Responsible Investing is a process in which the Environmental, Social and Governance (ESG) criteria are taken into account along with the usual financial criteria. Part I deals with listed RI (SRI funds and stocks) : Is it a credible alternative against the mainstream ? Part II deals with microfinance and impact investing The author, Xavier Heude has been entirely dedicated to the development of Responsible Finance by the mean of promoting Impact Investing, mainly. He is convinced that Private and Institutional investors are growingly interested in putting some part of their money in business activities or projects where they can themselves follow up the financial performance, and last but not least, the social and environmental outcomes generated. He is Co-founder of meso IMPACT Finance, a Luxembourg-based holding company aimed at taking stakes in financial intermediaries that generate a social and measurable impact. He is also co-founder of Backbone, an advisory company specialized in the sourcing of projects that generate social / environmental impact. www.backbone.eu.com Xavier Heude founded also the “PEERS Direct Investment” – a registered trademark in 2011, after having stated for many years, that there are still quite few incentives and operational frameworks and guidelines allowing and encouraging a large public to invest in socially responsible business activities or to support valuable social initiatives. A network is being built, in order to contribute to expand the mark and get it known worldwide.

1. 1
Xavier Heude
If you are planning for a year, sow rice
If you are planning for a decade, plant trees
If you are planning for a lifetime, educate people
Chinese proverb

2. 2
TYPOLOGY OF INVESTORS being most interested in sustainable investment
- women (they are more looking for personal values being reflected in investments)
- entrepreneurs
- ultra-wealthy
- younger generation
Huge problem : no set criteria used by industry today to define
‘sustainable’ practices or investments
A third of Global Investing Considered “Sustainable”

3. 3
Conference Paper
Roberts J and Young-Ferris A
'Immature or impossible ? – Making environmental, social and
governance issues calculable for investors‘
Principles for Responsible Investment (PRI) in Person Conference in
partnership with UNEP Finance Initiative and UN Global Compact,
London, United Kingdom, 10th September 2015

4. 4
Thousands of starfish washed ashore
A little girl began throwing them in the water so they wouldn’t die.
‘Don’t bother, dear’ her mother said, ‘it won’t make a difference’
The girl stopped for a moment and looked at the starfish in her hand.
‘It will make a difference to this one’”

5. Part 1 : « Responsible investing » Part 2 : « Impact investing »
“How the SRI industry has failed to respond to
people who want to invest with conscience.”
Paul Hawken (Natural Capital in 2004)

7. In the 1920s (USA, the Methodist Church) : Responsible Investment was originally initiated :
avoid 'sin stocks' in its investment policy
In 1928 (USA) : 1st ethical investment fund, the Pioneer Fund, enabling Christians to keep
"sinful" businesses out of their investment portfolio
One of the most early adopters of SRI : John Wesley (1703-1791), one of the founders of Methodism.
Wesley’s sermon “The Use of Money” outlined his basic tenets of social investing :
- not to harm your neighbor through your business practices
- to avoid industries like tanning and chemical production, which can harm the health of workers

8. By the 1960s :
 the financial‐moralist movement had started to spread to continental Europe (churches
and religious groups placed their financial investments in line with their views and principles
 Vietnam war : institutional investors involved in ethical discussions, when some companies
were challenged about their involvement in the production of napalm and anti‐personnel
weapons
In the 1980s : a growing number of investors were active with regard to the apartheid policy in
South Africa
In the 1990s : SRI began a new phase of development
 social activists
 public's broader consciousness of ESG issues (Environment – Social – Governance)
 growing perception of social responsibility by governments, corporations and investors

9. In 2005 : the UNO called on some of the world's largest institutional investors to participate
in the development of the UN Principles for Responsible Investment (PRI)
Process, coordinated by UN Global Compact and UNEP‐Finance Initiative
9
In 2011 : the EU has also formally “invited” European asset managers and asset owners
to sign up to the UN PRI – “A renewed EU strategy 2011-2014 for Corporate Social Responsibility”

10. Sources FAO 2005

11. 11

13. SRI is an investment process :
- in which the Environmental, Social and Governance (ESG) criteria are taken into
account along with the usual financial criteria
- where the voting rights attached to the stock are being exercised to promote CSR
practices
(Robin Edme, co-founder & former Eurosif & French SIF President)
• Most shareholders send corporate management a very simple message : “Make me money.”
• Social investors are sending a new message: “Make me money … but not at the expense of
the planet and its people.”

14. 14

15. Corporate Social Responsability
15

16. Notion de responsabilité sociétale

17. 17
Emphasis on
profit
maximisation
ESG risk
mitigation
(protect value)
ESG factors
integration
(enhance
value ?)
Address
societal
challenges
No trade-off
on return
Address
societal
challenges
Competitive
return being
uncertain
Address
societal
challenges
No
competitive
return
Address
societal
challenges
No financial
return !
Social / environmental impact is measuredESG initiatives are undertaken
and reported
Investment landscapeSource: Social Impact Investment Taskforce
seek a financial return
while pursuing positive social outcomes
target specific and measurable social returns
while producing financial returns

18. 18

19. 19
• An improved ability to attract and retain better employees
• Competitive advantages in production technology designed to eliminate waste
• More productive workforces
• Higher sales and more loyal customers
• Lower litigation costs
• Enhanced brand value and reputation
• Better risk and crisis management
• Good relations with government and communities
Non-financial considerations can have an impact on financial performance
Responsible investing

20. 20

21. 21
To which asset types does SRI apply ?
• Securities
• Bonds
• Money market
• Real estate
• Private equity

