Investing as if the future matters !

Graham Sinclair @esgarchitect

!

What ESG issues? Mining sectorAnnual event of the Principles for Responsible Investment (PRI), a voluntary signatory association of institutional investors and their services providers representing nominally US$ 25 trillion with over 1,000 signatories. Plenary on Africa and investment at PRI in Person 2013 in Cape Town, South Africa, 1 October 2013. PHOTOCREDIT: Graham Sinclair/SinCo archive 2013

Tracking positive ESG performance by... Global investors

Finding new investment to finance... Global entrepreneurs

How to invest more money in women and men who are creating their own jobs, and solving societal and environmental challenges. Like this entrepreneur, or “green” entrepreneur, a metals collector on the streets of Accra, Ghana, May 2011. PHOTOCREDIT: Graham Sinclair/SinCo 2013.

!!!!!!SOURCE: Johan Rockstrom: Let the environment guide our development. FILMED JUL 2010 • POSTED AUG 2010 • TEDGlobal 2010.

Joachim de Posada: “Don't eat the marshmallow!” TED2009

Long term investment is the “marshmallow test” for adults

SOURCE: Joachim de Posada: “Don't eat the marshmallow!” FILMED FEB 2009 • POSTED MAY 2009 • TED2009

Compounding works ...for the long term investor

NOTES: In US$. Assumed monthly real growth rate 0.33% = 4% annual real growth rate. Terminal value @ 31 October 2013: US$100 = US$ 136,488 from 1 August 1970; US$300 = US$139,151 from 1 May 1990; US$100 uncompounded = US$51,900 from 1 August 1970. SOURCE: Sean Smith/RisCura and Graham Sinclair/SinCo, November 2013.

$35,000

$70,000

$105,000

$140,000

$100 no compounding from August 1970$300 compounding from May 1990$100 compounding from August 1970

$51,900

$139,151

August 1980August 1970

October 2013

May 1990 August 2000 August 2010

$0

Investment grows geometrically with compounding. It takes 3x monthly investment to catch up, over 23 years.

Earth pictured in an image taken from edge of the solar system (1.44 billion kilometers) is an image of fragility in a vast galaxy. NASA's Cassini spacecraft has captured Saturn's rings and our planet Earth and its moon in the same frame Earth, which is 898 million miles (1.44 billion kilometers) away, appears as a blue dot at center right; the moon can be seen as a fainter protrusion off its right side. The other bright dots nearby are stars. 19 July 2013, the Cassini-Huygens mission is a cooperative project of NASA, the European Space Agency and the Italian Space Agency. Source: NASA/JPL/SSI/CICLOPS

Unless...

!!!!!!SOURCE: Johan Rockstrom: Let the environment guide our development. FILMED JUL 2010 • POSTED AUG 2010 • TEDGlobal 2010.

JOHAN ROCKSTRÖM Let the environment guide our development TEDGlobal 2010

Humans have the engineering to reshape the planet and its societies, directly and indirectly. If we chose to, we could flatten Table Mountain itself. Pictured: Caterpillar 785C Off Highway Truck. OceanaGold mining truck working the Macraes mine, Otago, New Zealand, 5 September 2009 photographed by Benchill, copyleft: Multi-license with GFDL and Creative Commons CC-BY-SA-3.0

!

Carve continents, flatten mountains, change ecosystems Anthropocene Era

Externalities A cape fur seal pup swims around oblivious to the plastic noose around it¹s neck. The seal is still growing and the plastic trash is not. The seal’s death is inevitable and painful. Plastic pollution in our seas is a growing problem and this is not an isolated incident. Photographed by Jean Tresfon at Duiker Island, Hout Bay 2013. Nikon D300 Subal Underwater Housing 2 Sea & Sea Strobes 1/250 F9 ISO400 underwaterimages.co.za

Unintended consequences of investment choices...

