Ways of Utilizing Financial Resources - The “Spectrum”

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Source: Adapted from Social Ventures Hong Kong, Virtue Ventures

Social Enterprises Socially-DrivenBusinesses

Pure Commercial Businesses

Charities/Non-Profit

Grants/donations

Social returns only

“Patient capital” - e.g. venture capital, loans (below market/forgivable/ long repayment)

Social impact and return of principal to allow “recyling” of dollars

Equity/debt - e.g. SRI funds

Financial returns and social and/or environmental impact (i.e. double/triple bottom line)

Equity/debt

Seeking highest possible financial returns (single bottom line)

Responsible Investing

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Source: Dow Jones Sustainability Indexes

RI asset under management is expected to grow from USD5 trillion in 2007 to around USD26.5 trillion in 2015 globally, accounting for 10-20% of total AUM

Portfolio snapshot - Beforeconsisted of mainly cash and traditional investments. ESG compliance was not part of the mandate.

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Commoditiesand realestate

Cash

Private equity/hedge fund

Equities

Fixed income

Traditional approach by asset class

ESG issues were not considered as part of the investment process

No social impact investments

Focused on traditional asset classes in equities, fixed income with emphasis on desired financial returns only

Portfolio snapshot - After… in transition towards ESG integration into entire portfolio

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Commoditiesand realestate

Fixed income

Equities

Social impactequity or debt

Cash

Private equity/hedge fund

ESG approach by asset class

Equity: sustainability index funds and theme based funds (e.g. environmental, responsible consumption) (migrated)

Fixed income: sustainability bond index (migrated)

Social impact investments: micro credit fund; private equity into social enterprises (ongoing)

Commodities: precious/industrial metals funds; agricultural commodities (evaluating)

Real estate: sustainable “green” property fund/assets (evaluating)

Private equity/hedge fund: pre-existing, not termed out

*** Diversification ***

Significant Investments/Grants to-date

5Social Enterprises Socially-DrivenBusinesses

Pure Commercial Businesses

Charities/Non-Profits

Grants/Donations “Patient capital”

Recycling of dollars

Double/Triple bottom line focus

Market rate financial returns

Investments that are screened through ESG lens

Dexia Micro-Credit Fund (managed by Blue Orchard)

Dexia Sustainable World Bond Fund

SEB Ethical Global Index Fund

First State Global Emerging Markets Sustainability Fund

Acumen Capital Markets Fund

Principles of Responsible Investing (“PRI”)

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Source: www.unpri.org

Asset Owners Investment Managers Service Providers

Government Pension Fund of Thailand

PRI was launched in April 2006 by the then UN Secretary-General Kofi Annan in New York

32 institutional investors representing USD2 trillion in assets signed on Launch Day

Today there are over 700 signatories representing ~ USD20 trillion in assets

Principles of Responsible Investing (“PRI”) (continued)

As institutional investors, we have a duty to act in the best long-term interests of our beneficiaries. In this fiduciary role, we believe that environmental, social, and corporate governance (ESG) issues can affect the performance of investment portfolios (to varying degrees across companies, sectors, regions, asset classes and through time). We also recognise that applying these Principles may better align investors with broader objectives of society. Therefore, where consistent with our fiduciary responsibilities, we commit to the following:

1. We will incorporate ESG issues into investment analysis and decision-making processes.

2. We will be active owners and incorporate ESG issues into our ownership policies and practices.

3. We will seek appropriate disclosure on ESG issues by the entities in which we invest.

4. We will promote acceptance and implementation of the Principles within the investment industry.

5. We will work together to enhance our effectiveness in implementing the Principles.

6. We will each report our activities and progress towards implementing the Principles.

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Source: www.unpri.org

“Capitalism takes a narrow view of human nature, assuming that people are one-dimensional beings concerned only with the pursuit of maximum profit. The concept of the free market, as generally understood, is based on this one-dimensional human being.”

Muhammad Yunus, Founder of Grameen Bank

“In the real marketplace of life, each one of us has the individual freedom to use our economic power in accordance with our values. We can deliver the benefits of robust free markets without abrogating ethical business practices in fair trade, in human rights, in safe products, and in microfinance lending.”

Jonathan Lewis, CEO of MicroCredit Enterprises

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