Conference Report

RI Americas 2013Long-term, sustainable, fiduciary investingDecember 10th & 11th, Bloomberg MPR Auditorium, New York City

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RI Americas 2013Long-term, sustainable, fiduciary investingDecember 10th & 11th, Bloomberg MPR Auditorium, New York City

RI AMERICAS 2013

CONFERENCE REPORT December 2013

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By country:

USA 258

UK 15

Canada 14

Netherlands 6

Mexico 3

Colombia 2

France 2

Germany 2

Australia 1

South Africa 1

Spain 1

Sweden 1

Switzerland 1

By region:

RI Americas 2013 attracted 307 delegatesfrom 208 companies and 13 countries

USA 81%

Rest of World 19%

By job level:

CEO/CIO/CFO/COO/ Executive Director/ Partner 15%

MD/Director/Business Head 27%

Investment Analytics/Research 10%

Other 21%

Manager 27%

By type of company:

Asset owners and their advisers 15% (eg pension funds, family offices,endowments, foundations)

Asset managers 45% (and suppliers of investment management services)

Service suppliers 25% (eg research agencies, indices, data vendors)

Others 15% (corporates, government and

regulators, associations,legal, academics etc)

• A.H. Salce Investments

• ABN AMRO

• Acciones & Valores

• ACIR, The New School

• Addenda Capital Inc.

• Aegon AssetManagement

• Africa SustainableInvestment Forum

• AGF

• Alcatel LucentInvestment Management

• AllianceBernstein

• Alternative InvestmentGroup

• Altrinsic Global Advisors

• AltruShare Securities

• Amalgamated Bank

• Amalgamated BankLongView Funds

• AP3 (Tredje AP-fonden)

• Apache CapitalManagement

• Aperio Group

• APG Asset Management

• APG Asset ManagementUS

• Ardour CapitalInvestments

• Arnerich Massena

• arthance

• Asset Owners DisclosureProject

• Atman Capital

• AXA InvestmentManagers

• Bank of America MerrillLynch

• Barclays

• Beaver Trail Farms

• BlackRock

• Bloomberg

• Bloomberg New EnergyFinance

• BNY Mellon

• Boston Common AssetManagement

By Company:

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• Breckinridge CapitalAdvisors

• Broadridge FinancialSolutions

• BSR

• California Clean EnergyFund (CalCEF)

• CalPERS

• CalSTRS

• Calvert

• Cambridge Associates

• Canada Pension PlanInvestment Board

• CDP

• Center for FinancialInclusion at Accion

• Ceres

• Chairmen's Forum

• Change to Win

• Chapman and Cutler

• Chevron Corporation

• Christian BrothersInvestment Services

• Christopher ReynoldsFoundation

• Citco Fund Services

• City National Rochdale

• ClearBridge

• ClearBridge Investments

• Climate Bonds Initiative

• Columbia University

• Columbia's ImpactInvesting Initiative

• Commonfund

• Community CapitalManagement

• Consultant

• Corporate Knights

• Credit Suisse

• Crowell & Moring

• CSRHub

• CtW Investment Group

• Deutsche Bank

• Devon Financial Partners

• Domini SocialInvestments

• Doris Duke CharitableFoundation

• Ecolibrium Strategies

• Ecosystem Capital

• EDELMANN

• EDF

• EIRIS

• EIRIS Conflict RiskNetwork

• EMC Corporation

• Emerging MarketsInvestors Association

• Empresas ICA

• Encana

• Ernst & Young

• ESG Analytics

• Ethics Metrics

• F.B. Heron Foundation

• Fairview Capital

• FE Global Clean EnergyCorp.

