© SASB

Webinar: Bringing the PRI Principles to life –

SASB as a toolset

Sustainability Accounting Standards Board & PRI

June 27, 2017

Your Panelists

Janine Guillot

Director of Capital

Markets Policy and

Outreach

SASB

6/27/2017 © SASB2

Mandy Kirby

Director Reporting,

Assessment and

Accountability

PRI

Deborah Ng

Director, Strategy and

Head of Responsible

Investing

Ontario Teachers’

Pension Plan

Katarina Hammar

Co-Head

Senior ESG Analyst

Nordea Asset

Management

Agenda For Today’s Webinar

Introductions

The PRI Perspective (10 minutes)

The SASB Perspective (10 minutes)

The Investor Perspective

OTPP (15 minutes)

Nordea Asset Management (15 minutes)

Q&A (5-10 minutes)

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The PRI Blueprint and AccountabilityMandy Kirby, Director Reporting, Assessment & Accountability

THE SIX PRINCIPLES

AT A GLANCELaunched in April 2006 at the NYSE, the Principles for Responsible Investment has:

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“Our aim over the next 10 years is to bring responsible investors together to create a sustainable financial system that contributes to a more prosperous world for all.”

ABOUT THE PRI

The Blueprint Vision

A framework for the next decade

Responsible Investors• Empower asset owners• Support investors incorporating ESG issues• Create an industry of active owners• Showcase leadership and increase accountability• Convene and educate responsible investors

Sustainable Markets• Challenge barriers to a sustainable financial

system• Drive meaningful data throughout markets

Prosperous societies• Champion climate action• Enable real-world impact aligned with the SDGs

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Enhancing Signatory Accountability A race to the top and a clear rulebook improve results

▪ Develop a responsible investment leadership table

▪ Launch PRI awards

▪ Define a minimum standard of activity that signatories must achieve;

▪ monitor and engage with those not meeting this

▪ delist any that fail to meet the standard over a two-year period

▪ Enhance access to the PRI’s Data Portal, a transparency and accountability tool

▪ Collaborate with peer organisations on reporting standards

▪ Develop recommendations for assurance and verification of data

▪ Delist signatories that contravene the spirit of the Principles.

Signatory Accountability A race to the top and a clear rulebook improve results

▪ Stakeholder consultation

▪ Targeted stakeholder groups and open signatory consultation July through September 2017

▪ Workshop session at PRI in Person in Berlin –September 2017

▪ Implementation begins in 2018

▪ See the Blueprint at https://blueprint.unpri.org/

© SASB

Sustainability Accounting Standards BoardSustainability Accounting Standards Board

Janine GuillotDirector of Capital Markets Policy and Outreach

27 June, 2017

The mission of SASB is to develop and

disseminate sustainability accounting

standards that help companies disclose

material, decision-useful information to

investors in a cost-effective way.

That mission is accomplished through a

rigorous, transparent process that includes

evidence-based research and broad,

balanced stakeholder participation.

Facts about SASB

▪ Develops & maintains industry-specific standards for 79 industries in 10 sectors

▪ Intended for use in mandatory SEC filings such as the Form 10-K and 20-F

The SASB MissionImproved sustainability disclosure enhances market efficiency

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The SASB DifferenceSASB standards are created for the market, by the market

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True and fair representation of

performance on material factors

SASB Disclosure Topics

and Metrics designed

for integration into

MD&A, risk factors, and

other sections as

appropriate

US GAAP governs

presentation of the

financials

Designed for Integration into Mandatory Public FilingsAn integrated reporting environment without regulation

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10-K or 20-F

© SASB

Complementary EffortsMandatory and voluntary reporting serve different purposes for different audiences

Material Information

Sustainability factors likely to

affect the financial condition or

operating performance of a

company

Relevant Information

All environmental, social, and

governance topics of interest

Investors

All

Stakeholders

Alignment is key (e.g., consistent approach to determining and disclosing “material”

information, presentation of results)

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10-K or

20-F

Evaluation of the Materiality of Sustainability Issues in Each IndustrySASB’s research and prioritization starts with a broad set of sustainability issues

Environment

• GHG emissions

• Air quality

• Energy management

• Fuel management

• Water and wastewater management

• Waste and hazardous materials

management

• Biodiversity impacts

Social capital

• Human rights and community relations

• Access and affordability

• Customer welfare

• Data security and customer privacy

• Fair disclosure and labeling

• Fair marketing and advertising

Human capital

• Labor relations

• Fair labor practices

• Diversity and inclusion

• Employee health, safety, and

wellbeing

• Compensation and benefits

• Recruitment, development, and

retention

Business model and

innovation

• Lifecycle impacts of products

and services

• Environmental and social

impacts on assets and

operations

• Product packaging

• Product quality and safety

Leadership and governance

• Systemic risk management

• Accident and safety

management

• Business ethics and

transparency of payments

• Competitive behavior

• Regulatory capture and political

influence

• Materials sourcing

• Supply chain management

Business model and innovation

Social capital

Human capital

Leadership and

governance

Environment

UNIVERSE OF SUSTAINABILITY

ISSUES

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Financial

Impact

Types of

Financial

Drivers

COST OF

CAPITALREVENUE COST

ASSETS &

LIABILITIES

Demand for

Core Products

and Services

Intangible

Assets and

Long-Term

Growth

Operational

Efficiency/Cost

Structure

Valuation of

Core Assets

and Liabilities

Governance,

License to

Operate and

Risk

Drug safety and

side effects

Diverse

workforce in

technology

Energy-efficient

chemicals

production

Stranded coal

assets

Operational

safety of gas

pipelines

Disclosure

Topics

Examples

Expected Value DriversSASB’s process identifies disclosure topics with evidence of impact on