22. 22
Explicit consideration of environmental, social and governance
factors in the investment decision-making process
Focus on specific or multiple issues related to ESG
Leading or best-performing investments within a universe,
category, or class
Compliance with international standards & norms, covering
ESG factors
Engagement activities and active ownership through voting
Ethical- or values based exclusions (weapons, pornography,
tobacco and animal testing)
Investments made with the intention to generate a social /
environmental impact alongside a financial return
(microfinance, community investing, social business,
entrepreneurship funds)
7 Resp. Invest. Strategies, not mutually exclusive
(a fund can use one or several strategies to select its investments)
“Non-systematic ESG integration”, in which ESG
analysis is made available to mainstream analysts
and fund managers but no formalized process exists
“Explicit and systematic ESG integration”, whereby
investors systematically consider or include ESG analysis
when rating or valuing investments, either voluntarily or
under mandates.

23. 23
Limitations of the study
• 278 asset managers and asset owners - AuM of € 15 trillion (i.e. 81 % of the market)
• figures are largely self-reported
• in the absence of a SRI framework, market players might have different understandings of SRI
Drivers of SRI demand

24. 24
Overview of SRI Strategies in Europe
Compound Annual Growth Rate (CAGR)
Market Growth by Strategy

25. 25Sustainability themed investments
Top exclusion criteria

26. 26
The SRI concept remains unknown to the general public : 66% of respondents
declared they had never heard of SRI before the survey (compared with 67% in 2015)
Only 4% of respondents who own a financial product have been offered SRI products
by their financial institution (compared with 3% last year)
40% of French people consider their financial advisor to be the most appropriate
person to inform them about responsible investment, followed by NGOs and consumer
groups
Almost 1/3 of the people surveyed consider that the existence of a label about savings
products, accredited by the state, could be a determining factor in choosing SRI products
National yearly survey conducted online between August 26th and 29th 2016
with a sample of 1,101 adults 16-75 in France

27. 27
Handicap of SRI
1) Lack of in-depth analysis : too often SRI fund overlook the core-business activities
- the current SRI model seems to be to identify a set of “ethical” issues, then cross-check
them against a list of companies …
- where those issues are found to be significant, or material, for a company, the fund
starts to engage with it
=> instead, funds should start by analysing the core-business activities of companies
=> working from a knowledge of how the business works would provide a better
starting point for engagement with companies

28. 28

29. 29
« Stratégie d’investissement :
La stratégie d’investissement du FCP s’appuie dans un premier temps sur la définition d’un univers de
valeurs présentant un potentiel de performance financière le plus élevé possible, puis dans un second
temps sur une stratégie de sélection de valeurs qui suivent une politique de développement durable jugée
favorable à l’appréciation du titre sur la durée, telle qu’évaluée selon notre notation interne des piliers
environnement, social et gouvernance..
La philosophie de gestion du FCP vise à investir dans des entreprises qui orientent leurs choix stratégiques
et opérationnels dans l’optique d’un développement durable. Elles viseront ainsi dans la conduite de leur
activité la recherche de performance globale - à la fois économique et financière, sociale-sociétale et
environnementale - dans le respect et la confiance de leurs parties prenantes internes et externes.
Ainsi, les actions seront sélectionnées selon la stratégie décrite ci-après :
- la sélection de l’univers d’investissement repose dans un premier temps sur l’utilisation de filtres
quantitatifs permettant de définir les valeurs qui seront considérées comme admissibles et feront l’objet
d’analyses complémentaires. L’univers des titres dans lequel le FCP est investi porte sur des actions sans
restriction de capitalisations,
- l’utilisation d’analyses externes a pour but d’aider le gérant à orienter sa propre recherche sur un
nombre réduit de titres inclus dans l’univers d’investissement. Le choix des analystes externes fait
également l’objet d’un processus de sélection défini par la société de gestion,
- Les titres ainsi pré-sélectionnés font dans un second temps l’objet d’une analyse qualitative de façon à
sélectionner les sociétés répondant aux meilleurs critères de développement durable. Les actions des
entreprises sont appréciées sur des critères de responsabilité et performance de nature
environnementale (E), sociale-sociétale (S) et de gouvernance d’entreprise (G) »
Prospectus

30. 30
Stratégie d'investissement
.
Dans le cadre de la gestion d'Allianz Citizen Care SRI, la principale source de valeur ajoutée est la
sélection active de titres de sociétés qui offrent le meilleur couple qualités sociétales / qualités financières
possible.
1 - Sélection active de valeurs ISR : Principale et récurrente
En matière d ISR, notre philosophie d’investissement correspond à une démarche de sélection sectorielle
positive (approche « best in class ") et non à ‘ approche d’exclusion propre à l’investissement éthique. La
sélection des meilleurs pratiques en matière de développement durable se matérialise par l’insertion de filtres
supplémentaires et complémentaires à l’analyse financière « classique" des valeurs représentées dans
l’univers d’investissement.
L’évaluation du comportement socialement responsable de l’ entreprise s’ intègre ainsi à l’ analyse
fondamentale et stratégique des valeurs qui reste donc à la base de la sélection de titres au sein des
portefeuilles et permet de conserver le profil risque/rendement d’ une gestion traditionnelle.
L’OPC favorisera des actions répondant à des critères ISR. Ces valeurs sont notées au sein de différentes bases
de données internes et externes à l’OPC. Les 5 critères prépondérants sont les suivants :
Droits de l’homme : il nous est impossible de transiger sur ce thème, nous en avons donc fait un critère
d’exclusion.
Prospectus

