TBLI Conference Nordic

ESG integration across asset

classes

Florian Sommer

Copenhagen, 16th June 2015

● Founded in 1956

● Headquartered in Frankfurt, Germany

● Active, fundamental asset manager with

integrated portfolio management/ research

approach

● EUR 253bn AuM, thereof EUR 141bn for

institutional clients

● Among the top 15 managers in Europe*

● Focus on asset management, no change

in shareholder structure over the years

● More than 2,600 employees

Union Investment is one of the leading asset managers in Europe

* Investment & Pensions Europe (IPE Research, June 2014). Data as of May 2015

2

1995 2003 2008 2012

8,3 bn**

Sustainable Investment at Union Investment

As of March 2015

* Sustainable and Responsible Investment; ** 8,3 euro billions Assets under Management in sustainable investments.

● More than 20 years of experience

● Sustainable investment solutions for all

major asset classes

● A competence team of 21 SRI*

portfolio managers / analysts

3

2015

Strategies

of exclusion

Best-in-class-

strategies

Strategies for

individual topics

Competence team

for sustainability

Engagement

overlay

Sustainability

overlay

Steering committee members*

● Adam Kirkman, AMP Capital Investors

● Archie Beeching, PRI

● Bram Bos, Univest Company (Unilever Pension

Funds)

● Christoph Klein, Deutsche Asset & Wealth

Management

● Doris Kramer, KfW Bankengruppe

● Florian Sommer, Union Investment

● Harald Klug, PIMCO

● Jennifer Anderson, The Pensions Trust

● Lorna Youssouf, Royal London AM

● Michael Salvatico, MSCI

● Urs Bitterling, Allianz Insurance

● Tomi Nummela, PRI

The PRI Workstream Fixed Income

4

* Status May 2015

2011 2013 2012 2014

ESG provides additional risk insight

5

Analyse

Avoid Reduce Change

● Olympus

● TEPCO / Fukushima

● BP / Transocean

● LIBOR scandal

● Parmalat

● Enron

● Costs of CO2

regulation (e.g.

automotive sector,

utility sector)

● Costs of nuclear exit

● Ban on

incandescent light

bulbs

● Foxconn:

suicides of workers

● Freeport:

human rights

● Wilmar: tropical

deforestation

● Hershey:

child labour

Event risks Regulatory risks Reputational risks Litigation risks

● Asbestos lawsuits

(USD 70 bn), e.g.

Owens Corning,

Saint-Gobain

● Lawsuits against US

tobacco industry

(USD 206 bn)

● Investment banks

(over USD 306 bn)

EN

Brutto

Netto

Indexed performance

(5-year comparison)

Regulatory risks: German utilities suffer from the energy transition

6

0

20

40

60

80

100

120

Feb 10 Feb 12 Feb 14

Eon

RWE

MSCI Versorger Index

As at 19 February 2015

As at 20 February 2015

Source: Bloomberg

Indexed spread performance

(5-year comparison)

50

100

150

200

250

300

350

2010 2011 2012 2013 2014 2015

Eon

RWE

Versorger Index - Merrill Lynch

Downgrade S&P

Downgrade Moody's

0%

5%

10%

15%

20%

25%

30%

35%

40%

Low Liquidity Buffer

and High Litigation Risk

High Liquidity Buffer and

Low Litigation Risk

Liquidity Buffer

(in Percentage of Market Capitalization)

Litigation Risks: $306 bn resulting from Actions and Fines for the Biggest 16 Investment Banks since 2010*

7

Quelle: SG Cross Asset Research / Equity 2015; *CCP Research, Juni 2015.

Caixa Bank ING Bank

Danske Bank

KBC Bank

SEB

Swedbank BBVA

DNB

Nordea

BNPP

(Post fine)

HSBC

Lloyds

UBS

Credit

Suisse

Barclays

RBS

Low Medium High

Litigation Risk

Deutsche

Bank

Bank Actions Costs

Bank of America

US MBS/CDO Misselling $16,7 bn

JP Morgan US MBS/CDO Misselling $9,0 bn

BNP Paribas US Trade Sanctions $8,9 bn

CITI US MBS/CDO Misselling $7,0 bn

Credit Suisse US Tax Evasion $2,6 bn

Deutsche Bank LIBOR Manipulation $2,5 bn

HSBC Money Laundering $1,9 bn

Costs of Actions for Banks

Corruption levels after Corruption Perception index (CPI)

(87 countries and defaults since 1970)

