Benefits of a Low Carbon Portfolio

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1 Benefits of a Low Carbon Portfolio John Fisher, CFA Equity Application Specialist jfisher1@bloomberg.net So far, there are few signs that either companies or countries have been able to decouple economic growth from carbon emissions growth. PWC 1

2 There are a number of significant drivers accelerating the integration of ESG into mainstream investment analysis More mainstream investors recognize that they can improve their financial returns by focusing on companies that prioritize sustainability - Abby Joseph Cohen, Goldman CIO Market Regulatory Fiduciary duty FASB disclosure SEC disclosure a company must disclose potential legislation or other significant risks that it faces, whether those risks are due to increased competition or severe weather. - Mary Shapiro, Former SEC Chair Client Demand Sell-side ESG Research departments UN PRI ($30tr); CDP ($67tr) EAI ($2.4tr) Specialist Independent Research, Ratings, Data and Consultancy businesses Increased corporate awareness SRI + Mainstream ABP, CalPERS, CalSTRS, NYCERS, FRR, PGGM, CPPIB, etc. +41% DC Plans planning to offer SRI option Advisors ESG factors represent a broad set of intrinsic concerns that may ultimately affect valuation of equity, fixedincome, real estate and infrastructure investments CFA Institute Mercer; Pricewaterhouse; McKinsey Rise of NGO s (KKR and EDF) Mercer believes that ESG factors are important - our clients (some of the largest asset owners in the world) do too. - Matt Orsagh CFA Institute - Craig Metrick, Mercer Investment Consulting 2 2

3 As a result, products and initiatives are now proliferating across asset classes, types and organizations The range of institutions integrating ESG into their business illustrates uptake: Mutual Funds (Equity and Fixed Income) Exchange Traded Product Stock Exchanges Sell-Side Research Index Products Private Equity 3

4 It is now estimated that nearly 1 in 10 AUM $$ globally is managed using ESG criteria in varying forms Source: Global Sustainable Investment Alliance, 2012 Global Sustainable Investment Review,

5 Bloomberg has seen a 41% annual growth rate in users of ESG data since

6 Bloomberg has seen a 41% annual growth rate in users of ESG data since

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13 CARBON & COST PER BTU 13

14 MERKEL S TASTE FOR COAL TO UPSET $130 BILLION GREEN DRIVE BLOOMBERG 9/22/14 14 More than a decade later, Europe s biggest economy is on course to miss its 2020 climate targets and greenhouse-gas emissions from power plants are virtually unchanged. Germany used coal, the dirtiest fuel, to generate 45 percent of its power last year, the highest level since 2007, as Chancellor Angela Merkel is phasing out nuclear in the wake of the Fukushima atomic accident in Japan three years ago. While new supplies sent wholesale power prices to their lowest level in nine years, consumer rates are soaring to fund the new plants. Germany s 40 million households now pay more for electricity than any other country in Europe except Denmark, according to Eurostat in Brussels.

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16 Bloomberg provides ESG data, analytics, research and news to support integration into investment decisions OVER 10,000 COMPANIES COVERED; 700 DATA POINTS FA ESG <GO> DEDICATED PROPRIETARY ESG RESEARCH AND NEWS BI ESG <GO> RV <GO> TOP ESG <GO>

17 Screening Building on the idea that environmental factors have real impacts on profitability, screening on GHG emissions, fuel intensity, and water consumption is leading to strategies that identify sustainable signals as well as scoring models based on qualitative and quantitative data.

18 Screening out sector exposure

19 CO2 PRODUCTION: WORKS OFFENDERS 19

20 Score, Rank, Backtest results

21 Backtesting: Exclude Carbon users, Overweight Value

22 Portfolio Risk and Analytics Portfolio Risk and Analytics tools have advanced to allow investors to quantify risks and understand how non carbon portfolios might behave.

23 Portfolio Risk and Analytics Multi Factor Modeling makes predicted risk analysis possible, for instance predicting a portfolios effectiveness in inflationary environments.

24 Portfolio Optimization Settings Investors can run complex optimization strategies to enhance their understanding and confidence in those strategies.

25 Portfolio Optimization Suggestions

26 Portfolio Optimization Analysis

27 Recap of tools Screen on an ever increasing set of Environmental, Social and Governance data at the Company level Score, rank and backtest model portfolios Understand the environmental impact of a portfolio Stress test scenarios such as inflation Optimize a portfolio towards a benchmark Contact your sales rep: CANCEL<GO> John Fisher, CFA jfisher1@bloomberg.net