Presentation by SinCo on sustainable investment in Africa, promoting AfricaSIF.org. InterContinental HOTEL & RESORTS, Lusaka - ZAMBIA | JANUARY 30 - 31, 2013 Zambia Pension Fund Investment Forum Charting a sustainable retirement and Pension funds Investment strategy http://www.mncapital-group.com/past-event-detail.php?ref=zambia-pension-fund-investment-forum

1. Integrating ESG
Into Investment Strategy:
Risks and Opportunities
Graham Sinclair
President, AfricaSIF.org
gs.africasif@gmail.com
Principal, SinCo
@esgarchitect
graham.sinclair@sincosinco.com
"1
sustainable investment consulting
Zambia Pension Fund Investment Forum
www.africasif.org
@AfricaSIF
africasif@gmail.com
www.sincosinco.com
@SinCoESG
info@sincosinco.com

2. Presentation flow
What do investors want?
About AfricaSIF.org
Rationale for sustainable investment
What ESG issues?
Strategies for ESG integration in Africa
Frameworks for ESG
Let's grow investment in Zambia, sustainably
"2
sustainable investment consulting

3. What do investors want?
"3

4. What do investors want?
Investors are seeking net-of-fees, net-of-inflation, risk-adjusted positive investment returns, for
example equity (dividends market price increases) or fixed income (coupon payments and principal
repatriation). Investors value diversity, non-correlation and liquidity.
Investors have a sense of long-term investment, but investor behavior may be irrational, herd-driven
on the fear-greed spectrum. Limits on scale, information and operational efficiency are parameters to
universal investment.
Investors want to reduce their buy/hold/sell decision to 2 pages describing the investment structure
(debt/equity), competitive advantages of firm and its products/services, quality of its management,
operational efficiency and strategic prospects. investors always want to buy their investments for the
lowest price, at the bottom of the J-curve (buy low-sell high).
"4@SinCoESG I sincosinco.com I info@sincosinco.com
sustainable investment consulting

5. Quick facts on Zambia
Only tells part of story
Exports - China 34.8%, Switzerland 18.2%, South Africa 7.8%, DRC 5.4%, South Korea 4.4%
(2011). Imports - South Africa 36.7%, DRC 20.6%, China 10%, Kuwait 5.9% (2011).
Traded stocks - $4.009 billion (31 December 2011), country comparison to the world: 91. $2.817
billion (31 December 2010). $2.804 billion (31 December 2009).
GDP. agriculture: 20.2% industry: 33.5% services: 46.3% (2012 est.)
Workforce 5.83m in agriculture: 85% industry: 6% services: 9% (2004).
Environmental issues. air pollution and resulting acid rain in the mineral extraction and refining
region; chemical runoff into watersheds; poaching seriously threatens rhinoceros, elephant,
antelope, and large cat populations; deforestation; soil erosion; desertification; lack of adequate
water treatment presents human health risks. "5

6. About AfricaSIF.org
Africa Sustainable Investment
Forum is an independent,Pan-
African, not-for-profit network,
knowledgebase and advocate
promoting investment in
sustainable development across
the continent. Launched in June
2010, the AfricaSIF.org Project is
run by volunteers building a
network of institutions and
individuals promoting sustainable
investment in Africa by investors
in public, private and philanthropy
sectors across asset classes,
countries and stakeholders from
our platform at www.africasif.org.
"6

7. "7

8. "8

9. "9

10. About AfricaSIF.org
AfricaSIF.org is a new, strategic step in
facilitating investment in Africa that
purposefully integrates environmental,
social and governance (ESG) factors.
AfricaSIF.org defines "sustainable
investment" as: "an approach to
investment in any asset class in Africa
where t, social and governance (ESG)
factors are proactively integrated at any
stage of the investment life cycle."
*AfricaSIF.org Trends 2012 Report*
Please join our major Africa sustainable
investment research project -
www.africasif.org/marketplace-and-
trends-report.php
"10

