SRI in Context June 19, 2008 Matt Christensen, Eurosif MIV Roundtable on Responsible Finance Paris

1. SRI in Context June 19, 2008 Matt Christensen, Eurosif MIV Roundtable on Responsible Finance Paris

2. Agenda Eurosif Background SRI Microfinance

3. Eurosif Key Facts Governance • Governed by 6 National SIFs from European countries • Existing European Sifs include: UK, FR, DE, NL, IT, BE, SW • New SIFs in development: ES, NO, DK, CH Funding Sources • Institutional member affiliates (70) • European Commission • Foundations Mission / Benefits • Address Sustainability through Financial Markets • Networking and Promotion for Member Affiliates • Research • Lobbying • Events and Communications • Partnerships Activities

4. European National SIFs Eurosif Member Affiliates Eurosif Formula for Success Thought Leadership + Advising and Lobbying the EU • SRI • Builds Awareness • Increases Understanding • Generates Demand • SRI = + Public Profile + Leverage and Reach through SIFs

5. EU Studies • Studies branching into other asset classes • Equities still the most important class • Sector Studies • Industries and themes • Nuclear, Water, Real Estate, Food, Insurance, etc. • Co-branded products • OECD Watch and other partners covering specific markets, themes and ideas Thought Leadership

6. Advising and Lobbying the EU and Multilateral Institutions • EC: Multi-Stakeholder Forum • Eurosif invited to represent the “investor” point of view among trade associations representing multi-nationals, trade unions and NGOs • Key goal of forum: agree policy recommendation on mandatory environmental, social and governance (ESG) reporting • EP: Corporate Governance Annual Statement • Eurosif drafted legislation that was incorporated into law that encouraged publicly listed companies to discuss the material ESG issues that they face • United Nations • Advised Ministers from 40 countries on developing policy schemes to develop venture capital markets that integrate climate change and eco-efficiency criteria into investing policy

7. Public Profile • FT, MSNBC, Global Pensions, etc. Le Monde, El País, La Stampa

8. Eurosif Member Affiliates, 2008

9. Belsif Retail SRI Consumer Survey Forum Nachhaltige Geldanlagen Climate Conference for G8 Forum per la Finanza Sostenible Inter-Parliamentary group on SRI Forum pour l’Investissement Responsable FAIRE, SRI Research Prize UKSif National Ethical Investment Week 18 – 24 May 2008 VBDO Shareholder Activism Leverage and Reach through SIFs • Swesif • Scandinavian SRI Market Study 2008

10. Input to EU Sustainable Development Scheme • Workshops on Selected Topics • EU Event • EU ‘Green’ and eco-efficiency developments • Public speeches Eurosif Activities for 2008 Lobbying Research Initiatives Events/ Comm’s • Transparency Guidelines • SRI Study • HNWI Study • Media Partnership: Le Monde, La Stampa, El Pais, Die Zeit, Le Temps • Sector/Thematic Studies: Nuclear, ICT, Water, Shipping Core Activities • Video streaming, website • Newsletter, Research Quarterly, EU Insider, Annual Legislation Review • Coordination of EU SRI information, Regional SIF quarterly updates • Member Affiliate Servicing

11. Agenda Eurosif Background SRI Microfinance

12. 1950’s 2000’s 1980’s Rise of Multinational Corporations Demise of Socialism Rise of Capitalism Globalisation • Corporations earning revenues bigger than some countries’ GNP • Loss of ‘1 company employment for a lifetime’ due to increased competition • State provisioning of individual needs not sustainable over long term • Privatisations of State industries • Shareholder value culture • Support for NGOs • Accountability and awareness of world events • Information dissemination (Youtube generation) Keynes Friedman ? ‘Sustainability’ as Key Component of Business Success is Growing