31. 31
Comité ISR
L'objectif de ce Comité est la revue et la validation de la liste de valeur ISR.
Cette liste est établie par les gérants spécialistes ISR par consensus. Si un titre fait l'objet d'un désaccord
entre les bases de données externes utilisées sur un ou plusieurs critères, une étude approfondie est
menée au sein du Groupe afin qu'un arbitrage soit fait et intégré dans notre base de données interne.
Sur la base des notes globales obtenues par les valeurs et des analyses menées sur ces " valeurs sensibles "
(valeurs pour lesquelles les bases de données sont en désaccord concernant la notation d'un ou plusieurs
critères), le Comité ISR ajuste sa liste de valeurs lorsque nécessaire.
Gouvernement d’entreprise : il s’agit pour nous d’un critère clef car source de risque financier potentiel.
Politique environnementale et sociale : ce sont des sources de création de valeur potentielles
actuellement peu ou pas exploitées par l’analyse financière traditionnelle.
Ethique : ce critère relève de la responsabilité des entreprises en développement durable en mesurant la
diffusion de leurs avancées en la matière auprès de l’ensemble de leurs parties prenantes (fournisseurs,
clients et régions d’implantation). »
Cette sélection de valeurs s’ intègre dans le cadre d’ une analyse financière classique basée sur l’ analyse
fondamentale, l’ évaluation et la caractérisation des titres.

32. 32

33. 33
Handicap of SRI
2) No (worldwide recognised) label
- the « SRI » terminology is free of use
- no common understanding of what RESPONSIBILITY is and how it is to be applied in
business

34. 34
ELIGIBILITY CRITERIA
To obtain a LuxFLAG Microfinance label :
• have a microfinance portfolio corresponding to at least 50 % of the MIV's total assets
• have at least 25 % of its microfinance portfolio invested in MFIs rated by a microfinance
rating agency recognised by LuxFLAG
• seek a return on investment
To obtain a LuxFLAG Environment label :
• have a portfolio of investments in environment-related sectors corresponding to at least
75 % of the fund's total assets
• screen all of its investments and potential investments on their management of
Environmental, Social and Governance (ESG) responsibilities
• seek a return on investment
A company is considered an environmental company when its turnover in environment
-related sectors corresponds to at least 20 % of its total turnover
LUXEMBOURG FUND LABELLING AGENCY (2006)

35. 35
To obtain a LuxFLAG ESG label :
• describe the ESG strategy and criteria … and how they are integrated in the investment
process
• screen 100 % of the invested portfolio according to one of the ESG strategies and standards
• apply an exclusion policy
• publish the full portfolio at least once a year and be transparent towards investors
30 % of total assets of the portfolio of the fund may be invested in the form of cash or short-
term cash equivalents.
The ESG strategies may include :
- best-in-class strategies
- multiple exclusion strategies
The following ESG strategies, by themselves, are not considered acceptable :
- single exclusion
- engagement & voting strategies

36. 36
To obtain a LuxFLAG Climate label :
• have a portfolio of investments corresponding to 75 % of total assets in investments
related, with a clear and direct link, to mitigation and/or adaptation of climate change or
cross-cutting activities
• describe its Climate Finance objectives (environmental and financial)
• seek a return on investment
• provide evidence that Environmental, Social and Governance (ESG) standards are
incorporated in the investment process
• have a measurement mechanism in place and must provide a report on expected and
realized results through indicators on an annual basis
• provide evidence that an exclusion policy is applied across 100 % of its portfolio
Exclusions (examples) :
- nuclear projects
- hydro-electric projects with a capacity above 20 MW
- large geothermal plants located in protected forest areas and specific
ecosystems
- biofuel projects (biodiesel and ethanol) … unless it can be demonstrated that no
threat to food security, to deforestation, forest degradation

37. Novethic SRI Label, launched in 2009, with the aim to
provide individual investors with a framework for Socially
Responsible Investment (SRI) products offered by
investment managers
 Label awarded to open-end funds (pooled funds) whose management systematically
takes into account Environmental, Social and Governance criteria
In order to obtain the Label, the fund manager must detail the fund’s SRI management
approach, provide reporting on the extra-financial characteristics of the fund and disclose
a complete list of portfolio holdings
37
Around 110 funds have received the label

38. 38
Handicap of SRI
3) Fiduciary duty
• A report from the law firm Freshfields Bruckhaus Deringer in 2005 for the asset
management stream of UNEPFI concluded :
« Conventional investment analysis focuses on value, in the sens of financial performance [...]
the links between ESG factors and financial performance are increasingly being recognised.
On that basis, integrating ESG considerations into an investment analysis so as to more
reliably predict financial performance is clearly permissible and is arguably required in all
jurisdictions ».

39. 39
• In the 2009 follow-up to the report, Fiduciary II, it is stated :
« Fiduciairies must recognise that integrating ESG issues into investment and ownership
processes is part of responsible investment, and is necessary to managing risk and evaluating
opportunities for long-term investment ».
Failing to consider all long-term investment value drivers,
including ESG issues, is a failure of fiduciary duty

40. 40
The aims of this Guidance
— make companies more aware of the importance of providing high quality ESG information
— help issuers and investors to navigate the complex landscape of ESG reporting
— enable richer data flows and dialogue on ESG
— support the consolidation of sound global reporting standards
— enable investors to make informed investment decisions
February 2017

41. 41
Definition of “materiality” (International Accounting
Standards Board) :
‘material’ information is that which could, if omitted
or misstated, influence the economic decisions of
readers relying on the financial statements
1) Investor materiality
• Align with what international standards recommend and peer companies
report. This facilitates comparability for investors globally.
• Use tools at your disposal. ESG research and index providers have specific
criteria and identified material themes for different companies and industrial
sectors
• Explicitly link ESG performance, business strategy and financial and
operational performance
ESG reporting priorities