• First State Investments

• Ford Foundatiom

• Fordham University

• Franklin TempletonInvestments

• FTSE

• Gifford Park Associates

• GISR

• Global Impact InvestingNetwork

• Global ThematicPartners

• GMI Ratings

• Goldman Sachs

• Goldman Sachs AssetManagement

• Goldman Sachs Bank

• Governance &Accountability Institute

• Governance AdvisersInternational

• Green Century CapitalManagement

• Gregoro

• GRI Focal Point USA &Canada

• Harbor Peak

• Harvard ManagementCompany

• Imprint Capital

• Inflection Point CapitalManagement

• InventivEnergy

• ISS

• IVOX GmbH

• IW Financial

• JPMorgan Chase

• Just Capital Foundation

• Kleinwort BensonInvestors

• KPMG Canada

• Lazard AssetManagement

• Lexington Partners

• Light Green Advisors

• Macquarie

• Mariner InvestmentGroup

• Mercer

• Mercy InvestmentServices

• Merrill Lynch

• MFS

• MNS CapitalManagement

• Moody's Analytics

• Moodyís Corporation

• Morgan Stanley

• MSCI ESG Research

• Neuberger Berman

• New AmsterdamPartners

• New Holland Capital

• New York City Office ofthe Comptroller

• New York CityRetirement Systems

• New York StateCommon Fund

• New York State CommonRetirement Fund

• NYC Comptroller

• NYC Comptroller's Office

• NYQM

• Oak Hill Capital Funds

• oekom research

• Office of NYCComptroller-Elect ScottStringer

• Office of the AttorneyGeneral of New York

• Ontario FinancingAuthority

• OPSEU Pension Trust

• Oristaglio FamilyFoundation

• Ownership Capital

• Paul Ellis Consulting

• Paul Weiss

• Pax World

• Perella Weinberg

• Presima

• PRI

• Prudential Fixed Income

• PwC

• Quotient Investors

• RBC Global AssetManagement

• Reinhart InstitutionalInvestor Services

• Repsol

• RobecoSAM

• Rockefeller & Co.

• Rockefeller Foundation

• S&P Dow Jones Indices

• Sarah ClevelandConsulting

• Scarab Funds

• Schroders InvestmentManagement

• SCS Financial

• SEIU Master Trust

• SITAWI

• Societe Generale

• SSgA

• Strategic Value Partners

• Style Research

• SustainAbility

• Sustainable InsightCapital Management

• Sustainable InvestmentsInstitute (Si2)

• Sustainalytics

• Tachymatics

• TB Investments

• Tellus Institute

• TerraVerde CapitalManagement

• The Guardian

• The Sankei Shimbun

• The Sustainability Group

• TIAA-CREF

• Tom Rotherham-Winqvist

• Tribeca Modular

• Trillium AssetManagement

• Trucost

• U.S. Fund for UNICEF

• UBS Investment Bank

• UFCW CapitalStewardship Program

• UNGC

• UNICEF Bridge Fund

• University of MarylandEnvironmental FinanceCenter

• University of TorontoAsset ManagementCorporation

• US Trust/Bank of America

• USS InvestmentManagement

• Veris Wealth Partners

• Walden AssetManagement

• Water AssetManagement

• World Economic Forum

• World Wildlife Fund

• Yale F&ES

• Zevin AssetManagement

• Zurich Global InvestmentManagement

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More than 300 investors,including over 40 assetowners attended the RIAmericas conference 2013in New York on December10th and 11th, organisedby Responsible Investor inpartnership withBloomberg.

RI Americas 2013 was produced by Responsible Investor which is published by Response Global Media Limited.

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In the discussions and debates on the state ofresponsible investing that sprang out ofconference, a central theme was the growingimportance of collaborations in driving ESGintegration to wider adoption.

“A tactical change is the rise of coalitions andcollaborations,” said Mike Garland, assistantcomptroller for environmental, social andgovernance in the office of New York City

Comptroller John Liu. “There’snothing so new about coalitions,but there are moments - Disneyand Massey Energy a few yearsback - where coalitions haveexercised their power in new ways.”

His office, he said, is part of newcoalitions fighting for politicaldisclosure and improved boarddiversity, among other issues: “It’shappening in a more informal but

regular way. I talk to my colleagues weekly, and Ithink issuers know that as well. We’re figuring outnew ways to change behavior.”

“ There’s nothing sonew about coalitions,but there aremoments . . . wherecoalitions haveexercised their powerin new ways ”

Mike Garland

From L to R: Ric Marshall, Mike Garland, Anne Sheehan, Richard Clayton

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Anne Sheehan, director of corporate governance atthe California State Teachers’ Retirement System(CalSTRS) agreed. “Investors need to send a unifiedmessage to companies—what KPIs [key performanceindicators] do you care about? Coalitions andcollaborations are helping to do that,” she said.

As one of the world’s pensionfunds most often referred to as aleader in the ESG integration space,CalSTRS is often called upon todiscuss its tactics. At the RIAmericas 2013 conference,Sheehan took the time to do that.She explained that she is thedirector of what she calls CalSTRS’“green team,” which works acrossasset classes to integrate ESG

throughout the fund’s portfolio. Her post sitswithin the investment office, and as the director ofcorporate governance, she runs the governancefund and directs corporate governance for the fundas a whole.