Defaults occur more frequently in corrupt countries

8

Source: Union Investment, Transparency International 2014

15 16 16

19

21

0 1

4

13

20

very low low medium high veryhigh

Countries

Defaults

Levels of corruption during the escalation of the EU debt crisis

Source: Union Investment, Transparency International, Corruption Perceptions Index (CPI)

Corruption

level

(CPI 2011)

Corruption change in % (CPI 2008-2011)

low

high

worse better

9

Italy

Iceland

Austria

Spain

Netherlands

United Kingdom

Greece

Sweden

France

Portugal

Denmark

Czech Republic

Israel

Ireland

Mexico

Germany

Hungary

Slovakia

USA

Belgium

South Korea

Turkey

Poland

20

30

40

50

60

70

80

90

-30% -20% -10% 0% 10% 20% 30%

OECD average: 70

10

Nuclear Prgr.

Senkaku-Isles

Kaschmir

Military Coup

China-Protest

Ukraine-Crisis Gezi-Protest Euro-Crisis

Racial Tensions

Drug Wars

Economic Crisis

Public Unrest Debt Crisis Boko Haram Streiks Arab Spring

Middle East ISIS

ESG helps to assess political risks

ESG score

Measuring ESG as a standalone dimension

42,3

Portfolio Benchmark

Top 5 ESG Scores Portfolio

Essilor 78,7

Veolia 75,2

Verbund 75,2

Schneider Electric 69,7

Procter Gamble 68,8

Examples „Fail“ in Benchmark

Glencore Human rights violations

Textron Controversial weapons

Petrobas Corruption

Walmart ILO labor standards

Barrick Gold ILO labor standards

Exclusion filter

Environment

Governance

Social

Quelle: Union Investment

11

59,1

89,6%

10,4%

Pass

Fail

Many thanks for your

attention!

Disclaimer

13

● This advertising material is intended only for professional clients as described in section 31a, paragraph 2 of the German Securities Trading Act (WpHG). The present document has been prepared and issued by Union Investment Institutional GmbH. The document does not constitute a binding offer. Union Investment does not assume any obligation or liability for this document. The document is no substitute for the individual advice by Union Investment Institutional GmbH. Union Investment Institutional GmbH is not responsible for disadvantages that may arise directly or indirectly from the distribution of this document or its contents. For extensive product-specific information and details of the opportunities and risks presented by the respective fund, please refer to the latest sales prospectus, the Bank's terms and conditions or the annual and half-yearly reports that can be obtained free of charge from Union Investment Institutional GmbH, Weissfrauenstrasse 7, 60311 Frankfurt am Main, Germany, telephone +49 69 2567-7652. These documents constitute the sole legally binding basis for the purchase of fund units.

● Origins of Data: Despite our effort and care no liability or guarantee can be assumed for the timeliness, accuracy or completeness of the data provided. Where data has been obtained from external sources, this is explicitly stated. We consider data obtained from external or publicly available sources to be reliable. Data obtained from external sources or contained in our own calculations may be incorrect. We assume no liability for any errors that may occur when data is passed on, recorded or entered or when calculations are made using this data.

● Historical performance: Performance data shown is historical. Past performances can not be taken as a reliable guide for future investments. The BVI method (time-weighted return) is used for these calculations. Where the gross method has been used for such calculations (adjusted for management fees and depositary fees), this is explicitly stated. Data calculated and presented using either the BVI method or the gross method does not include any front-end fees or product-specific costs (fees, commissions and other charges).

● Compliance with Global Investment Performance Standards (GIPS®) and the BVI-Rules of Conduct: Union Investment claims of compliance with GIPS® has undergone the verification process and has been verified by an independent third-party „verifier“. The Composite-Performance calculation and presentation comply with the GIPS® guidelines. The composite allocation of individual funds, or all Composites complying with GIPS® are available upon request. Union Investment Institutional GmbH has committed to comply with BVI’s code of conduct. In consequence, Union Investment Institutional GmbH employs the code's standards for performance illustrations. Cases of deviation will be individually indicated.

● Future assessment: Any opinion expressed in this document (including estimates and forecasts) is solely for information purposes and does not constitute an individual offer or a guarantee for future performance. Any opinion contained herein was given at the date of publication and may be subject to change without notice.

● Use of Union Investment’s country ratings: The country ratings devised by Union Investment are merely the outcome of its assessment of the creditworthiness of sovereign issuers for internal purposes, and they are intended to be used purely as quality appraisals of a certain selection of sovereign issuers. The ratings represent Union Investment Institutional GmbH’s own assessment and do not constitute a recommendation to take a particular course of action.

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