42. 42
2) Investment grade data
• Accuracy: deploy rigorous data collection systems
• Boundaries: align to the fiscal year and business ownership model
• Comparability and consistency: use consistent global standards to facilitate comparability
• Data provision: provide raw as well as normalised data
• Timeliness: provide data to coincide with the annual reporting cycle
• External assurance: consider strengthening the credibility of data by having it assured
• Balance: provide an objective view, including both favourable and unfavourable information
3) ESG reporting standards (ESG frameworks)
• Allow investors to analyse and compare ESG risks across companies and sectors

43. 43
4) Reporting formats
Annual report
• due to length and complexity, companies tend to discuss relatively few ESG issues
• ESG-related content may not fit the flow and structure of the annual report
workaround : publishing methodologies, policies and historical data online
Standalone sustainability report
• approach favoured by many issuers
• does not need to align with the style of the annual report
• raw data, tables and charts best suited to ESG information
Integrated report
• ESG information and data are presented in an integrated manner within the annual report
• model promoted by the International Integrated Reporting Council (IIRC) and aims to offer
5) Regulation and investor communication
• between 2013 and 2016, over 100 new mandatory instruments have been
introduced across 64 countries for ESG reporting
• over 80% of the world’s top economies mandate ESG reporting in some form

44. 44
Factors that would motivate Advisors to recommend Sustainable investments
Industry Survey of Financial Advisors on Sustainable and Impact Investing – June 2012
Project Managed by Calvert Foundation

45. Helps investors define and measure the
performance of global environmental markets

46. 46

47. 47
Does Socially Responsible Investing Hurt Investment Returns ?
(09/2012)
Four distinct bodies of research addressed this question :
1) Performance of SRI indices relative to traditional market indices
2) Performance of SRI mutual funds relative to traditional mutual funds and/or market
indices
3) Relative financial performance of hypothetical SRI stock portfolios against
conventional portfolios and indices
4) Tentative to determine if there is a linkage between corporate social responsibility
(CSR) and improved financial performance
Chief finding : socially responsible investing does not result in lower investment returns

48. 48Does Socially Responsible Investing Hurt Investment Returns ?
(09/2012)
Summary of SRI Fund Studies

49. 49

50. 50
Reasons why a socially responsible investment strategy
is unlikely to produce superior returns
• No consensus on how to define corporate social responsibility
• Data used to assess a company’s social responsibility is limited and often
flawed + self-reporting
• No consensus on how to define corporate social responsibility or how
to construct a portfolio based on the concept

51. 51
May 1990 : the Domini 400 Social Index (now the FTSE KLD 400 Index)
1st index to measure the performance of a broad universe of socially responsible
stocks in the US.
Since then, a number of other SRI indices have been created :
• 1999 - Dow Jones Sustainability Group Index for global portfolios
• 2000 - Jantzi Social Index (JSI) in Canada
• 2000 - Calvert Social Index in the United States
• 2000 - ECPI Index Family for European and global portfolios
• 2001 - FTSE4Good Index for global portfolios
• 2001 - Dow Jones Sustainability North American Index
• 2001 - ASPI Eurozone Index for European markets
• 2002 - Ethibel Sustainability Index Global
• 2004 - Johannesburg Stock Exchange SRI Index
• 2007 - KLD Global Sustainability Index (GSI)
• 2010 - MCSI North American ESG Total Return (NNASIU) Index
(… non exhaustive …)
SRI indexes

52. 52
MSCI World Socially Responsible Index

53. 53
Index Methodology
MSCI World Socially Responsible Index is constructed in two stages :
- 1) exclusion of securities of companies involved in nuclear power, tobacco, alcohol, gambling,
military weapons, civilian firearms, GMOs and adult entertainment
-2) MSCI’s Best‐in‐Class selection process is applied to the remaining universe of securities
(targets the securities of the highest ESG rated companies making up 25% of the market capitalization in
each sector and region of the MSCI World Index)
The Index is designed to have similar sector and region representation as the MSCI World Index.

54. 54
Environment-related sectors as defined in a globally recognised classification system such as …
the FTSE Environmental Markets Classification

55. 55
FTSE Environmental Opportunities Index Series
top 100 largest companies
by market capitalisation in the
FTSE Environmental
Opportunities All-Share Index
508 companies 7,710 companies

56. JSE SRI index - 2004
56

57. 30 Stock exchanges with Sustainability index
1. Australian Stock exchange 13. Johanesburg Stock Exchange 25. Singapore
Exchange
2. BM&FBOVespa 14. Korea Stock Exchange 26. SIX SWISS
Exchange
3. BME Spanish Exchange 15. London Stock Exchange 27. Taiwan
Exchange
4. Bolsa de comercio de Santiago 16. Moscow Interbank Currency 28. The Stock
Exchange of Thailand
5. Bolsa Mexicana de Valores 17. NASDAQ OMX 29. Tokyo Stock
Exchange
6. BSE 18. NASDAQ OMX Nordic Exchange 30. Toronto Stock
Exchange
7. Borsa Italiana 19. NSE
8. Bursa Malaysia 20. NYSE Euronext
9. Deutsche Borse AG 21. Philippines Stock Exchange
10. HK Exchanges and Clearing 22. Saudi Stock Market
11. Indonesia Stock Exchange 23. Shanghai Stock Exchange
12. Istanbul Stock Exchange 24. Shenzhen Stock Exchange
3/16/2017 57

