ADVISORY COMMITTEE VENUE INFORMATION. RACV City Club Level 2, 501 Bourke Street Melbourne VIC 3000

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1 ADVISORY COMMITTEE Kelly Christodoulou, Environmental, Social, Governance Manager; Investments, Australian Super Rob Fowler, Executive - Investment Execution, HESTA Tim Macready, Chief Investment Officer, Christian Super Alister Wong, Investment Manager, ESSSuper Chris Lye, Senior Investment Analyst, LUCRF Super Liza McDonald, Head of Responsible Investments, First State Super VENUE INFORMATION RACV City Club Level 2, 501 Bourke Street Melbourne VIC 3000 Phone: Web: Suggested attire: SC - Smart Casual SYMPOSIUM ARRIVAL Flights arriving Thursday 22 March 2018 Adelaide 8.25am: Virgin Flight VA 206 arrives from Adelaide 8.25am: Qantas Flight QF 674 arrives from Adelaide Brisbane 8.20am: Virgin Flight VA 302 arrives from Brisbane 8.20am: Qantas Flight QF 601 arrives from Brisbane Canberra 7.20am: Qantas Flight QF 795 arrives from Canberra 7.35am: Virgin Flight VA 252 arrives from Canberra Sydney 8.20am: Virgin Flight VA 806 arrives from Sydney 8.35am: Qantas Flight QF 409 arrives from Sydney

2 CIE creates global networks of institutional investors that enable better investment outcomes by sharing insight on new investment opportunities, best practice portfolio construction and risk management techniques. BACKDROP MIND THE GAP ENSURING THAT ESG INTEGRATION IMPROVES FINAL INVESTMENT OUTCOMES The need for effective consideration of Environmental, Social, and Governance (ESG) factors is now a well understood and appreciated facet of institutional investing. While difficult to prove a direct positive relationship, there is a growing body of research that supports ESG integration as a means of enhancing long-term investment returns, while also providing another lens to assess risk, and meet the broader objectives of stakeholders. However, there remains a notable gap between aspirations and outcomes. The challenge of achieving effective ESG integration, across all stages of the investment process, is currently one of the most dynamic areas of research and innovation for institutional investors, given the absence of standardised ESG metrics and widely-accepted practices, as well as the unique issues that arise in seeking to assess non-financial aspects of a company or asset. Furthermore, this initiative is being undertaken in the context of a socio-economic environment moving through significant changes, which require a proactive response from investors. Climate change, demographic shifts, technological disruption, and rising inequality and populism, among other trends, present both risks and opportunities to the sustainability of current investments. For institutional investors, the extent to which they can (and/or should) influence how companies address these changes is a topic for ongoing discussion and debate, and approaches will differ according to resources available, the objectives of stakeholders, and investment philosophy. CIE s ESG Investing & Integration Roundtable will take a deep dive into the issues associated with effective ESG implementation and ensuring it drives better investment outcomes. Following an interactive workshop structure, practitioners will participate in an exchange of ideas between industry peers that are focused on overcoming practical challenges. With a more organic structure and a limited number of asset managers in the room there will be value in unpicking, analysing and considering the inherent strengths and weaknesses of different individual investment models, strategies and approaches to holistic ESG integration. *As at 19 February 2018, subject to change 9

3 PRELIMINARY AGENDA Thursday 22 March am Roundtable registration SC 10.15am 10.20am 10.25am 10.30am Roundtable welcome Peter Horn, Managing Director, Centre for Investor Education Chair s opening remarks David Leggo, Chairman, Telstra Super CIE app tutorial Nick Corridon, Centre for Investor Education ASSESSING THE IMPACT OF MEGATRENDS THROUGH AN ESG LENS It is unsurprising that the impacts of big thematic drivers and future megatrends often correlates closely with ESG considerations. Analysis into these themes translates into material investment implications across regions, sectors, and company/asset specific opportunities and risks, and thus is becoming an important component of ESG research. This session will explore several key megatrends, highlighting areas which should be an ongoing focus of ESG research. Macroeconomic and Geopolitical Factors Time horizon: Multi (0-5+ years) Speaker: John Streur, Chief Executive Officer, Calvert Investment Management Adapting to changing consumption preferences in developed and emerging markets Sustainable urbanization and access to infrastructure key considerations from an ESG perspective Issues around food security and water availability Managing changing demographics from migration patterns and ageing populations 11.20am 11.35am Morning tea CASE STUDIES IN EFFECTIVE COMPANY ENGAGEMENT The idea of active shareholder engagement is encouraging in theory, but problematic in practice, with the number and complexity of issues for institutional investors to research and analyse making it difficult for companies that are seeking to proactively engage. However, the pursuit of ongoing engagement is a worthy endeavour with long-term benefits for both sides. To achieve best practice in this area requires drawing on a mix of internal and external resources, often with the ESG analyst overseeing these different inputs. Governance and Organisational Performance Time horizon: Multi (0-5+ years) Speaker: Fidelity International Peter Harris, Chief Investment Officer, BRC Global Resources *As at 19 February 2018, subject to change 10