11. Rationale for sustainable investment 1/2
1. More beneficial owners - you and me - and the trustees stewarding retirement funds,
are asking more questions. Institutional investment is a competitive global industry.
professionals manage portfolios across asset classes, project and company types;
financing/investing in stages of companies/projects business cycles.
2. Increasing materiality of environmental, social and governance (ESG) factors is driving
investors, and their end-clients, to integrate sustainability concepts. $13.6 trillion
globally, $229 billion in Africa reports proactively using ESG in investment policy or
process.
3. Increasing quality of coverage of ESG flowing from professional ratings agencies and
sharper focus. with more coverage, opportunity to use of new ESG valuation models.
Pursuit of "sustainability alpha" continues; ESG benchmarking and performance
attribution growing.
4. Improving African investment context is attracting capital. Benefit from making the
sustainable investment case for the positive outcomes, or reduction in negative impacts.
50% investment dollars in private equity in Sub-Saharan Africa is DFI-linked.
"11
sustainable investment consulting

12. 12

13. GEPF Developmental Investment Policy
$5 billion over 5 years
13
Pillar I
Investments
in Economic
Pillar II
Investments
in Social
Pillar III
Investments
in
Pillar IV
Investments
in Enterprise
Development
Sustainable long-term investment returns for the GEPF

14. Rationale for sustainable investment 2/2
Global pension investment best practice from Africa
Regulation 28 of Pension Funds Act 24/1956 effective 1 January 2012
PREAMBLE "A fund has a fiduciary duty to act in the best interest of its members whose
benefits depend on the responsible management of fund assets. This duty supports the
adoption of a responsible investment approach to deploying capital into markets that will
earn adequate risk adjusted returns suitable for the fund’s specific member profile,
liquidity needs and liabilities. Prudent investing should give appropriate consideration
to any factor which may materially affect the sustainable long-term performance of
a fund’s assets, including factors of an environmental, social and governance
character. This concept applies across all assets and categories of assets and should
promote the interests of a fund in a stable and transparent environment."
"14
sustainable investment consulting
@SinCoESG I sincosinco.com I info@sincosinco.com

15. Investment case is sum of all operations and investments. ESG issues are
material, but methods for valuing differ. Timing, shocks and impacts differ.
"15
WHAT ESG ISSUES? All the the companies' strategy,
operational plans and realities are tested in the harsh light
of investment analyst presentations, and a public forum
where stakeholders have a voice

16. Food security, food supply chains and nutrition of food & beverages is
important to food companies, investors. People want to trust what they eat?
"16
Social - Child Labor,
Consumer Product
Safety, Diversity,
Labor Relation
Environmental -
Environmental
Performance, Global
Sanctions, Superfund
sites, Toxic Chemicals
Governance - board
representation,
separation of powers
and duties, independent
directors, separate
Chairman and CEO.
What ESG Issues?

17. Strategies for ESG Integration in Africa 1/2
How will the least possible ESG data delivered as information on sustainability lead
to the maximum knowledge on the current value and future expected value of the
and its franchise with consumers, employees, policymakers, regulators, investors,
and other stakeholders?
Investors do not want a list of "material issues" for sector or generic firm. Investors
need the firm to explain the business critical sustainability issues, and ow the firm
with map and monitor and mitigate ESG risks, and maximize ESG opportunities.
"17
sustainable investment consulting
@SinCoESG I sincosinco.com I info@sincosinco.com

18. HEADLINE RISK TO INVESTORS
ESG is a factor throughout
investment life cycle
Impacts of all investor portfolio
companies/securities/projects
sums to portfolio-level ESG.
"18

19. Strategies for ESG Integration in Africa 2/2
• 1. Macro thematic issues relevant to mining or extractives - for example
water scarcity, carbon taxes, labour relations. Themes inform sense of
"investment conviction" about how sector, industry and firm may
manage key issues in strategy and operations.
• 2. Key value creators/destroyers - at sector and company levels, filters
for best/worst in class; tempers financial data with sense of prospects.
for example, firm may be estimated to have 35% upside but be worst
performer.
• 3. Active ownership over time - using ESG information as active
shareholder to steer company away from high-risk, low-reward
situations or binary issues with negative reputation impacts. Voluntary
initiatives like CRISA, PRI, EITI, Equator Principles or CDP play a role.
"19@SinCoESG I sincosinco.com I info@sincosinco.com
sustainable investment consulting

