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Copyright© JSE Limited 2008 www.jse.co.za Corli le Roux Head of SRI Index 2009 Review Socially Responsible Investment Index Company briefing.

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Presentation on theme: "Copyright© JSE Limited 2008 www.jse.co.za Corli le Roux Head of SRI Index 2009 Review Socially Responsible Investment Index Company briefing."— Presentation transcript:

1 Copyright© JSE Limited Corli le Roux Head of SRI Index 2009 Review Socially Responsible Investment Index Company briefing

2 Highlights of Index evolution Established May 2004 Crystallise debate Enable SRI Identify companies with good sustainability practices Aspirational benchmark Broad sustainability assessment Triple bottom line Corporate governance 2007 introduction of automatic assessment and international data provider Automatic universe expanded in 2008

3 Value proposition Highlight imperatives of sustainability Globally aligned Locally relevant – close the loop for companies around local concerns Framework for – internal risk management comprehensive reporting Enhanced reputation Framework/reference for awards, investment, ratings tools

4 Eligibility Base Universe: FTSE/JSE All Share Index For 2009 review: All Share as at March 2009 Automatic assessment 2008 SRI Index constituents Top 40 Mid Cap Voluntary assessment Small Cap If excluded from All Share at any time during process or after review, not eligible for SRI Index

5 Eligibility (cont.) Companies with structural complexities Holding companies Holding company policies and influence over holdings as guiding principle Full consideration of holdings above revenue threshold (to be determined) Board practice and other governance issues at holding company level Property investment funds and companies without staff Appropriate approach still being investigated For the time being, assessed with basic approach or similar to holding companies

6 Criteria overview: General Full sustainability approach structured along ESG lines Criteria as for 2008 Core and desirable indicators Core indicators reflect what should be regarded as minimum by companies (even though index does not at present require meeting all core indicators) Desirable indicators reflect aspirations – as Index becomes more demanding, desirables will gradually become core

7 Criteria overview: General (cont.) Policy, Management and Reporting Policy statements and documents, strategies and undertakings – ideally publicly available Management and performance cover implementation of systems, programmes, targets, objectives, includes monitoring and measuring of performance Reporting – content areas specified by indicators, should ideally be publicly available, Index does at present still accept internal reporting – aim to move towards public only in 2010

8 Criteria overview: Environment Aligned with FTSE4Good Impact classification High, medium, low - activity-based, assessed by EIRIS in relation to five key issues: climate change, air pollution, water pollution, waste, water consumption Overall classification based on highest impact High impact in one key issue or medium in more than four = high Medium impact in at least two issues = medium Rest = low Thresholds based on impact and coverage of environmental policies, systems and reporting

9 Criteria overview: Social Thematic approach BEE and HIV/Aids Applies only to companies with South African operations Threshold at two / three levels, all of which must be met Majority of all indicators (core and desirable) – half plus one AND One third of indicators met must be core AND SA companies only third level requirement: at least one core in each of BEE and HIV/Aids

10 Criteria overview: Governance and related sustainability concerns Thematic approach Covers basic corporate governance and listings requirements Covers economic issues and indirect impacts Threshold at two levels, both of which must be met Majority of all indicators (core and desirable) – half plus one AND One third of indicators met must be core

11 Criteria overview: Additional issues - roadmap Climate change Intention to include specific criteria in 2010 Climate change questionnaire included to help gather data for benchmarking Engagement will take place during the year to set level for SRI Index criteria Reporting Move towards core indicators met by public data only To be implemented 2010 – bear in mind for upcoming reporting

12 Process: Timelines Review comprises second half of the year Phase 1: EIRIS review of public information – commences in July Profile mailings to companies in three tranches: Tranche 1 – end July Tranche 2 – mid-August Tranche 3 – end August Phase 2: All companies have three weeks from receipt of preliminary profile to respond (extensions considered on merit by EIRIS) EIRIS submits results to JSE mid-October for JSE QA and borderline engagements Advisory Committee meeting mid-November Results announced end November

13 Process: Phase 1 EIRIS review of public information Most recently available public information Web sites, most recent annual report, brochures, etc. Preliminary profile of company compiled Contains general overview of business, environmental impact classification and assessment of public data against criteria Profiles mailed to companies in three tranches: No longer by year-end date, but intending to allow longer time for assessment of new or extensive data Tranche 1 – mostly companies failing in 2008 Tranche 2 – best performers, unsuccessful companies with more progress Tranche 3 – established constituents and companies not publishing large amounts of data

14 Process: Phase 2 Company response to profile assessment Respond directly on profile AND/OR Complete survey questionnaire in full or in part Directly on profile Typically where reporting is more advanced and most indicators met Mark up changes particularly to provide evidence for areas that still have to be met, to improve on met areas or update with new information Refer to surveys for guidance on type of information requested

15 Process: Phase 2 (cont.) Survey questionnaires Complete to the extent necessary in relation to areas that still have to be met, or to improve on met areas Useful where reporting is limited, to provide detail Attach additional information that is relevant Return to original researcher EIRIS incorporates new information in analysis and updates profiles Final profiles only sent to companies after results announced

16 What information?* For policies – Send the document If no text, proof of commitment/undertaking (e.g. Board resolution/minutes) For management systems – Adequate supporting evidence and information indicating that all relevant aspects of system exist E.g. training, managerial responsibility, identified targets/goals, monitoring against performance indicators, regular review, extent of coverage, feedback/correction mechanisms Reporting – Public document with evidence of publication Evidence of consideration by relevant internal reporting mechanism Confidentiality? Any document can be provided for consideration by EIRIS If confidential, mark clearly as such Only analysis included in profile, not raw data * Source: EIRIS FAQs

17 Borderline companies (BLs) Companies that meet most areas but fail marginally on one area Process: EIRIS submits final analysis to JSE JSE engages on that specific area with BL companies Deadline of a few days provided JSE decides whether to include or not Repeat borderline issues: Ground Rules (to be approved by Advisory Committee) will limit number of times company can be considered for BL inclusion Must show commitment to improve after second BL status If no actual improvement, excluded from Index

18 Best performers (BPs) Companies that meet Relevant environmental threshold All core indicators in social All core indicators in governance and related concerns Disclosed by environmental impact

19 Controversial issues / major news stories EIRIS conducts news search flagging specific issues Environmental violations, health & safety issues, major competition incidents, human rights violations First comprehensive search completed by end July, subsequent spot search end September JSE considers which issues warrant further engagement Severity of issue, local impact Engagement with company regarding handling of issue Will take place during course of review JSE may exclude company if deemed sufficient impact on broader sustainability Ground Rules (to be approved by Advisory Committee) will deal with process for re-entry by excluded company E.g. must show improvement or commitment to avoid Ground Rules already provide for exclusion in between reviews

20 Results correspondence Cover letter Indicates individual company result and salient matters, e.g. relevant controversial stories that were considered Summary sheet Indicates overall performance in relation to each pillar Environment overall met/not met Social and governance indicates number of indicators met relative to possible number Final profile

21 Salient issues Publication of results Press release Names of successful constituents and best performers Quotes by constituent companies No naming and shaming Value of research data Profile – guidance for companies on areas of improvement 2008 saw milestone collaboration with GEPF for data based on JSE criteria Further opportunities for research distribution – under discussion with EIRIS Creation of further products currently under development

22 Contact information JSE Corli le Roux Makhiba Mollo EIRIS Shelley McCluskey – Project Leader

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