1. Stock Market Value
of Sustainability: the
Dow Jones
Sustainability Index
Jvan Gaffuri
Santiago de Chile, 24.04.2012

2. Content
• SAM
• Sustainability Investing
• SAM Corporate Sustainability Assessment (CSA)
• Developments in Corporate Sustainability
2

3. SAM - Overview
• Investment boutique focused exclusively on Sustainability Investing since 1995
• Offering complementary capabilities to Sustainability Investing
• Powering Dow Jones Sustainability Indexes since 1999
• Member of Robeco, part of the Rabobank Group (with the highest credit rating of all
privately owned banks, awarded by rating agencies Moody’s, Standard & Poor’s, Fitch
and DBRS)
• EUR 11.3 billion total assets (as per 30.06.2011)
• Servicing a global and diversified client base
• Approximately 100 employees based in Zurich, Switzerland
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4. SAM - Research & Dow Jones Indexes
SAM Research – Sustainability Methodology Development
• Analysis of scoring results for improvements
• Development of new criteria, modification of questions
• Ensuring validity of company responses & supporting evidence
• Verifying consistency of comments and public disclosures
• Generation of sustainability scores
• Dow Jones Indexes
• Responsible for index calculation
• Companies are compared within their respective sectors
• Selections based on Dow Jones Indexes Sector Classification System
• Index components chosen according to pre-defined rules Index Guidebook
4

5. Content
• SAM
• Sustainability Investing
• SAM Corporate Sustainability Assessment (CSA)
• Developments in Corporate Sustainability
5