Cartoon depicting opinion of the exclusive nature of global emissions regulations at annual UN FCCC COP negotiations. COP17 was held in Durban, South Africa November - December 2011. © 2012 Zapiro. All Rights Reserved. Used with permission from www.zapiro.com

Big investors also shape the rules

Speaking upLive in front of video cameras and smartphone equipped audiences live tweeting, representative of NGO the Bench Marks Foundation seen posing questions to investors and companies the during Global Reporting Initiative stakeholder meeting for launch of South Africa Focal Point at Johannesburg Stock Exchange, February 2013. PHOTOCREDIT: Graham Sinclair/SinCo archive 2013

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ESG UNIVERSE

ESG data coverage reported by Bloomberg LP, November 2013. 20.8% global coverage based on 10,807 companies of total number of listed companies in country with an average score of 18.6, includes only companies with active trading status at 5 October 2013. Environmental scores based on 4,379* companieswith an average score of 20.7. Social disclosure scores based on 5,706* companies with an average score of 23.1. Governance disclosure scores based on 9,936* companies with an average score of 45.7. SOURCE: Bloomberg LP, November 2013.

More ESG data

A decade after a brilliant victory atop the iconic Alpe d’Huez inAlpine mountains in France, cyclist Lance Armstrong is tripped of all his titles for doping. Lance Armstrong, in maglia gialla di leader della classifica generale, all'arrivo dell'8a tappa del Tour de France 2003, Sallanches - L'Alpe d'Huez.13 July 2003. Source: Gawain78 Wikimedia Commons.

!

Investment legacy

By integrating ESG... Better performance is possible

!!!NOTES: Assuming US$100 invested from 28 September 2007 thru 31 October 2013. Standard indices. Market Price return, calculated monthly. US$ 16,717,754m n=1,152 (World n=793; EM n=327; S.A.n=32) at 13 November 2013. Free float market capitalization adjusted. MSCI Global Sustainability Indices represent the performance of the investment opportunity set (‘ESG beta’) of companies with high ESG ratings relative to their sector peers. They cover both global developed and the US markets. The indices target the highest ESG-rated companies making up 50% of the adjusted market capitalization in each sector of the underlying index, subject to the limitation that only companies with an ESG rating of ‘B’ or above are eligible for inclusion. They are reconstituted annually at the May Quarterly Index Review and rebalanced at the August, November and February Quarterly Index Reviews. SOURCE: MSCI ESG, November 2013.

1%9%

90%

Relative ESG Index Size

80

160

Sep

28, 2

007

Nov

30,

200

7Ja

n 31

, 200

8M

ar 3

1, 2

008

May

30,

200

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l 31,

200

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p 30

, 200

8N

ov 2

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008

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30, 2

009

Mar

31,

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9M

ay 2

9, 2

009

Jul 3

1, 2

009

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009

Nov

30,

200

9Ja

n 29

, 201

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ar 3

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010

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201

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p 30

, 201

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ov 3

0, 2

010

Jan

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011

Mar

31,

201

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ay 3

1, 2

011

Jul 2

9, 2

011

Sep

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011

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n 31

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012

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3M

ay 3

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013

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South Africa ESG IndexEmerging Markets ESG IndexWorld ESG Index

A trusted steward: the informal “key guard” watches over more than US$200,000 worth of cars for a gratuity at Muizenberg, Cape Town, South Africa in September 2013.

Informal “key guard” holds keys to expensive cars left with him while surfers enjoy the ocean

PHOTOCREDIT: Graham Sinclair/SinCo archive 2013

A trusted steward: the informal “key guard” watches over more than US$200,000 worth of cars for a gratuity at Muizenberg, Cape Town, South Africa in September 2013.

Unless you demand it, will investment management can be a noble profession of trusted stewards

PHOTOCREDIT: Graham Sinclair/SinCo archive 2013

Investing as if the future matters !

Graham Sinclair @esgarchitect

!