financial condition, operating performance or risk

Industry-

specific

disclosure

topics

Technical protocol for

compiling data; activity

metrics for normalization

Accounting metrics for

each disclosure topic

Robust Standards Designed to Provide Decision-Useful InformationSASB standards contain industry-specific disclosure topics, metrics, and guidance

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Stakeholder

consultation

Provisional

Standards

Technical

agenda,

proposed

changes

Public

Comment

Updates to

Standards

Codified

Standards

Standards

maintenance

Ongoing Standards Development ProcessSASB standards will be maintained to evolve along with the markets they serve

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2017/1Q 2018: Stakeholder consultation, public comment, finalize standards

Ongoing: Track emerging issues and revise standards periodically

Institutional Investor Support for Improved ESG Disclosure SASB’s Investor Advisory Group includes investors with over $20 trillion in assets

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IAG members:

▪ Encourage companies to disclose material and decision-useful ESG information to investors

▪ Believe standards would improve the quality and comparability of sustainability-related

information

▪ Believe SASB’s approach—which is industry-specific and materiality-focused —will help

provide investors with relevant and decision-useful information

▪ Agree to participate in SASB’s ongoing standards development process, so that outcomes

best reflect investor needs

▪ Agree to encourage companies to participate in SASB’s ongoing standards development

process, so that outcomes reflect both issuer and investor viewpoints

▪ Believe that SASB standards can inform integration of sustainability factors into investment

and/or stewardship processes, such as corporate engagement and proxy voting

The SASB Investor Advisory Group (IAG) comprises leading asset owners and asset

managers who recognize the need for consistent, comparable and reliable disclosure

of material, decision-useful ESG information.

SASB Investor Advisory GroupIAG Statement

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Nordea Asset Management

Responsible Investment

Katarina Hammar

20170627

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Hetal DamaniCo-Head

Senior ESG Analyst

Global and EM products

Katarina HammarCo-Head

Senior ESG Analyst

Nordic / Swedish products

Josephine Ekros RothSenior ESG Analyst

Nordic / Swedish products

Emil SundkvistESG Analyst

Nordic / Swedish products

Emir BorovacESG Analyst

Global and EM products

Nordea Asset Management Responsible Investment team

Julie Helm TrigeESG Analyst

Global and EM products

Susanne Røge LundSenior ESG Analyst

Global and EM products

Olena VelychkoESG Analyst

Global and EM products

TBCSenior ESG Analyst

Source: Nordea Investment Management AB

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Nordea Asset Management Responsible Investment Framework

(based on PRI principles)

ESG Case: Antofagasta plc

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• Antofagasta plc (Antofagasta) is a

Chile-based copper mining company

that operates 4 open pit mines in

Chile

• 2015 revenues of USD 3.394 billion

and copper production of 630,000 t

• 4th largest producer of copper in

Chile; an essential material for the

transition to a low-carbon economy

(e.g. EVs, renewable energy

infrastructure)

• Low-Med overall country risk

(Emerging Markets context);

particularly high around water supply

• High risk sector; numerous large-

scale mining projects have been

delayed and cancelled due to ESG

aspects

Antofagasta plc - Profile

Source: Bloomberg

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• Our main focus for Antofagasta*– Water

– Energy

– Community

– Safety

– Corporate Governance

• Framework aligns with what the

company states is material

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Company key ESG issues

Source: NAM ESG Sector Framework*Labour issues not a key focus due to positive track record

• Controlling shareholder (Luksic family) owns

65% of Antofagasta shares

• 11 Board members of which 5 independent

(Chilean law requires 1)

• Newly appointed 2nd female director on the

board (comes from Codelco and has 25 years

of experience from the mining sector)

• Audit committee fully independent and board

level Sustainability and stakeholder

management committee

• ESG KPIs linked to management remuneration

(safety, water, carbon) and individual

performance agreements with division execs

• Sustainability and stakeholder management

committee with Board oversight of ESG

• Remuneration appears to be aligned with

shareholder value creation: TSR, Performance

vs Peers/Index and EBITDA used as criteria for

Long Term Incentive Plan

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Corporate Governance: Sufficient corporate governance

practices, and in line with minority shareholder interests

NAM field visit to Los Pelambres Mine, Chile, November 2016

• EXPOSURE– 3 of 4 mining sites are in the arid desert

– Water demand for mining expected to

increase by 66% between 2014-2025

– Use of seawater expected to become

regulatory requirement

• STRATEGY & IMPLEMENTATION– First mining company to use thickened

tailings at large scale

– Desalination plant (capex 400 mln USD)