6. Sustainability Investing - Indexes, Raters and Research
Sustainable Asset Formation of Global Launch of Dow Jones
Management (SAM) Reporting Initiative (GRI) Sustainability Index (DJSI)
Innovest Strategic Value Formation of oekom research
KLD Research AG through spun-off from
Advisors
ökom GmbH
83 88 90 92 95 96 97 98 99 00
Formation of Risk
Metrics Group
Domini Social Index
EIRIS Research through spun off
from J.P. Morgan Launch of Carbon
Disclosure Project (CDP)
United Nations Environment
Calvert Social Index
Programme Finance Initiative
(UNEP FI)
Source: SAM Research AG
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7. Sustainability Investing - Indexes, Raters and Research
Launch of the Dow Jones Sustainability
Index Asia Pacific, and Korea
Launch of the Dow Jones
Sustainability Index North Thomson Reuters acquired ASSET4
America
Launch of the Dow Jones Bloomberg launched ESG Data Service
STOXX Sustainability Launch of UNPRI
Foundation of Glass, RiskMetrics acquired KLD Research
Index
Lewis & Co. and Innovest
01 02 03 04 05 06 07 08 09 10
JSE SRI Index S&P ESG
India
First Chinese Sustainability
Launch of the Ethibel Index
Sustainability Index S&P EGX ESG Index
vigeo Research
Launch ASPI (Egypt)
Bovespa Corporate Goldman Sachs Sustain MSCI acquired RiskMetrics
Sustainability Index Focus List Group, Inc.
Source: SAM Research AG
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8. Sustainability Investing - Evolution
Negative Engagement Positive Integration
screening & voting screening
Robeco SAM
Alpha Private Equity
(Cleantech PE)
SAM
Asset Management
Strategy
(Core & Themes)
focus
Norm-based / ethical
investing with
best-in-class and
Shareholder thematic screens
Activism SAM
Norm-based / ethical
Beta Indexes
investing
with exclusions Dow Jones
Sustainability Index
Time
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9. Sustainability Investing – Link to Corporate Sustainability
Corporate sustainability ...
... is a business approach to create long-term shareholder value by seizing
the opportunities and managing the risks that stem from sustainability trends
and challenges.
Sustainability investing ...
... is a long-term investment approach that integrates economic,
environmental and social considerations in the selection and retention of
investments.
 The aim of sustainability investing is creating performance
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10. Sustainability Investing - Which information do investors consider?
“We don’t like their sound, and guitar music is on the way out”
Decca Recording Co. rejecting the Beatles, 1962
“The horse is here to stay but the automobile is only a novelty - a fad”
Michigan Savings Bank,
advising Henry Ford’s lawyer, 1903
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11. Sustainability Investing - Investors are closing the gap
Adaptation to “93% of CEOs believe that S
Sustainability sustainability issues will be COMPANIE
critical to the future success of
their business.”
UNGC- Accenture (2010): „A new Era of
Sustainability“, p. 15.
RS
O
ST
VE
IN
“We believe that companies which
take environmental, social and
governance issues into account in
their operations will benefit from this
in the longer term“
Tomas Hildebrandt
Senior Portfolio Manager
Evli Investment Management Co. Ltd.
Time
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12. Sustainability Investing - Alpha from Sustainability
• SAM’s sustainability data has predictive power for stock-selection, reflected in the positive
information ratio (0.5) of the portfolio consisting of sustainability leaders*
• Added value is generated by selecting sustainability leaders and avoiding sustainability laggards
• Value creation is consistent and stable for the entire time period
*Slight changes were applied to the universe and methodology for the period between 2009 and 2010 (e.g. Canadian stocks are included in
this period).
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13. Sustainability Investing – HBS: Early movers are outperforming in the long-term
• Companies that adopted sustainability policies many years ago are showing long-term financial
outperformance (both stock market & accounting performance) compared to companies that have
very low adoption rates of such policies
• Comparison of adoption levels of Environmental & Social Standards for Suppliers of “High
Sustainability Firms” with “Low Sustainability Firms” shows that HSF have significantly higher
adoption rates
Type of Standard High Sustainability Firms Low Sustainability Firms
EMS 50.0% 18.2%
Data availability 12.3% 0.0%
Human Rights 17.4% 5.7%
Labor Standards 18.6% 8.1%
OHS Standards 62.9% 25.7%
Source: Eccles, Ioannou & Serafeim (2011): The Impact of a Corporate Culture of Sustainability on Corporate Behavior and
Performance. Harvard Business School, based on data provided by SAM.
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14. Value of Sustainability – HBS: Sustainability Leaders Outperformance
• Leading Sustainability Companies out-performed significantly over the long term
• Sustainability Leaders out-performed on ROE and ROA during the time period
Source: R. G. Eccles, I. Ioannou, G. Serafeim, The Impact of a Corporate Culture of Sustainability on
Corporate Behavior and Performance, HBS Working Paper 12-035, 2011.
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15. Sustainability Investing - Integrating Sustainability Into Financial Models
Economic Criteria
- corporate governance Revenues
- risk & crisis management
- brand management Earnings
- etc.
Costs Return on
Invested Capital
Environmental Criteria
SAM Fair Value
Invested
- operational eco-efficiency Investments Capital
- climate strategy
- environmental reporting
- etc.
Capital Structure
Weighted Ave.
Social Criteria Cost of Capital
- human capital development
- stakeholder engagement Cost of Capital
- supply chain management
- etc.
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16. Sustainability Investing – Integration
Company Valuation SAM Corporate SAM Fair Value
-Discounted Cash Flow (DCF) Sustainability Assessment
+
-
&
ROIC +0.2%
WACC -0.2%
Market Value Fair Value
ROIC 10.0% ROIC 10.2% SAM Fair Value Impact
WACC 5.0% WACC 4.8% range of + 10% - 15%
Legend:
ROIC Return on Invested Capital
16 WACC Weighted Average Cost of Capital