4 The evolving role of institutional investors as active shareholders Pursuing best practice in exercising voting rights Feedback from companies how can institutional investors improve? Implications of new regulatory changes 12.25pm 12.30pm Stretch break NAVIGATING TRANSFORMATION IN GLOBAL ENERGY MARKETS Rapid developments in global electricity generation and usage, particularly in emerging markets, carry significant implications for investors. Prices for both wind and solar power have fallen significantly, with record low prices recorded in 2017 (down 50% in just two years). While this clearly presents opportunities, there are also embedded risks across asset classes, which have arguably been underestimated by analysts, with a widespread clean energy transition set to occur over the next several years. Speakers in this session will discuss the impacts on portfolios for institutional investors and how investments can be positioned accordingly. Investments and Portfolio Construction Time horizon: Multi (0-5+ years) Speakers: Mike Wilkins, Head of Environmental & Climate Risk Research, S&P Global Ratings Tim Buckley, Director of Energy Finance Studies, Australasia, Institute of Energy Economics and Financial Analysis Global energy infrastructure investment and the role of green financing Going beyond existing frameworks to evaluate relative environment impact The pace of the transition to renewable energy, and where consensus expectations are likely to be wrong Exploring embedded risks; implications for Australia s economy 1.20pm 2.20pm Lunch TRANSITIONING TO A ZERO-CARBON ECONOMY While there is a clear push for investors to pay a more proactive role as an advocate for addressing climate change and its impacts, politicians and investors alike risk being trapped in a state of inertia. Part of the reason for this is that there is skepticism around the investment benefits of explicitly avoiding high emission companies and assets, and investing in low emission alternatives. This session will look past the politics and policies and into the practicalities of climate change, exploring what the transition to a zero-carbon economy means for investors moving forward. Investments and Portfolio Construction Time horizon: Strategic (2-4 years) Speaker: Kenneth St. Amand, Client Portfolio Manager, Mirova Where consensus expectations are likely to be wrong in the drive to reduce carbon emissions How climate change research can help investors address sources of potential risk Case studies of where reducing carbon emissions is creating economic value Impact of changing government policies where do opportunities and risks lie? *As at 19 February 2018, subject to change 11

5 3.10pm 3.15pm Stretch break FROM POLICY TO ACTION NAVIGATING NEW CLIMATE-RELATED FINANCIAL DISCLOSURES The task force on Climate-Related Financial Disclosures (TCFD) recently released its final recommendations report, which advocated for consistent climate-related financial risk disclosures for use by companies. The recommendations took into account the physical, liability and transition risks associated with climate change, and what constitutes effective financial disclosures across industries. As a result, companies are moving to implement recommendations from the TCFD, with investors now assessing the quality and relevance of disclosures that is being provided. Governance and Organisational Performance Time horizon: Current (0-2 years) Speakers: Terence Jeyaretnam, Partner, Climate Change and Sustainability Services, EY Cameron Reid, Program Manager Transition & Rehabilitation, AGL Review of approaches and methodologies companies are adopting to improve disclosures How climate-sensitive industries are proactively responding to investor concerns Issues to look out for in assessing the quality of disclosures Assessing emissions trajectories and physical climate risk 4.00pm 4.15pm Afternoon tea EVOLVING FRAMEWORKS FOR ESG INTEGRATION How investors can pursue improvement in ESG factors, through hard and soft measures, continues to be an open question with no one size fits all solution. As a result, different frameworks and approaches are being adopted, with each organisation needing to be strategic in allocating resources to areas where maximum impact and benefit can be achieved. This session will draw on the perspectives of different practitioners, and how they are proactively pursuing ESG integration. Investments and Portfolio Construction Time horizon: Strategic (2-4 years) Speakers: Bonnie Saynay, Global Head of Responsible Investment, Invesco Overcoming organisational challenges to effective ESG integration Practitioner perspectives: what are institutional investors doing with regard to ESG? Who should be leading on ESG-related issues, the asset owners or asset managers, and to what extent? Practical factors of importance to ESG investing: sharing experiences from the market 4.45pm Stretch break *As at 19 February 2018, subject to change 12

