Struktur der Zusammenarbeit

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21st January 2008, Milan
From Socially Responsible Investing to
Responsible Share Ownership Jean
Laville Deputy Director Ethos, 2 Place Cornavin,
Case postale, CH-1211 Genève 1 Ethos, 32
Gessnerallee, CH-8001 Zürich tel. [phone]
- Fax [phone]email info_at_ethosfund.ch
- www.ethosfund.ch
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Content

• The Ethos Foundation
• Socially responsible investing (SRI)
• Exercising voting rights
• Dialogue / engagement with companies

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Ethos

• Ethos Swiss Foundation for Sustainable
  Development
• Created in 1997 by two pension funds, currently
  composed of75 institutional investors.
• Objective To promote socially responsible
  investments (SRI)
• Role of think-tank
• Ethos Services SA
• Ethos Services is fully owned by the Ethos
  Foundation.
• Objective To offer various SRI services
• Role of do-tank

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The objectives of Ethos (Charta)

• 1. To invest primarily in companies that
  contribute to sustainable development.
• 2. To exercise shareholder voting rights
  systematically, in conformity with corporate
  governance codes of best practice.
• 3. To engage in constructive dialogue with
  companies regarding the demands of sustainable
  development and corporate governance best
  practice.

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Ethos Services

• Advisor of Ethos investment funds
• Ethos Institutional Investment Fund (CHF 1100
  Million)
• Pictet-Ethos (CH) Swiss Sustainable Equities (CHF
  180 Million)
• Asset management and SRI advisory mandates (CHF
  1050 Million)
• Shareholder meeting analyses services with
  administrative assistance for voting execution
• Engagement programme to raise company awareness
  of sustainable development issues and good
  corporate governance best practice

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• 2.
• Socially Responsible Investing (SRI)

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Sustainability and/or Performance ?
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Processus Ethos-Pictet Delivering Sustainability
and Performance

• Three independent model Portfolios.
• Each column represents a complete investment
  strategy.
• The model portfolios are dynamically aggregated
  in order to take care of performance cycles of
  each approach.

Financial Portfolio Alpha Standard Financial
Analysis Profitability of the Firm
Model Portfolio ESG Standard 120-150ESG
Criteria Organization of the Firm
Drivers of Performance
Sustainability Optimisation
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Delivering SustainabilityMeasuring the
Sustainability Impact
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• 4.
• Exercising Voting Rights

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Exercising Shareholder Rights

• Analyzing agendas of shareholders general
  meetingsThis analysis is based on the Ethos
  voting guidelines drawn up in line with the
  requirements of the main codes of best practice
  in corporate governance and the concept of
  sustainable development.
• Voting recommendationsVoting recommendations are
  intended to enhance long term corporate value for
  shareholders as well as for all other
  stakeholders.
• ? Use of the new information to form a voting
  opinion

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GM Nestlé (14.4.2005)Ethos Group shareholder
resolutions

• Three propositions for changing articles of
  association
• 1. Propose separation of Chairman and CEO
  positions
• (36 for, 13 abstain, 49 against)
• 2. Propose reduction of the length of board
  mandates from 5 years to 3 years
• (no vote due to lack of quorum)
• 3. Propose to lower the threshold of capital
  required for shareholders to be able to place an
  item on the agenda of the general meeting form
  CHF 1 million to CHF 100000- shares in nominal
  value
• (14 for, 12 abstain, 72 against)

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Nestlé Impact of the 3 resolutions presented in
2005

• The length of  cumul has been reduced to 2008.
• Nestlé has initiated in 2006 a survey among all
  of its shareholders on several points regarding
  its corporate governance.
• At the General meeting of 2006, the Board has
  decided to ask shareholders to give him the
  mandate to proceed to a complete revisions of its
  articles of association.
• The project will be presented for approval to
  shareholders in 2008.
• Ethos is regularly consulted on these
  modifications.
• Ethos also ask Nestlé to integrate the concept of
  sustainable development in its articles of
  association.

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• 5.
• Dialogue / Engagement with Companies

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 Engagement  Definition

• Engagement is a process of direct contact and
  dialogue with the management of firms.
• The objective is to raise awareness towards
  themes linked to sustainable development and
  corporate governance.
• The aim is to raise the value of firms for all
  its stakeholders.

