Building climate smart real estate& infrastructure into your portfolio

presentation to

IFSWF members

by Paul Clements-Hunt

The Blended Capital Group

June 20, 2017

What the presentation will cover:

The Big Picture: Cities, infrastructure, real estate and sustainability

Game changer: How policy is changing the carbon investment game

Green gold in real estate: a public markets case

Getting to carbon zero: a passive approach to learn the climate game

Climate smart infrastructure: where equality, environment & investment meet

The Big Picture: Cities, infrastructure, real estate

& sustainability

The Big Picture: Cities, infrastructure, real estate and sustainability

7.5 billion people on the planet with 60% living in cities with an expected increase to 9 billion plus by 2050 and rising to 70% urban population

The number of megacities with 10 million+ has jumped from 14 in 1995 to 29 in 2016

77 million people migrate from rural areas to cities each year

Properties consume 40% of world energy and generate 30% of greenhouse emissions

USD50 Trillion of investable real estate assets worldwide

Real estate companies & funds: 1.2% reduction in energy consumption; 2% reduction in GHG emissions; and 1% reduction in water use.

Game changer: How policy is changing

the carboninvestment game

Green gold in real estate: a public markets case

SUSTAINABLE REAL ESTATE SECURITIES STRATEGYGreen real estate securities outperform

Source: Bloomberg, La Française Forum Securities. As at December 31, 2016.Note: Global Real Estate Securities Index = FTSE EPRA/NAREIT Developed Index USD (Bloomberg Ticker = RUGL Index).

All index performance figures are quoted in USD GROSS OF FEES. All figures are reflective of a proprietary backtest. Backtested performance does not represent actual results. Actual results can differ significantly from the backtested returns being presented. Methodology includes daily rebalancing and excludes foreign exchange hedging and transaction costs.

Return - Risk Comparison

TOTAL

RETURN

MEAN

ANNUAL

RETURN

VOLATILITYSHARPE

RATIO

MEAN EXCESS

RETURN

(ANNUAL)

BETA

GREEN REAL ESTATE SECURITIES UNIVERSE 223.4% 11.3% 21.3% 0.53 5.6% 1.050

GLOBAL REAL ESTATE SECURITIES 77.5% 5.4% 19.9% 0.27

0

50

100

150

200

250

300

350

Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16

Green Real Estate Securities Universe Global Real Estate Securities Index

• A backtest based on a sustainable real estate securities universe (of companies with above average ESG scores) compared to historical performance of the global real estate index demonstrated an average outperformance of 5.9% over the benchmark index

Backtested Global Performance

PLEASE REFER TO BACKTEST DISCLOSURES.

ESG INVESTMENT PROCESSWide range of ESG key performance indicators (KPIs)

ENVIRONMENT –

Green Building Opportunities: Certification, Energy Reduction, Geographic and Portfolio

Exposures, Green Leases, Waste Management, Tenant Outreach

Carbon Management Approach: Exposure, Recognition, Rationale, Initiatives, Management,

Reporting, Outlook

Carbon Efficiency Latest: Intensity Scope 1&2 CO₂ MT/ USDm.

Carbon Efficiency Trend: Change in Intensity Scope 1&2 CO₂ MT/ USDm.

Toxic Emissions Management: Indoor VOCs, Outdoor emissions

Water Efficiency Management: Water Withdrawal Intensity m³/USDm, 5yr Change in Water

Withdrawal Intensity, Exposure, Initiatives, Outlook

Environmental Pillar: Overall Policy, Executive Oversight, EMS, Awards, Green/Brownfield

Sites

Each KPI is scored 0-10 and a weighted aggregate score is calculated

ESG INVESTMENT UNIVERSEExamples of Alpha Pool companies with moderate to high ESG scores

Source: La Française Forum Securities Research, Inflection Point Capital Management, Bloomberg. As at Jan 31, 2017.Note: Non-contractual and for informational purposes only. Examples are non-binding as to future investments and depend on market conditions.