58. 58

59. 59

60. 60
The Morningstar Sustainability Rating™ for Funds
1) Fund’s Portfolio Sustainability Score : measures how well the companies it holds are
managing their ESG risks and opportunities
2-step process
Prerequisite :
at least 50 % of the portfolio’s assets must be in one of the 4,500+ companies
covered by Sustainalytics globally
(because Sustainalytics’ ESG analytics apply at the company level, Morningstar
can score equities and corporate debt found in portfolios)
Asset-weighted average of the company ESG scores with deductions made for
holdings involved in controversial incidents, or the Portfolio Controversy Score
help investors determine the level of sustainability in their portfolios
4,500+ companies with its comprehensive ESG ratings and
10,000+ companies with its controversial incidents indicators
 quantitative indicator-driven approach using 60-80
performance indicators per company
Sustainalytics ESG methodology

61. 61
Conclusions :
• the ratings are portfolio-based, not performance-based (should not be the sole
basis for an investment decision )
• Funds that have explicit sustainable or responsible investment mandates represent
only about 2% of the fund universe
• Many investors who are interested in sustainability own conventional funds.
 some investors may discover that their funds are not doing well enough on a
sustainability basis and will actively seek out “intentional” ESG funds
2) Morningstar assigns a Morningstar Sustainability Rating, which is the Portfolio
Sustainability Score relative to Morningstar Category peers
Prerequisite :
at least 10 funds in a Morningstar Category must also receive a Portfolio
Sustainability Score

62. 62
Combination of voluntary and regulatory initiatives to promote CSR standards
Such standards can be contained in binding “hard law” instruments, such as national
laws and regulations, or in voluntary non-binding “soft law” instruments
Taking stock of existing CSR standards
Universe of CSR standards can be categorized according to the organization that created them :
• intergovernmental organization standards,
derived from universal principles as recognized
in international declarations and agreements
• multi-stakeholder initiative (MSI) standards
• industry association codes
• individual company codes
Overview of global and local CSR initiatives since 1995
CSR-standards’initiatives
3 major sets of standards
dozen
hundreds
thousands
Quantity

63. 63
Multi-stakeholder initiative standards (ISO, GRI, …) :
“Cross-sectoral partnerships created with a rule-setting purpose, to design and steward
standards for the regulation of market and non-market actors”. These partnerships
contain a mix of civil society, business, labour, consumers and other stakeholders
Industry association codes and individual company codes :
Codes jointly developed by the leading companies within an industry, to address social
and/or environmental aspects of supply chains, etc …
Proliferation of voluntary CSR standards resulting in a number of systemic challenges
related to standard setting and standard implementation
CSR-standards’initiatives

64. 64

65. 1. incorporate ESG issues into investment analysis and decision-making processes
2. be active owners and incorporate ESG issues into our ownership policies and practices
3. seek appropriate disclosure on ESG issues by the entities in which we invest
4. will promote acceptance and implementation of the Principles within the investment industry
5. work together to enhance our effectiveness in implementing the Principles
6. each report on our activities and progress towards implementing the Principles
2006 – the 6 principles
We will …
(in partnership with UNEP Finance Initiative and the UN Global Compact)
65

66. 66
Global
distribution
of signatories
(2015)

67. 67
History of the PRI

68. 68
RI integration of assets overall

69. 69
AccountAbility is a leading global think tank and consultancy
providing innovative solutions to the most critical challenges in
corporate responsibility and sustainable development (1995).
At the core of their work is the AA1000 Series of Standards - principles-based standards
to help organisations become more accountable, responsible and sustainable – 3 key-
principles :
- Inclusivity - people should have a say in the decisions that impact on them
- Materiality - decision makers should identify and be clear about the issues that matter
- Responsiveness - organizations should be transparent about their actions
The AA1000 AccountAbility Principles Standard : provides a framework for an
organisation to identify, prioritise and respond to its sustainability challenges
The AA1000 Assurance Standard : provides a methodology for assurance practitioners
to evaluate the nature and extent to which an organisation adheres to the
AccountAbility Principles
The AA1000 Stakeholder Engagement Standard : provides a framework to help
organisations ensure stakeholder engagement processes are purpose driven, robust
and deliver results.
Intergvtlorganisarionstandards

70. Strategic policy initiative (of the UN Secretary General’s office - 2000) for
businesses that are committed to aligning their operations and strategies
with 10 universally accepted principles in the areas of human rights, labour,
environment and anti-corruption
10.000 participants across 145 countries (out of them, 6000 business participants)
70
Human Rights
Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights
Principle 2: make sure that they are not complicit in human rights abuses
Labour
Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to
collective bargaining
Principle 4: the elimination of all forms of forced and compulsory labour
Principle 5: the effective abolition of child labour
Principle 6: the elimination of discrimination in respect of employment and occupation
Environment
Principle 7: Businesses should support a precautionary approach to environmental challenges
Principle 8: undertake initiatives to promote greater environmental responsibility
Principle 9: encourage the development and diffusion of environmentally friendly technologies
Anti-Corruption
Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery
Intergvtlorganisarionstandards

71. 71
The Principles for Social Investment are designed to encourage social investment that is:
Purposeful
The funder is knowledgeable and committed, reasonably assured to play a positive role
and does not negate or unnecessarily duplicate the efforts of other contributors.
Accountable
The funder takes responsibility for the intentional and unintentional effects of their
funding, and embraces the concepts of transparency, self-assessment, and peer
advancement.
Respectful
The funder has due regard for the local customs, traditions, religions, and priorities of
pertinent individuals and groups.
Ethical
The funder engages in reflective and legitimate practices conducted in accordance with
applicable laws and accepted international norms of behaviour.
Guidelines officially launched on 25 June 2010 and referenced in the New York
Declaration at the UN Global Compact Leaders’ Summit.
Intergvtlorganisarionstandards