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Dialogue / Engagement

• Direct initiatives with local partners
• In Switzerland Ethos Engagement Pool (Swiss
  pension funds)
• In France Strategic cooperation with avec
  Phitrust Active Investor
• In Europe Cooperation with te members of the
  European Corporate Governance Services (ECGS)
  network
• In US Ethos is member of ICCR
• In Asia ??

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Ethos Engagement-Pool (EEP)

• Objective To engage in dialogue with companies
  on the following topics (target 100 Swiss
  companies)
• Good corporate governance
• Environmental and social responsibility
• Choice of themes Defined by the Pool members
• Universe Swiss listed companies
• Implementation and communication Ethos Services
• Financing Each Pool members contribution is
  proportional to its amount of Swiss equities
  under management (13 Funds owning about CHF 50
  billion)

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EEP Dialogue Topics 2005-2006

• Corporate governance
• Individual elections of Board members
• Capital required to submit shareholder
  resolutions at GMs
• Executive remuneration
• Composition of the Audit Committee
• Publication of the GM minutes on the Internet
• Sustainable development
• Environmental and social reporting
• Adoption and implementation of company principles
  and codes of conduct
• Climate change

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Individual election of board members
Universe 100 largest companies listed in
Switzerland
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EEP - Environnemental Social Reporting
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Ethos participation in International Investor
Groups

• Mobilise companies on climate change(Carbon
  Disclosure Project)
• Mobilise investors on climate change(Institutiona
  l Investor Group for Climate Change)
• Monitor internet companies activities in
  countries repressing freedom of speech (Reporters
  without border)
• Improve assess to medicine in third world
  countries(Pharma Shareowner Group and Access to
  Medicine Index)
• Fight against corruption in the extractive
  industry(Extractive Industry Transparency
  Initiative)

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Carbon Disclosure Project 2007

• First CDP survey for Switzerland (50 companies)
• Response rate 78 (39/50)
• Partnership Ethos and Pictet Asset Management,
  and with the support of pension funds members of
  the EEP
• The Swiss SRI consultant Centre Info has written
  the CDP report

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Joint Action with other Investors

• A joint statement from institutional investors on
  the health crisis in emerging markets (AIDS/VIH,
  Malaria, tuberculosis)
• 15 institutional investors representing over EUR
  1000 billion assets under management
• Primarily a challenge to governments, but
  companies also have an important role to play and
  therefore their shareowners
• Not a forum for campaigning investors, but look
  to encourage companies to manage the risks and
  opportunities they are facing
• Dialogue with companies regarding their policy
  concerning differential pricing, the patent
  regime, public-private partnerships, donations
  programs, RD in tropical diseases,

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Some Challenges for SRI

• Reconciling performance and ethical values
• Combine financial objectives with social equity,
  human rights, environmental protection and
  economical development
• Responsible share ownership
• Exercise voting rights according to long term
  view including sustainable development
  considerations
• Exercising the right to dialogue
• New challenges for companies to be integrated
  climate changes, patents, awareness of civil
  society and consumers
• But is it enough to avoid turn-around point ???

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www.ethosfund.ch

• Free access to a  news  service on socially
  responsible investment and corporate governance.
• Ethos voting positions for the general meetings
  of Swiss companies of which Ethos is a
  shareholder.
• Portfolio composition of the Ethos funds and
  environmental and social evaluation of the
  companies.
• Publication of various studies on socially
  responsible investment.

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AnnexeCV

• Jean LAVILLE (1958) obtained a Masters in
  Economics, with specialization in international
  economics at the University of Lausanne in 1980.
  Subsequently, he worked as a post-graduate
  teacher at the Institute of Economic Sciences of
  the University of Geneva.
• From 1988 until 2002 Mr. Laville worked at the
  Pictet Cie Bank, with a particular focus on
  quantitative asset management. As Vice-Director
  he managed large quantitative investment
  portfolios for institutional clients. In
  addition, he was responsible for the development
  and management of Pictet Cies Sustainable
  Development portfolio.
• Mr. Laville joined the management of the Ethos
  foundation in 2002. As Deputy Director of the
  foundation he oversees the team of environmental
  and social analysts and is responsible for the
  overall management of the foundations
  portfolios.