17. Content
• SAM
• Sustainability Investing
• SAM Corporate Sustainability Assessment (CSA)
• Developments in Corporate Sustainability
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18. SAM CSA - Unique Model: Company-Sourced Data
Corporate Participation via the DJSI Questionnaire
Sustain- Feedback
ability
& Insight
Services
Data
Provided SAM Research (20 Sector Analysts)
Directly by
Companies
Methodology &
Data Guidance
SIMS3 Data Base
Unique insights from companies are essential
The limitations of financial materiality must also be recognized
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19. SAM CSA - Sustainability Criteria
Economic Dimension
Over 130 cross- and • Corporate governance
General Criteria (50%)
industry-specific
criteria and • Codes of conduct & corruption
dimension weights • Risk & crisis management
• Customer Relationship Management
• …
Social Dimension
• Labour practice indicators
General
Sector 33% 33% • Human capital management
Specific Criteria
Criteria 43% • Talent attraction & retention
57% 33% • Corporate citizenship & philanthropy
• Social reporting
• ….
Environmental Dimension
• Environmental reporting
• Environmental Policy/Management
systems
Dimension weights may deviate from the
ones stated above for each of the 58 • Climate Strategy
different market sectors analyzed by SAM. • Product Stewardship
• Operational Eco-Efficiency
• ….
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20. SAM CSA - Extra-financial Indicators (559)
Economic Dimension Environmental Dimension Social Dimension
• Anti-crime policy/measures 4 • Biodiversity 10 • Access to Insurance/ Other Social Value Added 1
• Antitrust Policy 4 • Building Materials 5 • Access to Water 3
• Brand Management 8 • Business Opportunities Financial Services/Products 2 • Addressing Cost Burden 2
• Codes of Conduct/Compliance/Corruption&Bribery 6 • Business Risks and Opportunities 4 • Bioethics 3
• Combating Smuggling 3 • Business Risks Large Projects / Export Finance 3 • Business Risks 2
• Compliance with applicable export control regimes 2 • Climate Change Governance 7 • Code of Ethics for Advertising 1
• Corporate Governance 10 • Climate Change Strategy 6 • Controversial issues, dilemmas in lending/financing 3
• Customer Relationship Management 19 • Climate Strategy 21 • Corporate Citizenship and Philanthropy 5
• Diversification 3 • CO2 from Logistics 2 • Digital inclusion 12
• Ecosystem Services 1 • Electricity Generation 4 • Editorial policy 1
• Efficiency 1 • Electro Magnetic Fields 5 • Enabling local development 7
• Exploration & Production 4 • Emission Products 2 • Ethical Conduct 2
• Food safety 2 • Environmental Policy/Management System 31 • Financial Inclusion/Capacity Building 1
• Gas portfolio 5 • Environmental reporting 4 • Health Outcome Contribution 6
• Grid Parity 6 • Fleet Age 1 • Healthy living 1
• Health & Nutrition 7 • Fuel Efficiency 2 • Human Capital Development 3
• Innovation Management 12 • Fuels for Tobacco Curing 2 • Human Rights & Corruption 2
• IT Security 6 • Genetically Modified Organisms 5 • Impact of Telecommunication services 3
• Lobbying activities 1 • Hazardous substances 5 • Labor Practice Indicators 3
• Market Opportunities 5 • International Production Standards 1 • Local Impact of Business Operations 2
• Marketing Practices 6 • Landfilling and alternatives 3 • Mine Closure 4
• Materiality 2 • Local Air Quality 1 • Noise 1
• Non-financial Project Evaluation 2 • LowCarbStrategy 4 • Occupational Health and Safety 16
• Piracy 2 • Manufactured Gas Plants 2 • Partnerships Towards Sustainable Healthcare2
• Price Risk Management 5 • Mineral Waste Management 8 • Promoting Responsible Gaming 5
• Privacy Protection 7 • Packaging 3 • Protection of Children 1
• Product Quality and Recall Management 3 • Product Impact 1 • Responsibility for Alcoholic Products 4
• Reliability 1 • Product Stewardship 30 • Responsible Marketing Policies 4
• Research and Development 5 • Raw Material Sourcing 5 • Security Forces 1
• Risk & Crisis Management 18 • Recycling Strategy 2 • Service to Patients 2
• Scorecards/Measurement Systems 2 • Refining/Cleaner Fuels 2 • Social Impacts on Communities 9
• Service development 2 • Releases to the Environment 2 • Social Integration 2
• Software-as-a-Service 2 • Renewable Energy 2 • Social reporting 4
• Stakeholder Engagement 3 • Resource Conservation and Resource Efficiency 5 • Stakeholder Engagement 8
• Strategy for Emerging Markets 6 • Risk Detection 3 • Standards for Suppliers 11
• Supply Chain Management 5 • Route network 1 • Strategy to Improve Access to Drugs or Products 4
• Transparency 1 • Sustainable Fibre and Pulp Sourcing 5 • Talent Attraction & Retention 8
• Water Operations 7 • Sustainable Management of Forests 6
• Transmission & Distribution 3
• Transport and Logistics 4
• Volatile Organic Compounds (VOCs) and hazardous
substances in supply chain 1
20 • Water Related Risks 7

