and Capital Ltd Responsible Investor

RisCura

Rob Lake Advisors Ltd. Robeco

Robeco Nederland B.V.

RobecoSAM Route2

Russell & Associates Russell Investments

Sanlam Investment Management (SIM) Santander Brasil Asset Management Sasria

SAVCA

SEIU Master Trust

SENTINEL RETIREMENT FUND SEV

SITAWI - ESG Research & Advisory Skandia Liv Kapitalförvaltning Sparinvest Group

Spencer Stuart

Stakeholders Empowerment Services Standard Life Investments

STANLIB

State Street Global Advisors (SSgA) Statnett SFs Pensjonskasse Stellenbosch University

Sumitomo Mitsui Trust Bank Limited Suomi Mutual Life Insurance Company Sustainable Returns

Sustainalytics

Swedfund International AB Swedish Municipal Workers´ Union Swedish Trade Union Confederation The Blended Capital Group

The Central Church Fund of Finland The University of Queensland TIAA - CREF

Towers Watson

Towers Watson Investment Services Transnet Retirement Fund

Trialogue Trucost Trust Waikato

UAW Retiree Medical Benefits Trust UBS Investment Bank

UFCW International Union Pension Plan for Employees UFF Agri Asset Management

UNEP FI

Union Investment

Unipension Fondsmaeglerselskab A/S United Farmers Fund - UFF (Pty) Ltd United Nations Joint Staff Pension Fund Unity Incorporation

Universities Superannuation Scheme - USS

University of Cape Town Graduate School of Business University of Pretoria

Varma Mutual Pension Insurance Company Vigeo

Vunani Fund Managers

Wellington Management Company, LLP

Wespath Investment Management (General Board of Pension and Health Benefits of the United Methodist)

William Blair WWF South Africa

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INTRODUCING THE PRI INITIATIVE

The United Nations-supported Principles for Responsible Investment (PRI) Initiative is an international network of investors working together to put the six Principles for Responsible Investment into practice. Its goal is to understand the implications of sustainability issues for investors and support signatories to incorporate these into their investment decision-making and ownership practices. By implementing the Principles, signatories contribute to the development of a more sustainable financial system. The Initiative has quickly become the leading global network for investors to learn about responsible investment and collaborate with their peers, companies and policymakers to generate sustainable, long-term investment returns for their clients and beneficiaries.

In early 2005, the then UN Secretary-General, Kofi Annan, invited a group of the world’s largest institutional investors to join a process to develop the Principles. A 20-person

Investor Group drawn from institutions in 12 countries was supported by a 70-person group of experts from the investment industry, intergovernmental organisations and civil society. The Principles were launched in April 2006 at the New York Stock Exchange.

WHY JOIN THE PRI?

Becoming a signatory to the PRI Initiative allows you to publicly demonstrate your commitment to responsible investment and places your organisation at the heart of a global community seeking to build a more sustainable financial system.

It provides a high-level framework for integrating ESG issues into investment decision-making and ownership practices within the bounds of investors’ fiduciary duties and offers a comprehensive range of tools and resources to support signatories.

In addition to ongoing opportunities to network, collaborate and learn from their peers via working groups, signatories can participate in more than 100 online and in-person events and webinars hosted by the Initiative around the world each year, including the annual PRI in Person event. Like the PRI Initiative as a whole, its agenda is designed to offer something for every signatory, regardless of their size, location, asset class focus, style of responsible investment or progress towards implementation.

■ Access a growing range of PRI Implementation Support resources to explore the case for integrating ESG issues and learn how to implement the Principles in a systematic way across asset classes.

■ Collaborate with your peers in the PRI

Clearinghouse, an online platform of investors seeking dialogue with companies, policymakers, and other stakeholders to advocate for improved disclosure and management of ESG issues. ■ Monitor and communicate your progress towards

implementing responsible investment and track progress relative to your peers via the PRI Reporting Framework. ■ Join local groups of signatories in PRI Networks to gain

implementation support at the local and regional level, and coordinate with peers to engage with local companies. ■ Leverage the PRI Academic Network to draw

on the latest research from business schools, scholars and academics on emerging best practice in ESG analysis and integration.

■ Contribute to the development of a more sustainable global financial system by helping to identify

and overcome strategic barriers to responsible investment, ensuring your interests are aligned with those of your clients and beneficiaries.

REPORT BE ACTIVE PROMOTE SEEK DISCLOSURE COLLABORATE INCORPORATE

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The South Africa Network was launched in May 2009 with support from the Government Employees Pension Fund of South Africa (GEPF), the largest pension fund in South Africa. It serves as a platform for PRI signatories in the region to discuss ideas, share experiences and collaborate on a range of ESG issues that are material to investment decision-making. GEPF has played a leading role in developing the network and acts as the network Chair.