6 4.50pm IMPROVING PORTFOLIO CONSTRUCTION USING ESG FACTORS Investors are developing increasingly sophisticated ways of measuring exposure to ESG factors across asset classes. For example, measuring a portfolio s carbon footprint is providing new insights into embedded risks and the investment impact of emissions. With further improvements in ESG-related data and information expected, investors will be able to create and implement more accurate portfolio metrics. Investments and Portfolio Construction Time horizon: Strategic (2-4 years) How the sustainable development goals (SDGs) will impact portfolio construction and investment management Adjusting asset allocation in response to risks and opportunities from ESG Using ESG factors as a risk management tool regional, sector, and company-specific considerations Case studies of what has worked/not worked in ESG-led capital allocation and investing 5.25pm 5.30pm 7.00pm Closing remarks Cocktails and canapés Roundtable concludes ROUNDTABLE THEMES CIE s investment roundtables are designed to deliver relevant timely insight, challenge conventional wisdom and provide unique perspectives to the Funds Industry globally. Today s investment environment requires multi-strand thinking to excel in the competitive, highly complex and interconnected global markets. Successful thought leaders in the global investment community are those who differentiate their organisation s strategies, performance, processes and products. While the challenges faced in the institutional investor market are many and varied, they can be grouped into four overarching themes. The core themes CIE will be addressing throughout 2018 are summarised as follows: INVESTMENTS AND PORTFOLIO CONSTRUCTION Institutional investors recognise the need to adopt a dynamic investment approach in building portfolios that effectively deliver CPI+ return objectives to members. Concerns about the ability of investors to meet return targets have provided the impetus for rethinking investment strategies. This has led to heightened interest in alternative assets and has reignited the public vs. private debate. Further, it questions the validity of the domestic bias that currently exists and it has brought about the realisation that a better understanding of risk is needed. As part of the increased focus on risk management, risk factor based allocation has gained traction, enabling investors to apportion portfolio risk to the various factors in line with the risk appetite of the board, members and stakeholders. Further complicating the implementation of investment strategies are the concurrent changes taking place in member demographics arising from growth in population size, an ageing population and higher life expectancy. These place pressure on both superannuation and insurance funds to fulfil the objectives of their members, policyholders and stakeholders whilst taking both, increasing longevity and investment risk into consideration. In the not too distant future, drawdowns are expected to rise as the Baby Boomer generation transitions to retirement, thus placing further importance on meeting the retirement needs of members. For insurers, increased longevity risk presents a more challenging environment whereby producing sufficient investment returns to meet *As at 19 February 2018, subject to change 13

