ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) SURVEY CFA Institute June 2015 . TABLE OF CONTENTS About The Survey 03 Survey Results 04 Respondent Profile 17 Appendix: Data Tables & Comments 20 2 . ABOUT THE SURVEY Background & Purpose The purpose of this survey is to better understand the perceptions of CFA Institute membership concerning ESG issues and ESG data, as well as how members use such information in their investing processes. Methodology On 26 May 2015, 44,131 CFA Institute members that are portfolio managers and research analysts were invited via email to participate in an online survey. The survey closed on 5 June 2015. 1,325 valid responses were received, for a response rate of 3% and a margin of error of ± 2.7%. 3 . SURVEY RESULTS 4 . 73% OF SURVEY RESPONDENTS TAKE ESG ISSUES INTO ACCOUNT IN THEIR INVESTMENT ANALYSIS AND DECISIONS, WITH GOVERNANCE BEING THE MOST COMMON. Which, if any, of the following ESG issues do you take into account in your investment analysis or decisions? TOTAL AMER APAC EMEA INSTITUTIONAL PRIVATE 78% 74% 68% 64% 63% 59% 59% 58% 56% 57% 56% 50% 55% 49% 45% 44% 46% 42% 33% 33% 27% 24% 18% 9% Governance N=1,322 Environmental Social I do not take ESG factors into consideration 5 . THE MAIN REASON SURVEY RESPONDENTS TAKE ESG ISSUES INTO CONSIDERATION IN THEIR INVESTMENT ANALYSIS/DECISIONS ARE TO HELP MANAGE INVESTMENT RISKS. Why do you take ESG issues into consideration in your investment analysis/decisions? 70% 60% 50% 40% 30% 20% 10% 0% To help manage investment risks TOTAL AMER APAC EMEA INSTITUTIONAL PRIVATE 63% 65% 57% 63% 66% 60% ESG To help performance Clients/invest identify It’s my is a proxy for ors demand it fiduciary duty investment management opportunities quality 44% 38% 37% 37% 43% 38% 37% 37% 34% 45% 37% 34% 50% 35% 38% 40% 47% 38% 41% 33% 44% 33% 34% 45% My firm derives reputational benefit Regulation requires it Other 30% 29% 31% 34% 36% 28% 7% 4% 13% 11% 7% 4% 5% 5% 3% 4% 5% 5% N=955 6 . 57% OF THOSE CONSIDERING ESG ISSUES INTEGRATE THEM INTO THE WHOLE INVESTMENT ANALYSIS AND DECISION MAKING PROCESS. How do you take ESG issues into consideration in your investment analysis/decisions? 70% 60% 50% 40% 30% 20% 10% 0% ESG integration into the whole investment analysis and decision making process TOTAL 57% AMER 55% APAC 60% EMEA 61% INSTITUTIONAL 63% PRIVATE 50% Best-in-class investing / positive alignment Exclusionary screening Active ownership Thematic investing Impact investing Other 38% 38% 25% 44% 37% 39% 36% 37% 28% 37% 34% 42% 26% 23% 24% 35% 29% 22% 23% 23% 17% 25% 19% 27% 21% 20% 22% 21% 20% 23% 4% 6% 1% 2% 3% 6% N=946 7 . THE MAIN WAYS SURVEY RESPONDENTS GET ESG INFORMATION IS THROUGH PUBLIC INFORMATION, FOLLOWED BY THIRD PARTY RESEARCH. How do you get ESG information/data? 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Public information TOTAL AMER APAC EMEA INSTITUTIONAL PRIVATE Third party research 75% 77% 81% 68% 74% 75% 66% 65% 62% 71% 68% 67% Reports and statements from the company 64% 65% 64% 62% 66% 61% Direct engagement with company Regulatory filings Other 50% 48% 51% 54% 58% 36% 46% 51% 43% 32% 48% 42% 4% 4% 3% 4% 4% 5% N=953 8 . SURVEY RESPONDENTS INDICATE THE MOST IMPORTANT ESG ISSUE IN THEIR INVESTMENT ANALYSIS/DECISIONS IS BOARD ACCOUNTABILITY, FOLLOWED BY HUMAN CAPITAL AND EXECUTIVE COMPENSATION. Please rate the following ESG issues in terms of importance to your investment analysis/decisions on a scale of 1 to 5, where 1 is not important at all and 5 is very important. Board Accountability 78% Human Capital 62% Executive Compensation 61% Environmental Degradation 54% Resource Scarcity 52% Demographic Trends 50% Supply Chain 47% Board Diversity 41% Climate Change 40% N=872-882 per item Chart showing the % selecting 4 or 5 (top 2 box importance) 9 . OF THOSE NOT TAKING ESG FACTORS INTO CONSIDERATION, 47% SAY IT IS BECAUSE THEIR CLIENTS/INVESTORS DO NOT DEMAND IT. Why do you not take any ESG issues into consideration in your investment analysis/decisions? Lack of demand from clients/investors What, if anything, would cause you to begin considering ESG issues in your investment analysis/decisions? 