She says the fund is more and more often teamingup with peer funds - especially those outside theU.S. - to tackle ESG issues.

“We are a global investor; we’re in 42 markets,”she said, “we team up on a number of issues onengagements because many of these companieshave international investors. And we’re moving to aglobal marketplace; it helps us understand what’sgoing on in other market and how they differ.”

For New York State Common Retirement Fund -which is much earlier in the ESG integrationprocess, as Marjorie Tsang, director of strategicresearch and solutions, is quick to point out -teaming up with other funds is anintegral part of its initiation. Shesaid the fund engages in corporategovernance initiatives, and on issuessurrounding hydraulic fracturingand climate change. It has alsoengaged with other pension fundsto call for sustainable stockexchange listing requirements.

On its own, New York State Common RetirementFund just published for the first time an annualcompliance survey on ESG policies, which all of itsmanagers and consultants will be required tocomplete. Tsang says that going forward,completing the survey will be an annualrequirement of the fund’s underlying managersand consultants. “Our managers need tounderstand our perspective that this conductaffects the value of our portfolio,” she said.

“Our managers needto understand ourperspective that thisconduct affects thevalue of ourportfolio ”

“ Investors need tosend a unifiedmessage tocompanies - whatkey performanceindicators do youcare about? ”

Anne Sheehan

Marjorie Tsang

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In another nod to the importance of fosteringconversations and collective action among assetowners, Keith Ambachtsheer, director of RotmanInternational Centre for Pension Management

discussed writer and managementconsultant Peter Drucker’s “leadwagon theory,” which holds thatthe world’s major pension fundsare those best poised to combine“mission, motivation,competence, and scale to beeffective asset owners”—and topush for sustainable capitalismthat starts to close the principle-agent gap, and return control of

companies to shareholders. To compound thepower that large asset owners can have in thisregard, Ambachtsheer said, they need to getserious about collaborations.

“Lead wagons from companies need to talk to leadwagons from the investment side,” he said. “Wehaven’t done enough to create constructiveforums to create dialogues and discussions fromboth sides.” Ambactsheer said a number of suchforums are being developed, however, to point upareas where companies and investors can see ‘win-win’ scenarios.

Jeffrey Smith, partner in the environment, energyand resources group at Crowell & Moring, the lawfirm, stressed that for those collaborations to workout, a shared language around ESG will be crucial.

“Not enough attention has beenpaid to the words that are beingemployed,” he said, adding that hehas become a member of theadvisory committee to theSustainability Accounting StandardsBoard (SASB), which is developingESG reporting standards for 88industry sectors.

“The SASB sausage maker will meanthat words like ‘materiality’ willcome out with very precise meanings,” he says.

Other panelists discussed their own guidelines andresearch for promoting the adoption of ESG amonginvestors. Lorenzo Saà, head of reporting andassessment for the UN-supported Principles forResponsible Investment, said that in late SeptemberPRI released a new reporting framework, whichrequires signatories to report on their progress onthe principles. By June 2014, Saà said he expectsthat 1,000 investors will have disclosed on howthey implement the principles.

“ We haven’t doneenough to createconstructiveforums to createdialogues anddiscussions fromboth sides ”

“ The SASB sausagemaker will meanthat words like‘materiality’ willcome out withvery precisemeanings ”

Jeffrey Smith

Lorenzo Saà

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Robert Schwob, principal at Style Research,shared research that underlines the complicationsinherent in treating corporate governance as aninvestment theme. He explained that his research

has found that stock performancedoesn’t broadly correlate toperformance on corporategovernance issues, being more ofan individual company question.However, he said there was betternews for thematic investors onthe environmental side, whereStyle Research has analysed datafrom Trucost: “The eureka is thatthere is an investment themelooking at the environment

wherein the cleanest—that is, lowest carbon—companies outperform,” he said.

Other conference discussions revealed just how farresponsible investing has to go before it’s fullyintegrated into most asset owners’ investmentprocesses. Glaring difficulties remain in the fixedincome asset class, as one panel discussed.

Henry Shilling, senior vice president of Moody’sCorporation, said that “we see a dearth” of fixed-income funds that incorporate ESG. According tohis firm’s research, which it conducted inpartnership with Mercer, Only 23 such funds areoffered today in the U.S., and 72 percent of themfollow an exclusionary policy. The vast majority areoffered by PIMCO and Calvert.