13. SRI Defined ‘An investment process that considers the social, environmental and/or ethical consequences of investments, within the context of rigorous financial analysis’ Increasingly based on the view that these issues matter for the long term shareholder value of a company SRI acronym ‘du jour’: ESG (environmental, social, governance) Social Responsible Investment

14. Global SRI Market $3.6 trillion 1% $2.6 trillion 16% 35% 64% 84% 2006 2003 North America Europe AUS/Asia Source: Eurosif research SRI Market is Growing SRI now represents 10-15% of worldwide equity investing …new market figures on October 2, 2008

15. Integration: UK, NL, FR Integration Engagement Overlay: UK, NL, BE Engagement Best of class approach Sustainable Development Funds : France & Belgium Environmental Funds : Germany, Northern Europe, Switzerland Environmental criterias Socially responsible funds : USA, Canada, UK, Switzerland, Northern Europe Screening and best of class approach Ethical Funds : USA Europe Screening criterias 1928 1970 1980 1990 2006 SRI Strategy Evolution

16. SRI: Differences Within Europe

17. Why SRI is Growing: HIGH RETURNS FOR THE LONG HAUL – Calpers Case Study • Sustainability Performance for the Long Term Yields Excellent Returns • Calpers’ returns by asset class: 2004 2005 2006 2007 • US equities: 21% 8% 10% 21% • International equities: 31% 17% 27% 30% • Hedge funds: 10% 9% 12% 17% • Corporate governance/sustainability: 54% 21% 17% 24% • International fixed income: 8% 11% -1% 2% • Alternative (private equity): 13% 23% 19% 23% • Real estate: 12% 38% 37% 20% Source: Eurosif research

18. SRI Expanding to Other Asset Classes • Debt (Corporate and Government) • Real estate • Venture capital and Private Equity • Fund of funds • Hedge funds • Microfinance

19. Agenda Eurosif Background SRI Microfinance

20. Reasons for Interest Among SRI Players • Diversifier of investment risks • Returns have little correlation with returns on equity & fixed income…so far • Microfinance is less susceptible to macro-economics developments such as interest and inflation Interesting return / risk profile • Combination of strong growth and attractive returns in high growth economies. • Demonstrated lower risk profile – in good and bad economic conditions Social advantages • Promoting economic development by giving families and small businesses in developing countries access to affordable credit • Important factor but do not have priority among SRI investors

21. Criteria for SRI Players Similar to Other Asset Classes • Size and track record • Minimum of one year track records and optimally, two to three years of performance data • Investors tend to search for liquidity and ease of capital deployment Reporting • Audited results • Credible ratings Differentiation • ‘Story’ and focus of the fund • Importance of management and access to good investments will rise as field becomes crowded

22. Examples of Microfinance as Asset Class • Institutional Investors: SRI • Pension funds: At year end 2007, APG invested $32m in microfinance with returns of 6% on average so far and an additional $25m placed in fund in February 2008. PGGM announced in March 2008 a commitment of €200m over the next 2 to 3 years • Foundations: Credit Agricole launched in February a €50m fund in collaboration with Grameen Bank. The new Grameen Credit Agricole Microfinance Foundation is seeking additional funding from institutional investors and large European companies with the aim of raising a total of €150m in the next two years. Private Equity: Non-SRI • California-based venture capital group Sequoia and Unitus, the Seattle based company that lends to and invests in MFIs, have ploughed $11.5 million into SKS Microfinance • Other players expressing interest range from Carlyle to Blackstone with minimum investment amounts at $20 million range Growing role of High Net Worth Individuals (HNWIs) and Retail investors

23. Challenges Going Forward • Financial structuring: debt versus equity Need to screen potential MFIs carefully Risk of over-funding Tension between ‘good’ or ‘bad’ MFIs – Compartamos example • Clarification of roles & responsibilities between public and private players • Example of role of EIF and EIB Need to develop common industry standards (transparency and reporting) • Example of Eurosif Transparency Guidelines for SRI fund managers • Example of VQS EU project done with SRI research organisations in public equities