47% These issues are not material – no added value 35% Demand from clients/investors 57% Proven link between ESG and financial performance Lack of information/data 21% Regulatory / legal requirements to consider ESG issues Insufficient knowledge of how to consider these issues 21% 48% Better information on ESG risks/opportunities Inability to integrate ESG info in my quantitative models Not relevant to my job Market practices requires me to focus on short-term performance Other 15% 29% 25% Clarity that it doesn’t conflict with my fiduciary duty 22% Development of the internal capability on how to consider these issues 7% Nothing 5% 17% Other 20% 8% 5% N=357 10 . 28% OF SURVEY RESPONDENTS INDICATE EMPLOYEES AT THEIR FIRM RECEIVE TRAINING ON CONSIDERING ESG ISSUES. Do any employees at your firm receive training on how to consider ESG issues in investment analysis/decisions? TOTAL AMER APAC EMEA INSTITUTIONAL PRIVATE 66% 56% 53% 53% 44% 46% 40% 34% 28% 26% 23% 23% 21% 21% 18% 18% 16% 14% N=1,244 Yes No Not sure 11 . OF THOSE RECEIVING TRAINING, THE MOST COMMON WAYS ARE THROUGH MISCELLANEOUS SOURCES AND LEARNING BY DOING. How do employees at your firm receive training on how to consider ESG issues in investment analysis/decisions? TOTAL AMER APAC EMEA 77% 72% 67% 58% 58% 61% 61% 53% 46% 31% 26% 24% 21% 13% 12% 13% 12% 7% 8% 3% N=349 Miscellaneous sources Learning by doing, it’s an art Live, in-person structured (research papers, books, training course conferences) Online structured training Other 12 . OF THOSE WHO INDICATE EMPLOYEES AT THEIR FIRM DO NOT RECEIVE TRAINING, 77% WOULD LIKE THEM TO – WITH MISCELLANEOUS SOURCES BEING THE MOST PREFERRED MODE, FOLLOWED BY ONLINE STRUCTURE TRAINING. If you would like employees at your firm to receive training in considering ESG issues, what would be your preferred mode? TOTAL AMER APAC EMEA 37% 32% 30% 30% 27% 26% 25% 23% 22% 20% 19% 16% 16% 13% 12% 14% 12% 10% 9% 2% 3% Miscellaneous sources (research papers, books, conferences) N=656 Online structured training Learning by doing, it’s an art Live, in-person structured training course 1% 1% Other 0% None of these, I do not think training in considering ESG issues necessary 13 . 61% AGREE THAT PUBLIC COMPANIES SHOULD BE REQUIRED TO REPORT AT LEAST ANNUALLY ON A COHESIVE SET OF SUSTAINABILITY INDICATORS IN ACCORDANCE WITH THE MOST UP-TO-DATE REPORTING FRAMEWORK. Do you agree or disagree that public companies should be required to report at least annually on a cohesive set of sustainability indicators in accordance with the most up-to-date reporting framework? TOTAL 84% AMER APAC EMEA INSTITUTIONAL PRIVATE 82% 65% 61% 53% 51% 30% 30% 23% 20% 16% 6% N=1,246 Agree 8% Disagree 19% 15% 10% 17% 9% No opinion 14 . 69% THINK IT IS IMPORTANT THAT ESG DISCLOSURES BE SUBJECT TO INDEPENDENT VERIFICATION. Do you think it is important that ESG disclosures be subject to some level of independent verification? TOTAL AMER APAC Who do you think is best positioned to provide independent verification of ESG disclosures? EMEA Other 2% 83%82% No preference 14% 69% 63% 18% 16% 15% 6% Yes N=1,247 No 9% Independent Professional Services Firm (e.g. public accounting firm) 31% 19% Professional Services Firm skilled in ESG matters 53% 10% 9% No opinion N=856 15 . SURVEY RESPONDENTS ARE SPLIT ON WHAT LEVEL OF INDEPENDENT VERIFICATION IS NECESSARY. What level of independent verification do you believe is necessary? Which best represents your view on how much should be spent to obtain independent verification? 26% Other 2% 21% Not sure 8% 18% 16% Limited verification, lower level of assurance 46% 10% 6% Similar to an audit, high level of assurance 44% N=856 3% As much as the cost of the audit of the financial statements Less than Less than a half as much quarter of the as the cost of cost of the the audit of audit of the the financial financial statements statements Less than Less than 5% 10% of the of the cost of cost of the the audit of audit of the the financial financial statements statements Other Don’t know 16 . RESPONDENT PROFILE 17 . GEOGRAPHIC DISTRIBUTION OF RESPONDENTS Region (N=1,325) AMER APAC EMEA 21% 11% 68% TOP RESPONDING MARKETS N % USA CANADA 723 140 55% 11% UNITED KINGDOM GERMANY SWITZERLAND AUSTRALIA SOUTH AFRICA INDIA BRAZIL CHINA HONG KONG JAPAN FRANCE NETHERLANDS SINGAPORE VIET NAM IRELAND MALAYSIA 63 34 32 31 24 21 19 19 16 16 15 12 10 8 7 7 5% 3% 2% 2% 2% 2% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 18 . PRIMARY ASSET BASE AND YEARS WITH THE CHARTER Primary Asset Base (N=1,325) Institutional Private Both Years with the CFA Charter (N=1,325) Not applicable 25% 12% 16% 18% 41% 15% 14% 10% 11% 7% 31% < 2 years 2 to 5 years 6 to 10 years 11 to 15 years 16 to 20 20+ years No CFA years charter 19 .