21. SAM CSA - Media & Stakeholder Analysis (MSA)
• MSA helps to verify a company’s involvement and management of critical economic, social
and environmental issues or crisis situations
• Cases identified in the MSA can lead to exclusion of the DJSI anytime during the year
• MSA can add up to 50% of the weighting in an individual criteria
• Impact analysis revealing potential risks of reputation, financial liabilities
• Assessment of materiality based on:
Media, direct contacts with company, NGOs, consumer organizations, websites of public
authorities, governments, international organizations
• Issues covered: Economic-crime illicit commercial practices Human rights issues
Workforce conflicts Large disasters or accidents
Management response
to the issue
Various data sources (e.g. transparency, Materiality: Integration in
Index-based search Potential measures taken) • Low corporate
• Medium
utility issue • High sustainability
Effectiveness of
Continuous monitoring • ..... performance
management
response
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22. SAM CSA – Output: Scorecard
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23. SAM CSA - Participation
Participation of Companies in DJSI has been Constantly Increasing Over the Years
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24. SAM CSA: Companies in the DJSI Indexes 2011 – Latin America
• Banco Bradesco S/A Pref
• Companhia Energetica de Minas Gerais – CEMIG
• Embraer S.A.
• Fibria Celulose S.A. Ord.
• Itau Unibanco Holding S.A. Pref.
• Itausa-Investimentos Itau S/A Pref.
• Petroleo Brasileiro S/A Pref
• Redecard S/A Ord
• Ecopetrol S.A.
• Grupo de Inversiones Suramericana S.A.
• Grupo Nutresa S.A.
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25. SAM CSA: Examples of companies recently added in the DJSI
Indexes – Latin America
• Ecopetrol (2011)
• Grupo de Inversiones Suramericana S.A. (2011)
• Grupo Nutresa S.A. (2011)
• Embraer – Empresa Brasileiras de Aeronautica (2010)
• Redecard S/A Ord (2009)
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26. Content
• SAM
• Sustainability Investing
• SAM Corporate Sustainability Assessment (CSA)
• Developments in Corporate Sustainability
26

27. Developments: Long-term trends impacting competitive advantage
Demographics, Resource Scarcity, Pollution, Climate Change
Regulation Innovation Scarcity Climate Change Population growth
natural resources
• Co-creation • Stressed Ecosystem • Scarcity skilled
• Governance • Resource efficiency
capabilities • Reconstruction workforce
• Anti-trust regulations • Innovative materials
• Innovation • Infrastructure • Health costs
• Consumer protection Management • Agribusiness
• Health • Nutrition
Impact on value chains within / across sectors
Competitive advantage of companies
Source: SAM Research
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28. Developments - Club of Rome 1972: Limits to Growth
Fate or Choice?
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29. Developments - Methods to Accelerate Aging
+ 10 Wrong Partner
+ 9 to 10 High Blood Pressure
+ 8 Depression
+ 6 Being Uneducated
+ 10 to 15 Smoking
+ 3 Being Male
+ 3 Inaccurate Medication
+ 2 High Vitamin Dosage
+ 2 Passive Smoking
+ 1 to 3 Wine > ½ liter per day
Years
Source: Max Planck Institute, 2008
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30. Developments - Predictions often underestimate…
“I think there is a world market for maybe five computers”
Thomas J. Watson, Chairman of IBM, 1943
"Where a calculator […] weighs 30 tons, computers in the future may have only 1,000
vacuum tubes and weigh only 1.5 tons"
Popular Mechanics, 1949
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31. Developments - “Wait and See” may not be good enough
Witnesses for the perished culture of the Easter Islands
31 Photo: www.losapos.com