– Pioneering use of sea water

• PERFORMANCE– Secured water rights

– Water consumption (intensity) better than

peers

– Water recycling rate (80%) above industry

average

– Seawater (untreated and desalinated)

accounted for 45% of group water

consumption in 2015

Average water consumption at existing mines is ~8 LpS/kt between 2009-

2014 (Morgan Stanley)

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Water: Water scarcity addressed through new technologies –

albeit requiring increased capex

• EXPOSURE

– El Mauro Tailings Dam has been the

source of opposition from the local

community (causing production loss

of 8kt of copper about 1% of annual

output in 2015).

– Expansion has already delayed by 3

years due to environmental permitting

issues

• STRATEGY & IMPLEMENTATION

– Somos Choapas approach to

community engagement implemented

at Los Pelambres; collaboration

agreement between the company and

the municipality; being replicated at

other projects

• PERFORMANCE

– Resolved dispute; Still some

opposition – but overstated by MSCI

– New agreement on water, safety and

expansion of Los Pelambres mine

(desalination plant)

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Community: Source of community opposition appears largely

addressed and expansion plans appear on track

Source: MSCI Controversy monitor 2015

Source: RepRisk Global Business Intelligence 2015

• EXPOSURE– The use of seawater and desalination

requires increased energy use

– Power costs 14% of total operating

costs

– Energy demand expected to increase by

80.3% between 2014 to 2025

– Carbon tax starting January 2017

STRATEGY & IMPLEMENTATION– Investments in renewable energy

– Investments in wind and hydro

– Installed solar plant at Centinela

– Energy efficiency initiatives

– No targets set and lack of broader

climate strategy

• PERFORMANCE– 47% of energy use at Los Pelambres is

from RE (target of 80% by 2019)

– Energy intensity and CO2 intensity

increasing due to use of seawater (but

lower than industry average)

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Energy: Energy consumption still an issue despite efficiency

measures

COCHILCO Expected consumption forecast, 2014 - 2015

• EXPOSURE

– All operations exposed to safety risks due to

nature of mining activities; safety essential for

human capital

– 60% of employees/contractors live in nearby

regions- safety critical to fruitful community

relations and recruitment and retention

• STRATEGY & IMPLMENTATION

– Safety reviewed by Board

– OHSAS 18001 certified operations

– 75% of labour force are contractors; contractor

compliance enforced via internal audits.

– Use of near miss safety pyramid (industry norm)

and incentivise near miss reporting

– Training and say “No” campaign

– Investigations after every critical fatality, injury or

near miss

• PERFORMANCE

– TRIF increasing but below industry average

– LTIF increasing but below industry average

– Fatalities (2 in 2016; up from 1 in 2015 but still

well below sector industry average at 7)

Safety: Safety setbacks experienced but clear priority for

management (tied to remuneration)

Lost Time Injury Frequency Rate 2015 (Morgan Stanley)

Total Recordable Incident Frequency 2015 (Morgan Stanley)

Fatalities 2015 (Morgan Stanley)

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ESG Conclusion: ESG risks managed and improving

• Quality of ESG management of key issues assessed as sufficient and on a positive

trend; Good management suggests lower cost of capital and increased duration of

mine’s useful life; Improvements still required on safety performance and energy

• Well positioned for use of seawater but negative impact on capex and capital intensity

as a result of securing water for growth in production e.g. desalination, energy use,

seawater infrastructure, etc.

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2017-03-07

Key issues Business model Corporate Governance Business ethics Environment Social

Development Contribution Governance QualityBusiness ethics and

transparency of payments

Water and wastewater

management

Employee health, safety and

wellbeing

Country/Sector Risk- Independence of Board

structure

Regulatory capture and

political influenceBiodiversity impacts Labor relations

Lifecycle impacts of products

and services

- Board compensation

practicesEnergy management

Human Rights and Community

Relations

- Minority shareholder

influence

Waste and hazardous

materials management

Accident and safety

management

- Sustainability governance Fuel management

- Diversity of Board &

Executive managementGHG Emissions

Audit & Accounting practices

Score B B B A B

- Risk exposure 1 2 2

- Financial impact 1 2 2

- Reputational 2 3 3

Weight 30% 10% 13% 23% 23%

Specify Trend Positive

ESG Scorecard: ANTOFAGASTA PLC Rating: B +

Red

Green

White

Thank you!

Your Panelists

Janine Guillot

Director of Capital

Markets Policy and

Outreach

SASB

6/27/2017 © SASB35

Mandy Kirby

Director Reporting,

Assessment and

Accountability

PRI

Deborah Ng

Director, Strategy and

Head of Responsible

Investing

Ontario Teachers’

Pension Plan

Katarina Hammar

Co-Head

Senior ESG Analyst

Nordea Asset

Management