7 existing liabilities and ensuring income protection becomes paramount. Presently, the post retirement market is underdeveloped and lacks sufficient investment options to cater for the needs of those people transitioning to retirement. This highlights the need to develop and improve post-retirement solutions for members, better manage volatility and generate return on invested capital. In addressing these issues, investment strategies will be revisited along with finding the balance between sound asset allocation decision making and meeting member objectives, in both, the accumulation and drawdown phases, which requires ongoing consideration. MACROECONOMIC AND GEOPOLITICAL FACTORS Quantitative Easing and its subsequent removal is a key driver affecting asset prices and returns, creating further distortions across markets that has added to the complexities of navigating the low growth environment faced. In addition, there are structural trends playing out that investors need to be aware of, such as; How will the reshaping of Europe s bureaucratic and economic structures impact company performance in a post Brexit world?; How successful will Australia be at navigating the decline in its terms of trade following the resources boom? How will China s shift from a command to demand economy progress and what will be the consequences for China, the Asian region and Australia? However, the uncertainty surrounding the sustainability of China s growth presents a risk to the Australian economy and gives rise to concerns as to the sustainability of the emerging market growth story and whether the global interconnectedness between developed and emerging economies poses greater risks than what is sometimes assumed. Greater global interconnectedness has increased the importance of geopolitical factors and currency as drivers of portfolio returns and the risks presented to investors portfolios. Heightened participation in foreign investment markets and the level of currency volatility exhibited in recent years has brought more media attention to the way investment organisations manage currency exposures. Furthermore, it has placed industry practitioners under greater scrutiny, pressuring them to optimise the management of these exposures. Recognising the fluidity of global and domestic macroeconomic and geopolitical developments and the impact they can have on investment performance, investment strategy and member outcomes, necessitates constant review and analysis. GOVERNANCE AND ORGANISATIONAL PERFORMANCE The Australian superannuation industry is currently undergoing a period of change. This requires funds to constantly evolve their practices and ensure alignment of internal and external objectives is achieved in order to effectively navigate the environment in which they operate. This is a task that fund leaders are entrusted with, which they work tirelessly to manage as the industry continues to grow both in terms of total funds under management and individual fund size. The growth in scale, whether organically or through merger and acquisition activity, is giving rise to internalisation of funds investment activities. Increasing complexity is pushing funds toward increasing internal resources as a means of improving their understanding of investment markets, investment management and their ability to identify investment opportunities. At the same time, funds are facing greater competition from the self-managed super fund (SMSF) and banking sectors, which continue to represent a sizable portion of the industry s total funds under management. This emphasises the importance of member engagement, communication, education and fund differentiation as tools for retaining members and keeping them invested for life. Also adding to the changing organisational landscape of superannuation funds are regulatory changes, increases to the SG, the introduction of MySuper and greater focus on risk management. The Australian insurance landscape is also subject to transformation driven by increasing operational complexity and regulatory change. Wider constraints are placed on the way insurers invest capital to meet liabilities and the increased use of derivatives and synthetic instruments requires funds to develop internal investment teams with specialised skill sets. On the other hand, this also highlights the need to bridge the gap between the investment and insurance teams in terms of investment and actuarial knowledge, understanding and objectives. CIE s role is to bring these challenges to the attention of industry practitioners, explore innovative ways of addressing them and evaluate their implications for Australian institutional investors. Furthermore, shifts towards *As at 19 February 2018, subject to change 14

8 insourcing and larger scale are expected to remain, presenting ongoing challenges and changes to funds internally and the environment faced externally. Consequently, CIE believes Governance and Organisational Performance is a theme that requires ongoing attention to ensure that change is managed optimally. REGULATORY ENVIRONMENT The global regulatory environment continues to transform in a bid to create a more robust global financial system. The approach taken has been to allow governments and regulators alike to enact reforms that may increase transparency and accountability, to reduce volatility, and in the process improve functionality and sustainability. This has seen a wealth of regulation coming to life across the globe, including the Dodd Frank Act, The Volcker Rule, BASEL III, EU bail-in legislation, Solvency II and a host of others. Along with global regulatory reforms, the Australian superannuation industry has undergone a number of regulatory changes including the increase of the superannuation guarantee (SG), the latest tranches of FOFA and Stronger Super reforms. As part of this, the powers given to APRA have increased the onus of boards, placing greater pressure on board members to elevate their level of investment knowledge and ensure independence of trustees. On the other hand, the more stringent capital adequacy requirements under LAGIC imposed on insurers highlight the need to make more capital efficient allocation decisions and places further pressure on insurers in meeting liabilities with a limited opportunity set of viable investments. Reviewing the implications of and the mechanics behind implementing regulatory change will be an area of focus for superannuation and insurance funds over the coming years. The issues related to industry specific regulatory changes and those applying to the broader domestic and global financial sectors will be addressed to varying degrees across CIE s different investment forums/symposiums throughout 2018, along with a number of associated and related sub-issues. TIME HORIZON Current (0-2 years): Strategic (2-4 years): Visionary (5+ years): Multi (0-5+ years): Themes that fall within this category are those that superannuation/pension funds are grappling with presently and have near term ramifications for funds. Themes that fall within all the time horizons mentioned above. These are topics for funds to consider so as to strategically position themselves ahead of the curve for organisational and investment opportunities, or protect themselves from potential risks that are beginning to form, but not yet fully impounded in markets. Long term issues that superannuation/pension funds may or may not confront in the future fall within this time horizon. These topics look at the possibility of future events playing out and give delegates thought provoking ideas for preparing their funds for the unknown. *As at 19 February 2018, subject to change 15