32. Developments - Long-term trends impacting competitive advantage
Demographics, Resource Scarcity, Pollution, Climate Change
Regulation Innovation Scarcity Climate Change Population growth
natural resources
• Co-creation • Stressed Ecosystem • Scarcity skilled
• Governance • Resource efficiency
capabilities • Reconstruction workforce
• Anti-trust regulations • Innovative materials
• Innovation • Infrastructure • Health costs
• Consumer protection Management • Agribusiness
• Health • Nutrition
Impact on value chains within / across sectors
Competitive advantage of companies
Source: SAM Research
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33. Developments - HDI and Ecological Footprint
Innovation is required to enable
human development by using
less biocapacity
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34. Developments - Sustainability Drivers as Innovation Triggers
Stage 1 Stage 2 Stage 3 Stage 4 Stage 5
Viewing Compliance Making Value Chains Designing Sustainable Developing New Creating Next-
as Opportunity Sustainable Products and Services Business Models Practice Platforms
Efficient production, New methods for Meeting demands New knowhow
First mover
new sources of product develop- differently, i.e. new platforms
advantages for early
materials, ment or ecofriendly delivery techno- and technologies,
implementers
reuse and recycling packaging logies, services new applications
Source: R. Nidumolu, C.K. Prahalad and M.R. Rangaswami (2009), Why Sustainability Is Now the Key Driver of
34 Innovation, Harvard Business Review, September 2009, U.S. and Canada.

35. Developments - Innovation Management
DJSI 2011 Company Assessments - Innovation Managment
80
70
59
60 56
52
48 49
50 47
43
Score
40
30 28
20
10
0
Average 2010 Average 2011
North America Europe Asia / Pacific Rest of World
35

36. Developments – Innovation Management
The results of the SAM Corporate Sustainability Assessment show an increasing number of companies tracking
environmental innovation (product, processes and revenues), highlighting the importance of sustainability within
the innovation process.
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37. Developments - Long-term trends impacting competitive advantage
Demographics, Resource Scarcity, Pollution, Climate Change
Regulation Innovation Scarcity Climate Change Population growth
natural resources
• Co-creation • Stressed Ecosystem • Scarcity skilled
• Governance • Resource efficiency
capabilities • Reconstruction workforce
• Anti-trust regulations • Innovative materials
• Innovation • Infrastructure • Health costs
• Consumer protection Management • Agribusiness
• Health • Nutrition
Impact on value chains within / across sectors
Competitive advantage of companies
Source: SAM Research
37

38. SAM CSA - DJSI 2012 - Supply Chain Management: Why are investors
interested in how companies are managing their supply chain?
• Currently, companies are not only outsourcing
production, services and business processes
Working conditions
but also corporate responsibilities and Human Rights
reputational risks Toxic substances
• The dilemma of combining lower cost, faster Guidance for
subcontracting
deliveries with improved sustainability
performance and product quality Product quality
Recall risk
• SAM therefore wants:
• to identify companies that have a lower Costs
supply chain risk profile (due to e.g. supply
chain characteristics, appropriate
Transfer of mismanaged sustainability issues
management of these risks etc.) into actual costs
• to identify companies that are using
sustainable supply chain management as an
opportunity to improve their financial
38 performance in the long term