Boston Properties(BXP US)

US landlord and developer of quality urban offices with a costal markets focus

Good capital allocator with ability to do JVs with large partners; currently building one of the largest projects in the country (Salesforce Tower in San Francisco)

Strong balance sheet and quality mgmt. team

Overdone fears of a pronounced slowdown in core urban markets provide a good entry point

ESG Factors:

Recognized for corporate environmental responsibility: Leader in the Light Award, GRESB Green Star, Green Lease Leader and Energy Star certification executive member

Targets min. LEED Silver certification on developments

ESG score: 6.3

Market Cap (US$B) : 20.0

Expected Return : 4.6%

Gross Div. Yield p.a.: 2.3%

P/FFO : 21.5x

Leverage : 49.2%

Entra(ENTRA NO)

Leading Norwegian real estate company focused on flexible and green office space in central locations

Over 70% of space is let to companies in public sector

High portfolio occupancy, long average lease of close to 8 years

Dominant market position, focus on acquisition and value add development projects

ESG Factors:

Focus on environmental, health & safety, anticorruption and business crime

Targets BREEAM standards, specific targets for energy & water consumption reduction by 2017

ESG score: 7.5

Market Cap (US$B) : 2.0

Expected Return : 8.5%

Gross Div. Yield p.a.: 3.8%

P/FFO : 15.4x

Leverage : 45.2%

City Developments(CIT SP)

Leading Singapore developer with over 50 years track record

Global presence in residential, commercial and hotel sectors

Focused on investing in China, UK, US, Japan and Australia through growing its funds management business and prime assets

ESG Factors:

First Singapore company to be listed on all 3 of the world’s top sustainability benchmarks

Invests 2-5% of construction costs on green innovation

Carbon reduction targets set at 22% by 2020, 25% by 2030 with net zero carbon emissions on corporate office

Environmental, health and safety assessment system & awards for contractors & suppliers

ESG score: 8.4

Market Cap (US$B) : 6.0

Expected Return : 24.1%

Gross Div. Yield p.a.: 0.9%

P/FFO : 26.6x

Leverage : 31.2%

Getting to carbon zero: a passive approach to learn

the climate investment

A passive ESG strategy tackling climate change

• The Zero Carbon Indices offer exposure to a broad and diversified selection of companies that have demonstrated carbon footprint and ESG leadership when compared to peers.

• The Zero Carbon indices do not avoid or underweight any sector but rather aim at selecting best-in-class players while neutralizing regional and sectoral biases.

• The Zero Carbon Indices are particularly suited to investors seeking to:

• Reduce the carbon footprint of their investments

• Invest in ESG leader• Without compromising with relative

performance

Investment Case About the Index

To build the Index, we use a positive screening methodology to review c. 3000 international companies

The Index identifies companies that satisfy both of our criteria:

The most carbon-efficient

The ESG leaders

The Index selects companies within the first quartile of its peer group on both Carbon & ESG indicators

Within each cluster (regional/sector) of the stocks universe, selected companies are weighted based on their score

The Index is rebalanced on a quarterly basis. The changes are implemented on the first working day of January, April, July and October of each year

The CZ Index design in a nutshell

Zero Carbon Index

Create an index with a zero carbon footprint and strong ESG profile

without any bias

Core portfolioLow Carbon

Create a « Low Carbon » portfolioWith a strong ESG profile

using a best-in-class approach

International ex-renewable companies

Size & liquidity filters

Best-in-class filter based on:

~ 150 stocks

Low Carbon + Strong ESG scores

Satellite PortfolioSolution Providers

International renewable companies

Create a diversified portfolio of companies involved in clean and

renewable energy

Filter of the renewable universe based on size and liquidity criteria

1. Market cap ≥ $300M2. Free float ≥ $100M

3. Liquidity: 3 month ADV ≥ $3M

IPCM collects and/or estimates avoided emissions

~ 20 stocks

Avoided Emissions

+ =

~ 170 stocks

Zero Carbon Footprint

Parallel Approach

Carbon footprint

1. Financed Emissions

2. Carbon Intensity

ESG Scores

North America

EurozoneEuropeDeveloped

Market

Latin America

Japan

EuropeEmerging Market

Asia Pacific

ex-Japan

Emerging Market

Asia Pacific ex-Japan

Developed Market

Middle East & Africa

Brick construction

Objective

Investment Universe

Filteringcriteria

Index Construction

Climate smart infrastructure: where equality, environment

& investment meet

Up to 2030 the world needs to invest 3.8% of GDP equivalent to USD 3.3 trillion a yearin economic infrastructure simply to keep up with expected growth rates;

Current estimates have the infrastructure gap at USD 350 billion a year but if we wantto deliver the UNSDGs that triples to a gap in excess of USD 1 trillion a year;

Mature infrastructure (stage 4) in developed markets is equivalent to a « coupon clipping » exercise for asset owners;

However, investment in greenfield and early maturing infrastructure (Stage 1-2) in the emerging markets is where the greatest need is requiring the highest risk appetite:

The problem of timid capital? Desperate need for new, de-politicized public-private models to initiate

projects; A new role for SWFs working with National Development Banks and

international private capital with a risk appetite? The need to recycle infrastructure debt more rapidly; New opportunities associated with smart, resilient cities benefiting from

technology leaps from metering to decentralised energy.