72. 72
2012 Social Investment Pioneer Awards
Responsible Business
Recognising companies that commit to social, economic, and environmental sustainability while balancing the
interests of diverse stakeholders
Eswaran Brothers Exports, Sri Lanka / Pacific Rubiales Energy Corp, Colombia
Inclusive Business
Recognising companies that deliberately target middle to low-income communities as members of the value chain,
as suppliers, clients and customers
B-BOVID, Ghana / Restaurantes Toks, Mexico
Shared Value
Recognising companies that seek to create social and business value through redesigning products, services and
markets
Small Giants, Australia / Unilever, Indonesia
Social Business
Recognising non-loss, non-dividend cause driven enterprises purposefully created to address broad community
development priorities
SMEFUNDS, Nigeria / BBVA Microfinance Foundation, Spain
Strategic Corporate Philanthropy
Recognising companies that align core business capabilities and commercial objectives with philanthropic intentions
Slightly Different, UK / Ferrovial, Spain

73. The OECD Guidelines and Socially Responsible Investment
for Multinational Enterprises outline what OECD member
governments agree are the basic components of
responsible corporate conduct.
Recommendations addressed by governments to
multinational enterprises that cover a broad range of
corporate activities
Chapter 1 - Concepts and Principles
Chapter 2 - General Policies
Chapter 3 - Disclosure
Chapter 4 - Employment & industrial relations
Chapter 5 - Environment
Chapter 6 - Combating bribery
Chapter 7 - Consumer interests
Chapter 8 - Science & Technology
Chapter 9 - Competition
Chapter 10 - Taxation 73
42 adhering governments
International network of civil society organisations
promoting corporate accountability
Intergvtlorganisarionstandards

74. Independent not-for-profit organization working to drive greenhouse gas
emissions reduction and sustainable water use by business and cities
“The first step towards managing carbon emissions is to measure them because in business what gets
measured gets managed. The Carbon Disclosure Project has played a crucial role in encouraging companies
to take the first steps in that measurement and management path.” - Lord Adair Turner - Chairman, UK
Financial Services Authority
Non-profit organization (2002) initiated as from 1997 by the CERES
(Coalition for Environmentally Responsible Economies, a non-profit coalition of investors,
public pension funds, labor unions, religious and public interest groups, that works in
partnership with companies toward the common goal of corporate environmental
stewardship) … promoting economic, environmental and social
sustainability.
GRI provides all companies and organizations with a comprehensive
sustainability reporting framework that is widely used around the
world
2500 reporters (2011) 74
encouraging companies to publish greenhouse gas emissions reduction targets
and to make year-on-year reductions in those emissions
Intergvtlorganisarionstandards

75. 75
Six Steps to better sustainability governance
Step 1: Ensure that the CEO leads the charge
With any major corporate culture shift or organization change, the CEO’s visible leadership is key. The CEO needs to set the
behavioral example for the organization; if he or she is not taking it seriously, and it shows, no one will. There is simply no
substitute for a passionate and engaged CEO who embraces this commitment in word and action.
Step 2: Incorporate sustainability into the Board agenda
Simply put, a Board is responsible for ratifying strategy, and sustainability is a crucial aspect of strategy. Sustainability should not
only be front and center for all Directors on a Board; it should also be the focus and responsibility of a Sub-Committee of the
Board.
Step 3: “Incentivize” executive leadership and engagement
33% of corporate executives say that lack of incentives tied to sustainability performance is a barrier to capturing potential value
from sustainability. The Board should determine how executive pay can be based on the organization’s performance against
sustainability goals. Many companies have “suddenly” seen more movement after adjusting their bonus structures at the senior
levels.
Step 4: Develop a customized design that fits your organization
A one-size-fits-all approach based solely on what has worked for others is a mistake. The right solutions can be strikingly different
across varying organizational sizes, sectors, regions, and cultures. Don’t rely too heavily on “leading practices” – focus on
designing a structure that works for your organization.
Step 5: Empower the CSO and the Sustainability Office to “make it happen”
A CSO and his or her team can be brilliant; they can be the world’s experts on sustainability and leading change—but if they’re
not given the necessary political capital and access, which requires the visible and vocal backing of the CEO and Board, they will
be limited in their impact.
Step 6: Help all employees understand the implications of sustainability in their roles
Many companies can point to widely understood cultural values that define their organizations—for example, “we have a culture
of safety,” or “we are committed to our customers first”—and it is easy to see these values in employee behavior. Similarly, a
culture of sustainability—one in which employees understand the ESG impacts of their everyday actions, have ESG performance
targets and are evaluated according to those targets—is a necessity for a sustainable organization.