39. Developments – Supply Chain: link between the overall management of sustainability
issues and the management of supply chain risks
• Strong correlation between overall
corporate sustainability performance and
y = 0.9263x + 3.419
the supply chain performance (based on
Score Correlation 2
R = 0.7519
120
results of the SAM‘s Corporate
Sustainability Assessment 2011) 100
80
Standars for Suppliers
• Sample: 1269 companies (87.9 % of
60
total) were asked questions about
Standards for Suppliers as part of SAM‘s 40
Corporate Sustainability Assessment
2011 20
0
0 10 20 30 40 50 60 70 80 90 100
Total Score
• 72.4 % of the top 20 % scoring
companies overall are also amongst the
top 20 % scoring companies in the
Standards for Suppliers criteria
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40. SAM CSA – DJSI 2012 - Supply Chain Management: New Framework
Awareness of both risks & opportunities is the foundation for SAM’s new analytical
framework for sustainable supply chain management
Risk Management
Measures Measuring Performance
& Capacity Building
Exposure & awareness
Training and
Transparency
incentives for staff
Strategy
Supplier Selection Opportunities
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41. Where are we going?
Photo: http://metroroute66club.blogspot.com/
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42. Stock Exchanges demand ESG Disclosure
Stock exchanges are increasingly adopting listing requirement on ESG disclosure evidencing the
enormous shift towards the importance of ESG issues in the financial arena. They can play a
pivotal role in enhancing the ESG disclosure and transparency of listed companies.
Country Stock Exchange Listing Requirement on ESG Disclosure
Australia Australian Securities Exchange Disclosure on extent to which the companies have followed its Corporate
(ASX) Governance Principles and Recommendations which includes sustainability-
related issues
China Shanghai Stock Exchange Governance standards in Corporate Governance code and Environmental
(SSE) standards under “Green IPO” policy for initiating an IPO or obtaining
refinancing from banks for 14 most polluting industries
Norway Oslo Børs Companies applying for listing should define and disclose the guidelines for
corporate social responsibility
Malaysia Bursa Malaysia Mandatory disclosure on CSR information in the annual reports
South Johannesburg Stock Exchange Integrated sustainability reporting and third party assurance under King Code
Africa (JSE) on Corporate Governance III
Taiwan Taiwan Stock Exchange CSR reporting in the corporate governance statement with information on
(TWSE) company’s CSR system, measures adopted and performance
US NYSE Euronext Mandatory disclosure of governance practices including the availability of a
code of business conduct
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43. Methods to Decelerate Aging („Downaging“)
Years
- 0.9 1 Aspirine per day
- 1 Folic Acid (daily)
- 2 High HDL Level
- 2 Washing Hands (daily)
- 2 Good C Reactive Protein
- 3 Good Sleep
- 3 Wine < 1/3 liter per day
- 3.4 Sports (2500 kcal/week)
- 4 Periodical Sex
- 6 Good Social Contacts
- 7 OPTIMISM
Source: Max Planck Institute, 2008
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44. Sustainability Services - Contact
Edoardo Gai
Head Sustainability Services
In industry since 1999; with SAM since 2000
Jvan Gaffuri
Sr. Manager Sustainability Services
In industry since 1997; with SAM since 2006
Matthias Narr
Manager Sustainability Services
SAM Sustainability Services
In industry since 2005; with SAM since 2009 Josefstrasse 218
8005 Zurich
Switzerland
Cornelia Wicki Phone: +41 44 653 1240
Junior Manager Sustainability Services Fax: +41 44 653 1050
services@sam-group.com
In industry since 2010; with SAM since 2011
www.sam-group.com/services
www.sustainability-indexes.com
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45. Disclaimer
No warranty This publication is derived from sources believed to be accurate and reliable, but neither its accuracy nor completeness
is guaranteed. The material and information in this publication are provided "as is" and without warranties of any kind, either
expressed or implied. SAM Group Holding AG and its related, affiliated and subsidiary companies disclaim all warranties, expressed
or implied, including, but not limited to, implied warranties of merchantability and fitness for a particular purpose. Any opinions and
views in this publication reflect the current judgment of the authors and may change without notice. It is each reader's responsibility
to evaluate the accuracy, completeness and usefulness of any opinions, advice, services or other information provided in this
publication.
Limitation of liability All information contained in this publication is distributed with the understanding that the authors, publishers
and distributors are not rendering legal, accounting or other professional advice or opinions on specific facts or matters and
accordingly assume no liability whatsoever in connection with its use. In no event shall SAM Group Holding AG and its related,
affiliated and subsidiary companies be liable for any direct, indirect, special, incidental or consequential damages arising out of the
use of any opinion or information expressly or implicitly contained in this publication.
Copyright Unless otherwise noted, text, images and layout of this publication are the exclusive property of SAM Group Holding AG
and/or its related, affiliated and subsidiary companies and may not be copied or distributed, in whole or in part, without the express
written consent of SAM Group or its related, affiliated and subsidiary companies.
No Offer The information and opinions contained in this publication constitutes neither a solicitation, nor a recommendation, nor an
offer to buy or sell investment instruments or other services, or to engage in any other kind of transaction. The information described
in this publication is not directed to persons in any jurisdiction where the provision of such information would run counter to local laws
and regulation.
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