20. Frameworks for ESG - global and local
"20@SinCoESG I sincosinco.com I info@sincosinco.com

21. Frameworks for ESG - mining sector
• Social licenses to operate, obtained through community engagement and sustainability
management, are ever more essential to mining companies’ ability to run a successful mine.
• The industry is faced with many tough decisions. Management at many companies must
choose between layoffs or profits. Others are forced to choose between ramping up
production of low grade mines – the result could mean higher carbon emissions, wastes, and
costs - or move operations deeper into regions with high uncertainty due to risks of corruption,
social changes, or sensitive environments that can block projects from going forward.
• The increasingly scarce high grade projects are also often in regions where safety and
environmental standards need to be drastically upgraded to meet international standards. Poor
social and environmental performances also significantly raise risks of resource nationalization
and higher payment demands.
• Labor cost inflation reaches double digits for many companies and diminishes long term
confidence that high margin mines in areas of unrest will remain strong investments. Mining
companies face additional risks of cost hikes through increased regulatory pressure, expanding
carbon regulations, and higher costs for energy and supplies
"21@SinCoESG I sincosinco.com I info@sincosinco.com
sustainable investment consulting

22. "22
Zambia Pension Fund Investment Forum
What sustainable investment will reward his pension lifestyle?

23. Let's grow investment in Zambia, sustainably
• Increased demand for growing economies. More demand for ESG strategies. $13.6
trillion globally, $229 billion in Africa reports proactively using ESG in investment
policy or process. 50% investment dollars in private equity in Sub-Saharan Africa is
DFI-linked.
• Increasing materiality of environmental, social and governance (ESG) factors is driving
investors, and their end-clients, to integrate sustainability concepts.
• Increasing quality of coverage of ESG flowing from professional ratings agencies and
sharper focus. with more coverage, opportunity to use of new ESG valuation models.
"23
sustainable investment consulting

24. Integrating ESG
Into Investment Strategy:
Risks and Opportunities
Graham Sinclair
President, AfricaSIF.org
gs.africasif@gmail.com
Principal, SinCo
@esgarchitect
graham.sinclair@sincosinco.com
"24
sustainable investment consulting
Zambia Pension Fund Investment Forum
www.africasif.org
@AfricaSIF
africasif@gmail.com
www.sincosinco.com
@SinCoESG
info@sincosinco.com

25. Indemnity
This ESG research by SinCo includes funds, firms and initiatives that may be clients
of SinCo, or the parent of, or affiliated with, a client of SinCo. SinCo ESG research
reports, articles and profiles have not been submitted to, nor received approval
from, the United States Securities and Exchange Commission or any other
regulatory body. While we have exercised due care in compiling the information, we
make no warranty, express or implied, regarding the accuracy, completeness or
usefulness of the information and assume no liability with respect to the
consequences of relying on the information for investment or other purposes. In
particular, SinCo ESG research is not intended to constitute an offer, solicitation or
advice to buy or sell securities.
Without limiting any of the foregoing and to the maximum extent permitted by law, in
no event shall SinCo have any liability regarding any of the Information for any direct,
indirect, special, punitive, consequential (including lost profits) or any other damages
even if notified of the possibility of such damages. The foregoing shall not exclude or
limit any liability that may not by applicable law be excluded or limited.
"25
sustainable investment consulting
@SinCoESG I sincosinco.com I info@sincosinco.com