76. 76
ISO 26000 – Social responsibility
Voluntary guidance on social responsibility (no requirements,
and therefore will not be for use as a certification standard like
ISO 9001:2000 and ISO 14001:2004)
Pan-European network (institutional investors, financial service providers,
academic institutes, research associations, trade unions and NGOs) and
think-tank whose mission is to develop Sustainability through European
Financial Markets. 90 affiliates
Mutli-stakeholders’intiatives

77. 77
European SRI Transparency Code (November 2004) :
Launched with support from the European Commission with the aim to create
more clarity on the principles and processes of SRI mutual funds :
As of December 2012, more than 500 funds from over 50 signatories have
adopted the Code. This compares with a total of 884 SRI funds publicly
distributed in Europe
TWO KEY MOTIVATIONS UNDERPIN THIS CODE
1. The opportunity for retail SRI funds to clarify their SRI approach to investors and other
stakeholders in an easily accessible and comparable format
2. Proactively strengthen a self-regulation that contributes to the development and
promotion of SRI funds by setting up a common framework for transparency best
practices

78. 78
Several goals direct GSIA’s work :
1) to deepen the impact and visibility of GSIA members at the global level and to communicate
about the distinctive role in national, regional and international arenas
2) to enhance the synergies between GSIA members
3) to undertake initiatives that would benefit from global coordination, and to enable GSIA
members to support and supplement each other’s work where cross-border (regional and
international) collaboration is needed or occurring
4) to enable GSIA members to be strong, effective and productive within their regional and
national markets
5) to provide advice and support, where possible, to local and regional sustainable investment
organizations
Mission : deepen the impact and visibility of sustainable investment
organizations at the global level
Vision : a world where sustainable investment is integrated into financial
systems and the investment chain and where all regions of the world
have coverage by vigorous membership based institutions that represent
and advance the sustainable investment community
(collaboration of 7 of the largest sustainable investment
membership organizations in the world)

79. Global network of civil society organisations (Friends of the Earth, Rainforest Action Network,
WWF …) and individuals tracking the operations of the private financial sector (commercial
banks, investors, insurance companies, pension funds) and its effect on people and the planet
The Collevecchio Declaration (Jan. 2003) - endorsed by more than 200 organisations –
provides a vision for a sustainable finance sector
Benchmark by which civil society will measure the banking sector’s commitment to
sustainable development :
1. Commitment to sustainability
2. Commitment to ‘do no harm’
3. Commitment to responsibility
4. Commitment to accountability
5. Commitment to transparency
6. Commitment to sustainable markets and governance
79
Mutli-stakeholders’intiatives

80. 80
Not for profit body founded in 1995 (London) which has evolved into a global
membership organisation of over 600 leaders in corporate governance in 50 countries,
with institutional investors representing assets under management of around $18 trillion
 Raise standards of corporate governance worldwide
Guidelines for companies to integrate non-financial information better into business reporting :
- businesses should be selective about the non-financial indicators
- make sure that information given to investors is directly linked to strategy
- must show that they understand how their relationships with staff, customers and suppliers,
for example, affect financial performance indicators such as sales, cash flow and share price
“Few companies at the moment can explain how managing non-financial issues helps them
achieve current and future financial goals”
“Investor demand for non-financial performance information about companies has to date
been limited. Companies have little reason to do this if investors aren’t pressuring them.”
– Frank Curtiss, chairman of the ICGN (2009)
Mutli-stakeholders’intiatives

81. 81
The International Integrated Reporting Council (IIRC) is leading the development of a
global framework for Integrated Reporting.
It is a powerful, international cross section of leaders from the corporate, investment,
accounting, securities, regulatory, academic and standard-setting sectors as well as
civil society
Mission statement
To create a globally accepted integrated reporting framework which brings together
financial, environmental, social and governance information in a clear, concise,
consistent and comparable format.
The aim is to help with the development of more comprehensive and comprehensible
information about organisations, prospective as well as retrospective, to meet the
needs of a more sustainable, global economy.
New approach to corporate reporting that demonstrates the linkages between an
organization’s strategy, governance and financial performance and the social,
environmental and economic context within which it operates.
 by reinforcing these connections … Integrated Reporting can help business to
take more sustainable decisions and enable investors and other stakeholders to
understand how an organization is really performing …
Mutli-stakeholders’intiatives

82. 82

83. Credit risk management framework for
determining, assessing and managing
environmental and social risk in project finance
transactions.
 76 signatories
83
… seeking ways to assess and manage the
environmental and social risks associated with the
Project Finance sector
 Launched in 2003 and initially adopted by 10
global financial institutions (ABN AMRO Bank, N.V.,
Barclays plc, Citi, Crédit Lyonnais, Credit Suisse First
Boston, HVB Group, Rabobank Group, The Royal
Bank of Scotland, WestLB AG, and Westpac
Banking Corporation).

84. 84
Leading European expert in the assessment of companies and
organisations with regard to their practices and performance on
environmental, social and governance (“ESG”) issues
- Evaluate the level of commitment shown by organisations towards all CSR
or sustainable development goals
- Identify any risks incurred by the company or organisation in this area
- Evaluate their level of management
0ne of the world's leading rating agencies and provides the
crucial head start in the segment of sustainable investment
Development of innovative investment strategies that combine
sustainability research with a high rate of return, for institutional
investors and financial service providers

85. 85
A Social Impact Bond is essentially a public-private partnership, funding
effective social services through a performance-based contract
Almost 60 projects linked to Social Impact Bonds have been launched in
15 countries (as of June 2016) which raised over 200 million USD in capital

86. The first experiment (2010) : how to reduce recidivism rates among males in England ?
Partnership UK-government / private investors
Goal : to address re-incarceration rates at the Peterborough prison
of 3,000 short-term prisoners
Private investors (17 foundations and charitable trusts ) provided
approximately $8 million to a consortium of 6 organizations
specialized on rehabilitation of former prisoners through access to
housing, training and employment, medical services, benefits and
financial advice, and family support.
Government engagement : to repay the investors if the 12 month reconviction rates drop by 10 % in 4 years …
or stay above 7.5 % for 7 years.
2014 : reoffender rates dropped by only 8.4 % (the project did not yield a payout in 2014)
On track to pay investors in 2016 … ?