WHAT PRI IS DOING IN SOUTH AFRICA

The PRI continues to support an initiative by the

International Finance Corporation (IFC) and the Principal Officers Association (POA) on the Sustainable Returns for Pensions and Society (SRPS) project. The Project provides a consistent framework and set of tools for retirement funds to comply with Regulation 28 of South Africa’s Pension Funds Act and the Code for Responsible Investing in South Africa (CRISA). The project responds to a need for capacity building and tools to support principal officers and trustees of pension funds to implement this new requirement. The PRI is represented on the CRISA committee and ASISA RI Standing committee. The Network is actively working to increase the asset-owner membership and to increase its footprint in neighbouring African countries.

STEERING COMMITTEE

■ John Oliphant, Chair of the PRI South Africa Network ■ Adrian Bertrand, Government Employees Pension Fund ■ David Couldridge, Element Investment Management ■ Malcolm Fair, Riscura

■ Malcolm Gray, Investec Asset Managemnent

■ Monika Kraushaar, Momentum Manager of Managers ■ Paul Lee, Hermes Equity Ownership Services ■ Lungani Sibiya, Eskom Pension and Provident Fund ■ Jon Duncan, Old Mutual Investment Group South Africa

WORKING GROUPS

ENGAGEMENT

The group is focused on the regulatory challenges currently facing collaborative shareholder engagement in South Africa. The group investigates potential collaborative engagements with local companies and creates opportunities for dialogue with public policymakers.

AWARENESS AND RECRUITMENT

The group focuses on raising awareness about the materiality of ESG issues to investment processes among asset owners, investment managers and service providers in South Africa and for the recruitment of new signatories to the PRI.

+27 84 362 4189

South Africa Network Manager Xolisa Dhlamini

[email protected]

SOUTH AFRICA SIGNATORIES

ASSET OWNER

• Eskom Pension and Provident Fund

• Government Employees Pension Fund of South Africa • Sanlam Limited

• SASRIA SOC Limited

INVESTMENT MANAGER

• 27Four Investment Managers

• Absa Capital Alternative Asset Management Pty Ltd • Afena Capital Pty Limited

• Allan Gray

• Argon Asset Management Proprietary Limited • Atlantic Asset Management Pty Ltd

• Cadiz Holdings • COMANCO

• Coronation Fund Managers • Element Investment Managers • Futuregrowth Asset Management • Harith General Partners

• Inspired Evolution Investment Management • Investec Asset Management

• Investment Solutions • Kagiso Asset Management • Mazi Visio Manco Pty Ltd • Mergence Africa Investments • Mianzo Asset Management • Momentum Asset Management

• Momentum Manager of Managers Pty Limited • Oasis Group Holdings

• Pan-African Asset Management Pty Ltd • Prescient Investment Management • Prudential Portfolio Managers • Public Investment Corporation (PIC) • Royal Bafokeng Holdings (Pty) Ltd • Sanlam Investment Management (SIM) • Sentio Capital Management (Pty) Ltd • STANLIB Asset Management Ltd • UFF Management PTY ltd • Vantage Capital

PROFESSIONAL SERVICE PROVIDER

• Avior Research

• Fiduciary Solutions • GraySwan Financial Services • Johannesburg Stock Exchange (JSE) • Kigoda Consulting

• Malaczynski Burn Pty Ltd • RisCura

• Unity Incorporation

44

_SIGNATORIES

4

AO

32

IM

8

SP

PRI SOUTH AFRICA NETWORK

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THE PRI WOULD LIKE TO THANK THE MANY SPONSORS

AND SUPPORTERS OF PRI IN PERSON 2013:

PLATINUM SPONSORS:

GOLD SPONSORS:

SILVER SPONSOR:

SUPPORTER:

COLLATERAL SUPPORTERS:

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SAVE THE DATE!

Montréal, Canada

24-26 September 2014

An investor initiative in partnership with UNEP Finance Initiative and UN Global Compact

SPONSORSHIP OPPORTUNITIES

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The PRI is an investor initiative in partnership with

UNEP Finance Initiative

and the

UN Global Compact

.

UN Global Compact

Launched in 2000, the United Nations Global Compact is a both a policy platform and a practical framework for companies that are committed to sustainability and responsible business practices. As a multi-stakeholder leadership initiative, it seeks to align business operations and strategies with 10 universally accepted principles in the areas of human rights, labour, environment and anti-corruption, and to catalyse actions in support of broader UN goals. With 7,000 corporate signatories in 135 countries, it is the world’s largest voluntary corporate sustainability initiative.

More information: www.unglobalcompact.org

United Nations Environment Programme Finance Initiative (UNEP FI)

UNEP FI is a unique partnership between the United Nations Environment Programme (UNEP) and the global financial sector. UNEP FI works closely with over 200 financial institutions that are signatories to the UNEP FI Statement on Sustainable Development, and a range of partner organisations, to develop and promote linkages between sustainability and financial performance. Through peer-to-peer networks, research and training, UNEP FI carries out its mission to identify, promote, and realise the adoption of best environmental and sustainability practice at all levels of financial institution operations.

http://www.unpri.org/pri-in-person-2013-cape-town/pictures/

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UN Global Compact