Lenora Suki, senior productstrategist at Bloomberg, summedup one of the inherent difficultiesof incorporating ESG into a bondstrategy: “If you’re going to buy abond and sit on it for the life ofthe bond, how do you work ESGinto that?” In response to thequestion she posed, she suggestedmoving beyond the term of thebond issue itself and taking ESG considerations tothe issuer level.

“ If you’re going tobuy a bond and siton it for the life ofthe bond, how doyou work ESG intothat? ”

Henry Shilling

Lenora Suki

Robert Schwob

“ The eureka is thatthere is an investmenttheme looking at the environmentwherein the cleanest- that is, lowestcarbon - companiesoutperform ”

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Tim Coffin, senior vice president of BreckinridgeCapital Advisors, said it considered the firm’s ESGstrategy to be part of good risk management, addingan extra layer of due diligence to its high-yield bond

purchases. He echoed the sentimentthat a type of shareholderengagement could be an aspect ofthe bond space. “We have acollaborative role with thecompanies we invest in,” he says.“We assume we’ll hold till maturity.”

Another obstacle blocking the wideadoption of ESG is the ever-thornyquestion of fiduciary responsibility,

and what that concept means for asset owners.

Keith Johnson, head of institutional investor legalservices at Reinhart Boerner Van Deuren, the law firm,challenged a common concern that asset owners maybe in breach of their fiduciary responsibility when theyprioritize responsible investing.

He turned that fear on its head, arguing that thosewho shun ESG factors by pointingto fiduciary duty restrictions havetheir priorities flipped: “I think alot of the hesitance to engage inresponsible investing is actuallyitself a violation of the duty ofloyalty,” he said. “It’s a paradox,because any fiduciary is going tobe concerned about these issues,and you’re supposed to besticking your neck out for your

clients and not worrying about who’s going to turnaround and sue you.”

Peter Webster, CEO of EIRIS, noted that the U.K.Law Commission had a similar concern with regardto fiduciary responsibility. In response tospeculations that fiduciary duty laws may actuallybe causing short-termism among investors, theCommission launched in March 2013 a fiduciaryduty review, which aimed to determine whethercurrent laws benefit end investors. Websterhighlighted some of the key points that haveemerged so far from the review: pension trustees’use of ESG factors in theirinvestment process is officially legallypermissible, and asset owners canconsider how ESG issues affect theportfolio as a whole, and not justeach stock.

Webster said EIRIS conducted asurvey of pension beneficiaries to get a sense of their stance onhow they feel their schemes shouldbe reacting to various issues. Sixty-five percent said they believed theirfunds should act on child laborissues, and 46 percent wanted theirschemes to do what they could tosafeguard the environment. Forty-three percent want annual reports from their pension plans.

“In this fiduciary discussion, there’s a tendency tosee fiduciaries as inanimate objects,” Webster said.“But fiduciary duty has to do with the greatesthappiness of the greatest number of people.”

“We have acollaborative rolewith the companieswe invest in,” . . .“We assume we’llhold till maturity ”

“ I think a lot of thehesitance to engagein responsibleinvesting is actuallyitself a violation of the duty of loyalty ”

“ In this fiduciarydiscussion, there’s atendency to seefiduciaries asinanimate objects,But fiduciary dutyhas to do with thegreatest happiness ofthe greatest numberof people ”

Hugh Wheelan and Anne Sheehan

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Alka Banerjee, S&P Dow Jones Indices

Andrea Phillips, Goldman Sachs

Anne Simpson, CalPERS

Stephen Scofield, Sustainalytics

Michel di Capua, Bloomberg New Energy Finance

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Peter Grauer, Chairman, Bloomberg

Rina Kupferschmid-Rojas, ESG Analytics

Christina Kusoffsky Hillesöy, AP3, Sweden

Matt Diserio, Water Asset Management

Matt Christensen, AXA Investment ManagersSarah Cleveland

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Richard W. Clayton III, Research Director, CtW

L to R: Gustavo Pimentel - SITAWI, Will Oulton - First State, Chris Davis – Ceres

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Adam Kanzer, Domini Social Investments

Patrick McGurn, Institutional Shareholder Services

Will Oulton, First StateSean Kidney, Climate Bonds Initiative

L to R: Hugh Wheelan, Kevin Parker, Michael Bret, Matthew Diserio, Chris Davis, Michel di Capua

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