26. Quick facts on Zambia
Only tells part of story
Exports - China 34.8%, Switzerland 18.2%, South Africa 7.8%, Democratic Republic of the Congo 5.4%, South Korea 4.4% (2011)
Imports - South Africa 36.7%, Democratic Republic of the Congo 20.6%, China 10%, Kuwait 5.9% (2011).
Traded stocks - $4.009 billion (31 December 2011), country comparison to the world: 91. $2.817 billion (31 December 2010). $2.804
billion (31 December 2009).
Urban population: 36% of total population (2010). rate of urbanization: 3.2% annual rate of change (2010-15 est.).
Labour force. 5.839 million (2012 est.) country comparison to the world: 67
Unemployment. 14% (2006 est.) country comparison to the world: 138. 50% (2000 est.).
GDP. agriculture: 20.2% industry: 33.5% services: 46.3% (2012 est.)
Workforce 5.83m in agriculture: 85% industry: 6% services: 9% (2004).
Environmental issues. air pollution and resulting acid rain in the mineral extraction and refining region; chemical runoff into
watersheds; poaching seriously threatens rhinoceros, elephant, antelope, and large cat populations; deforestation; soil erosion;
desertification; lack of adequate water treatment presents human health risks.
Landline 85,700 (2011) country comparison to the world: 149. Mobile 8.165 million (2011) country comparison to the world: 87.
Internet users 816,200 (2009) country comparison to the world: 105. "26

27. "27
Rationale for sustainable investment 2/3
• $13.6 trillion (21.8%) of professionally managed assets
reporting incorporating environmental, social and governance
(ESG) factors into investment selection and management (Jan
2013 on 31 Dec 2011 data). Positive/best-in-class screening
stands at just over $1.0 trillion, while impact investing ($89
billion) and sustainability-themed investments ($83 billion) are
comparatively small.
• Investment in Africa reporting proactively investing using ESG
factors $228 billion AuM. Integration of ESG is $198 billion
AuM. South Africa is 95% of Africa investment market; ESG-
branded investment products make up just 1% AuM.
• According to Bloomberg ESG, "in 2010, 5,000 investors in 29
countries accessed more than 50 million ESG indicators in the
Bloomberg platform— a 29 percent increase over 2011."
• 40 percent of shareholder resolutions in 2012 in the USA
pertained to environmental and social concerns, up from 30
percent during the prior proxy season. RSA share owner
activity increasing off low base, online reporting of proxy votes.
• ESG performance studies
reflect sustainability may
increase returns. ESG tilts
in listed equity perform
best for buying ESG
"improvers" and shorting
"laggards" *2008-12
• $10 billion annual
savings on U.S. electric
bills from new lightbulb
standards. 59%
proportion of emissions-
reductions efforts pay for
themselves in 3 years.
• 67% return from listed
equity portfolio based on
the Carbon Disclosure
Leadership Index since
2006. 31% return of by
CDP Leadership Index's
Global 500 peers during
the same period.
@SinCoESG I sincosinco.com I info@sincosinco.com

28. What ESG Issues? 2/3
CARBON
From SinCo research for Navigating Muddy Waters research series
commissioned by WWF with SinCo, Trucost and Carbon Tracker, using GEPF's
fixed income and equity portfolio as worked example. Confirmed that investors
attitudes to carbon & water scarcity risks ranged from ambivalent to concerned.
Previous studies of the development of institutional investor approaches to
sustainable investment in South Africa identified 1/3 had no knowledge of a
carbon tax pricing scenario, another 1/3 had zero.
*2015 carbon tax shifted valuations - Arcelormittal lost 6%
"28
sustainable investment consulting
@SinCoESG I sincosinco.com I info@sincosinco.com

29. What ESG Issues? 3/3
WATER
Analyst note from Standard Bank on 14 resources companies.
Most mining and industrial operations in RSA in water-stressed areas:
Waterberg and Witbank Coal fields, Witwatersrand gold complex, and Bushveld
PGM igneous complex. Lonmin and SASOL have lowest scores on their
proprietary ratings for water management. "Anglo Platinum has the highest
score, implying the lowest risk, it is still without IWUL at its key operations,
based on public information available at date of publication...SA Resource
sector is still only about one year into setting fixed targets and monitoring
them"
"29
sustainable investment consulting
@SinCoESG I sincosinco.com I info@sincosinco.com