SRI Industry Update April 7, Kevin O Keefe, Chief Investment Officer

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1 SRI Industry Update April 7, 2016 Kevin O Keefe, Chief Investment Officer

2 What We Plan To Cover Overview of recent trends in SRI (Sustainable, Responsible, Impact) investing Impact investing Climate change The decline of fossil fuels The inevitability of Big Solar Exclusionary vs. Solution approaches Screening vs. ESG Integration Gender lens investing SRI model portfolios in 401(k) plans

3 Impact Investing Impact Investing First coined in 2007 Investing with the intent to produce a measurable social impact alongside a financial return 360-degree accountability

4 Impact Investing Investopedia: DEFINITION of 'Impact Investing' Impact investing is investing that aims to generate specific beneficial social or environmental effects in addition to financial gain. Impact investing is a subset of socially responsible investing (SRI), but while the definition of socially responsible investing encompasses avoidance of harm, impact investing actively seeks to make a positive impact by investing, for example, in non-profits that benefit the community or in clean technology enterprises.

5 Impact Investing Keys to a successful impact investing plan -Stakeholder alignment -Faster feedback loops -Proving your value proposition -Talent recruiting and retention -Surviving changes in capital structure

6 Impact Investing Learn more about Impact Investing: Industry publications: Global Impact Investing Network (GIIN): Mutual fund companies: Wall Street giants:

7 Climate Change

8 Climate Change It s about economics, not just environmentalism. In 2015, the US built more solar power than natural gas power for the first time.

9 Climate Change

10 Climate Change Big Solar: US boom Riding three strengths, overcoming one weakness

11 Climate Change

12 Climate Change The boom in Utility Solar Strength #1: Price

13 Climate Change

14 Climate Change The boom in Utility Solar Strength #2: Predictability

15 Climate Change

16 Climate Change The boom in Utility Solar Strength #3: More states have plants

17 Climate Change The boom in Utility Solar Overcoming the weakness of Capacity Factor

18 Climate Change

19 Climate Change

20 Climate Change

21 Climate Change

22 Russell 3000 Index Energy Weighting

23 Exclusionary vs. Solution Approaches Calvert Principles for Responsible Investment Calvert Investments seeks to invest in companies that provide positive leadership in the areas of their business operations and overall activities that are material to improving societal outcomes, including those that will affect future generations. Commitment to these Principles signifies continuing focus on companies with superior corporate responsibility and sustainability.

24 Exclusionary vs. Solution Approaches Pax World Sustainable investing is the full integration of environmental, social and governance (ESG) criteria into investment analysis, security selection and portfolio construction. Pax World seeks to identify forward-thinking companies that are leaders in their industries, meet positive standards of corporate responsibility, and focus on the long term. We seek to respond to the growing community of investment advisors, institutions and individual investors who believe that a company s astute management of its impact on the environment and society as well as its own operational governance are essential factors in its long-term success.

25 Exclusionary vs. Solution Approaches Praxis Funds Through our stewardship investing philosophy and practice, you can integrate your faith and values with your investments. It s an opportunity for you to generate positive results for others, as well as yourself.

26 Exclusionary vs. Solution Approaches Domini Funds Domini Social Investments LLC is an SEC-registered investment adviser that specializes exclusively in socially responsible investing. We serve individual and institutional investors who wish to create positive social and environmental outcomes while seeking competitive financial returns. This website contains extensive information about the Domini Funds, how we choose our holdings and how we use our investments to encourage a higher level of corporate responsibility and to help rebuild communities in need.

27 Exclusionary vs. Solution Approaches TIAA-CREF Mutual Funds With a dual objective of providing competitive returns and making a positive impact, these funds seek to promote broader economic development, positive social outcomes and a healthier environment. We evaluate investments based on the following factors: Environmental - May include climate impact, energy consumption, waste management and natural resources. Social - May include employee engagement, labor relations, human rights practices, product safety and community impact. Governance - May include management structure, board accountability and independence, executive compensation, audits and internal controls, and shareholder rights.

28 Gender Lens Investing Traditionally, business practices and social customs have mostly ignored gender considerations when allocating capital.

29 Gender Lens Investing Evaluating investment opportunities on how they support: women s leadership, women s access to capital, products and services beneficial to women and girls, workplace equity, and related shareholder engagement and policy work. Investments that satisfy one or more of these criteria are presumed to deliver greater positive impact to women and girls.

30 Gender Lens Investing Gender lens investing is inclusionary of other impact lenses. Whether investing to alleviate poverty, build community wealth, or combat climate change, engaging women from the grass roots to the C-Suite can only enhance outcomes.

31 Gender Lens Investing More resources on Gender Lens Investing: content/uploads/2015/03/ca_women-wealth-and-impact- 2.0_ pdf

32 SRI and 401(k) Model Portfolios

33 SRI and 401(k) Model Portfolios Proponents of sustainable and responsible investing have reason to celebrate. Long-term investing with careful consideration of environmental, social and governance factors is going mainstream. On the regulatory front, updated guidance from the Labor Department acknowledges that fiduciaries can proactively apply ESG factors when making investment decisions, so long as they focus on the economic merits of doing so.

34 SRI and 401(k) Model Portfolios Interpretive Bulletin , released by the DOL on Oct. 22, is intended to lessen concern about potential fiduciary risks for those who make economically targeted investments. This bulletin replaces previous guidance (Interpretive Bulletin ) that unduly discouraged fiduciaries from considering economically targeted investments and environmental, social and governance (ESG) factors, according to the DOL.

35 SRI and 401(k) Model Portfolios Fiduciary advisers must pay attention to developments in the SRI space and consider how they can make use of ESG factors in service to their clients. Blaine F. Aikin is executive chairman of fi360 Inc.

37 Investing for Impact 2016 Regional Events designed to educate and connect financial professionals working with socially conscious investors. San Francisco, March 24, 2016 Portland, OR, April 20, 2016 Chicago, May 11, 2016 New York City, June 21, 2016 Boston, July 14, 2016 For more information:

38 27th Annual SRI Conference on Sustainable, Responsible, Impact Investing #AllinForImpact! 27t Annual SRI Conference November 9-11, 2016 Hyatt Regency Downtown Denver, Colorado

39 Q&A

SRI and Community and Economic Development Reinventing Our Communities: Transforming Our Economies Federal Reserve Bank of Philadelphia

SRI and Community and Economic Development Reinventing Our Communities: Transforming Our Economies Federal Reserve Bank of Philadelphia Alya Z. Kayal, Esq. About US SIF US SIF: The Forum for Sustainable