Long term investing as if the future matters!

1. Investment is about saving for the future. The longer you invest, the more the investment takes advantage of compounding of positive returns, by keeping costs low and assets diversified across asset classes and regions over economic cycles. Unless you invest for the longer term...

2. Investment decisions include all material factors that estimate the future earnings of the firm. That means all financial facts, including environmental, social and governance (ESG) factors, matter. You need trust in the investment ecosystems and investment professionals in New York, Singapore, Dubai, London, or Johannesburg. Unless you demand ESG...

Investing as if the future matters !

Graham Sinclair @esgarchitect

!

graham.sinclair@sincosinco.com Linkedin.com/in/grahamsinclair Skype: graham_sinclair +27.81.87.87.332 RSA +1.484.802.9908 USA +1.802.332.6887 SkypeIn

sustainable investment consulting

!!

www.sincosinco.com@SinCoESG

info@sincosinco.com

Sustainable Investment Consulting

• SinCo - sustainable investment consulting - is a specialist sustainable investment advisory boutique formed in February 2007. We have no other focus, we have no conflicts of interest. We build investment conviction and competence for our clients using ESG factors in investment ecosystems.

• SinCo has a track record of building robust answers to tough questions in sustainable investment. Our clients have included institutional investors, UN agencies and international NGOs, think tanks and foundations and stock exchanges.

SinCo designs ESG architecture for long term sustainable investment

that matters.

Discussing the impact and future of the PRI with Kofi Annan in The Netherlands, May 2008.

Debating the progress of ESG in Africa and the role of private equity at the JSE in South Africa, August 2012.

With fellow CSR Africa keynote and sustainability legend, Gro Harlem Brundtland in Nigeria, May 2012.

AfricaSIF.org is a new, strategic step in facilitating investment in Africa that purposefully integrates environmental, social and governance (ESG) factors.

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.

AfricaSIF.org defines "sustainable investment" as "an approach to investment in any asset class in Africa where environmental, social and governance (ESG) factors are proactively integrated at any stage of the investment life cycle."

You are invited to join our all-volunteer AfricaSIF.org project leadership team, or sign up as an individual member, or join your organization as an institutional member from 2014. Join us at africasif.org/support.

�22

Better performance possible

NOTES: Assuming US$100 invested from 28 September 2007 thru 31 October 2013. Standard indices. Price return. Calculated monthly. SOURCE: MSCI ESG, November 2013.

1%9%

90%

World ESG Index Emerging Markets ESG IndexSouth Africa ESG IndexNOTES: US$ 16,717,754m n=1,152 (World n=793;

EM n=327; S.A.n=32) at 13 November 2013. Free float market capitalization adjusted. SOURCE: MSCI Inc November 2013.

Relative ESG Index Size

Relative ESG Index Performance

0

80

160

Sep

28, 2

007

Nov

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200

7Ja

n 31

, 200

8M

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1, 2

008

May

30,

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l 31,

200

8Se

p 30

, 200

8N

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008

Jan

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009

Mar

31,

200

9M

ay 2

9, 2

009

Jul 3

1, 2

009

Sep

30, 2

009

Nov

30,

200

9Ja

n 29

, 201

0M

ar 3

1, 2

010

May

31,

201

0Ju

l 30,

201

0Se

p 30

, 201

0N

ov 3

0, 2

010

Jan

31, 2

011

Mar

31,

201

1M

ay 3

1, 2

011

Jul 2

9, 2

011

Sep

30, 2

011

Nov

30,

201

1Ja

n 31

, 201

2M

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0, 2

012

May

31,

201

2Ju

l 31,

201

2Se

p 28

, 201

2N

ov 3

0, 2

012

Jan

31, 2

013

Mar

29,

201

3M

ay 3

1, 2

013

Jul 3

1, 2

013

Sep

30, 2

013

South Africa ESG IndexEmerging Markets ESG IndexWorld ESG Index