87. Rikers Island Social Impact Bond Payment Schedule
First social impact bond in the U.S. (2012) : recidivism
Goldman Sachs pledged $9.6 million to the Adolescent Behavioral Learning Experience (ABLE) Program
Goal : reduce incarceration rates at Rikers Island in New York City through behavioral therapy.
Return : capital investment returned … if the number of jail days avoided by young men is at least - 10 % in 4 years
A $7.2 million grant provided by Bloomberg Philanthropies guarantees a large portion of the investment

88. 88
• youth employment (Japan)
• care of the elderly (Japan)
• support for children in care and at-risk children and a reduction in the need for
out-of-home care (Australia)
• helping school drop outs into employment (Germany, India)
• juvenile justice (USA)
• early childhood education (USA)
• teen pregnancy prevention (USA)

89. SIB mechanism

90. 90
GBP core components
1. Use of proceeds – measuring green impact
• fully directed towards ‘Green Projects’
2. Process for project evaluation and selection
• transparent in the eligibility of projects …how they will meet critical environmental objectives
3. Management of proceeds
• transparent track on net proceeds, through segregated sub-account, sub-portfolio, etc …
• audit recommended as an additional level of robustness
4. Reporting
• annual report on use of proceeds … including amounts allocated ; impacts achieved / expected
• recommendation to use an external reviewer … such as consultant review, verification,
certification, and/or rating
Any type of bond instrument where the proceeds
will be exclusively applied to finance or re-finance
in part or in full new and/or existing Green Projects
1st stock exchange in the world
100 % dedicated to green
financial instruments

91. 91

92. 92

93. 93
- importance of chief executive leadership and tone from the top
Leadership Skills for a Sustainable Economy :
Define the mindset, behaviour and new management skills required for sustainability
that should be expected from
boards and senior management teams, operational managers, customer-facing staff
and all employees
 nominations for committees and Boards need to be more proactive in requiring basic
knowledge and experience of improving ESG performance
 headhunters asked to find new board members should be screening for ESG awareness
 sustainability and what it means for the Board must be part of induction and continuous
professional development for Board members
 accredited training programmes supporting change

94. Lack of standardisation / guidance
 large variety of approaches and definitions on the industry’s side
 very different preferences on the investors’ side
European Fund Classification (EFC) : …developed by EFAMA to facilitate a
transparent comparison of investment funds
 offers fund-providers the possibility of flagging that their funds follow
a socially responsible investment strategy
Need for more transparency : client reporting, communication of investment approaches
and selection methods
 would help investors distinguish between different SRI offerings and allow them to
make more informed decisions
94

95. The EU should:
• support self-regulatory initiatives on transparency of SRI
• recognise SRI as an incentive that can help encourage corporate responsibility of investee
companies and sustainable development
• endorse SRI in the management of EU state ‐owned or controlled funds and investment
schemes
• encourage institutional asset owners (particularly public pension funds and other public
institutional investors) to be transparent about whether they adopt SRI practices or not
• encourage better and more standardised disclosure of ESG information by investee
companies which would facilitate investment managers investing assets on behalf of clients
who want to invest in SRI products
The Key Investor Information Document (KIID) and other issuing
documents – such as the prospectus for a fund – should indicate that
the investment policy follows certain SRI
standards
95

96. 96
What could an investor look like in 2030?
Investors are likely to be more investors located in different places, with different needs, social,
political and economic attitudes, lifestyles and income patterns
Sovereign wealth funds are likely to play an even greater role
Investors are likely to need to increase their level of engagement with the industry.
A greater proportion of the population will probably need to manage their finances more actively to take
control of their financial future
NEEDS
PROFILE
Investors are likely to assign increased value to trusted brands, particularly as awareness of
issues such as data security, confidentiality and privacy increases
Simplicity, transparency, honesty and integrity are likely to be regarded as more important buying criteria
Investors will probably want less risk and more certainty. As a result, they are likely to expect better
solutions to their individual needs and may also want to ‘lock down’ value earlier in a product lifecycle
24/7 connectivity and access to relevant and timely information via a wide variety of media types will
increasingly be expected as the norm

97. 97
BEHAVIOUR
Multitasking and time scarcity is likely to continue to escalate, prompting more investors to
look for time-saving solutions, single point of access and aggregation across a range of
providers
Investors are likely to be more willing to consider non-traditional alternatives to ‘traditional’
savings and retirement products

98. The 10 Commandments of Sustainable
Investment
1. Make sure you or your money managers have access to top-quality, company-specific research
on sustainability risks and opportunities
2. Make sure that they actually use it.
3. Do not use sustainability research in isolation, without combining it with more traditional
fundamental and/or quantitative investment research.
4. Do not expect perfection from your investee companies.
5. Do not presume that all sustainability factors – or even any of them – are relevant to all
investment decisions, in all industry sectors, all of the time. They’re not.
6. Do not assume that each of the “4 Pillars” (Environment, Human Capital, Stakeholder Capital, and
Strategic Governance) is equally relevant to a particular company. They probably aren’t.
7. Do not assume that the relative financial importance of each of the 4 Pillars will remain constant
over time. They won’t.
8. Do not apply a double standard to the financial performance of your “sustainability-enhanced”
portfolios.
9. Do adopt a long-term investment horizon.
10.Do challenge your advisors and money managers.
98
Adapted from INVESTING IN A SUSTAINABLE WORLD: Why GREEN Is the New Color of Money on Wall Street by Matthew J. Kiernan,
Ph.D. (AMACOM 2008)

99. Contacts
Xavier Heude
xh@peersdirectinvestment.com