AIG Global Investment Group  Sustainable Investment Initiative TBLI Triple Bottom Line Bangkok  May 24-25, 2007 By MARLYS ...
Lessons > AIGGIG Integrating Principles of Sustainable Investment   <ul><li>Why is sustainability valuable for an asset ma...
AIGGIG >  Our Asset Management Businesses are Truly Global Atlanta Birmingham Dallas Hartford Houston Los Angeles Mexico C...
AIG > Understanding AIGGIG Lines of Business Asset Management General Insurance Life Insurance & Retirement Services Finan...
AIGGIG >  Insurance Portfolio and Asset Management American International Group, Inc. Domestic Life Insurance Business Uni...
AIGGIG > Milestones in AIGGIG Sustainable Investment Fall 2006 Innovative  Sustainable Future PE fund created AIGGIG becom...
Project AIGGIG on Sustainability > A Call To Action at AIGGIG Project AIGGIG [2005]:  It’s time to speak of the elephant i...
Sustainability as an AIGGIG Value <ul><li>“ Sustainability … the notion that environmental stewardship, social responsibil...
Sustainability in AIGGIG > What It Is and Is Not <ul><li>IT IS ABOUT </li></ul><ul><li>New business reality for all firms....
Investment Architecture > Critical Design Elements <ul><li>Clear and compelling  value proposition  to adjust current phil...
Project Management > Corporate and Reporting Structure ESG   Architect and Advisor Marlys Appleton VP Sustainability Initi...
Integration - What process and approach leads to  success <ul><li>Powerful  leadership  by CEO of investment unit and lead...
Integration: The 6P Model Understand and interpret ESG influences across investment management ©2007 Sinclair & Company Si...
Simplified Asset Management Architecture Asset  Class Manufacturing Legal/Regulatory Oversight = Compliance Enterprise Ris...
Internal Best Practices Model 1.  AIGGIG Leadership Integrated Strategy Approach Demonstrate Commitment & Focus Incorporat...
Takeaways > AIGGIG Integrating Principles of Sustainable Investment   <ul><li>Why is sustainability valuable for an asset ...
AIGGIG SI > Managing a Global Project Team Fortnightly executive sessions at AIGGIG global headquarters, 70 Pine St. Just ...
Thank You
Bio <ul><li>MARLYS APPLETON </li></ul><ul><li>[email_address] </li></ul><ul><li>Vice President: Sustainability Initiatives...
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Integrating Principles of Sustainable Investment

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Marlys Appleton, Head of Sustainability Initiatives - AIG Global Investment Group - USA.

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  • Welcome – Background and History I am here to represent the Global Investment Group, the investment arm of AIG We refer to ourselves as AIGGIG I am a member of the Global Performance Measurement Group where I oversee performance and benchmarking for ALT and DER and the production of all of risk statistics for our global fixed income portfolios. This includes all the effective duration numbers that flow through to AIG ASSET_LIABILITY MODELS and the scenario analysis or stress testing data required for AIG’s AM Best regulatory requirements. I began working on sustainability in June 2005 as part of a Task Force, PROJECT AIGGIG, Six people from around the globe were ask about policy surrounding GHG, Climate and SRI. We recommended that AIGGIG adopt a policy of sustainability across our investments and operations. CEO Win Neuger went before AIG CSR Committee Jan 2006 presenting the recommendation of sustainability. Throughout 2006 we crafted the high level policy, negotiated acceptance and buy in from the Business Units, and we have a workplan for implementation over a 12-18 month time horizon.
  • Integrating Principles of Sustainable Investment

    1. 1. AIG Global Investment Group Sustainable Investment Initiative TBLI Triple Bottom Line Bangkok May 24-25, 2007 By MARLYS APPLETON Vice President Chair, Sustainability Steering Committee [email_address]
    2. 2. Lessons > AIGGIG Integrating Principles of Sustainable Investment <ul><li>Why is sustainability valuable for an asset manager ? </li></ul><ul><li>Engaging talented investment professionals </li></ul><ul><li>Improving process of identifying risks and opportunities. All risks may not be rewarded. </li></ul><ul><li>Current best practice varies across asset classes. Dark spaces in private equity. </li></ul><ul><li>Seeking new avenues to capture risks and exploit opportunities. Mapping to time horizons and velocity of investing approach. </li></ul><ul><li>Independent informed opinion of underlying valuation is critical. Develop better breakpoints. </li></ul><ul><li>What process and approach will contribute to successful integration? </li></ul><ul><li>Powerful leadership by CEO of investment unit and leaders in each asset class/business unit </li></ul><ul><li>Clarify internal investment decision process from market-facing distribution, approaches to ESG differ. </li></ul><ul><li>Anticipate a range of personal opinions by educated, influential and ego-driven investment professionals. </li></ul><ul><li>Anticipate challenges of understanding the investment decision-making process. AIGGIG adopted Six P model from ESG Architect. </li></ul><ul><li>Develop staged project, move quickly to establish early wins and build momentum. </li></ul>Leadership required. Articulate and market value to investment professionals. Staged integration. Endurance trumps enthusiasm.
    3. 3. AIGGIG > Our Asset Management Businesses are Truly Global Atlanta Birmingham Dallas Hartford Houston Los Angeles Mexico City New York San Francisco San Juan Toronto NORTH AMERICA Buenos Aires Santiago São Paulo SOUTH AMERICA Johannesburg Nairobi AFRICA Melbourne AUSTRALIA EUROPE Bangkok Hong Kong Jakarta Jerusalem Kuala Lumpur Manila Mumbai Seoul Shanghai Singapore Taipei Tokyo ASIA Data as of 30 September 2006. Barcelona Berlin Bucharest Budapest Dublin Istanbul London Madrid Milan Moscow Prague Rome Vienna Warsaw Zurich For our clients, we invest from 44 asset management offices located worldwide, complemented by the extensive network and resources of AIG, which operates in 130 countries and jurisdictions with nearly 200 analysts worldwide
    4. 4. AIG > Understanding AIGGIG Lines of Business Asset Management General Insurance Life Insurance & Retirement Services Financial Services AIG Global Investment Group (AIGGIG ) AIGGIG Global Wealth Management AIG SunAmerica Asset Mgmt Corp. AIG Advisor Group, Inc . Real Estate Fixed Income Equity Alternatives
    5. 5. AIGGIG > Insurance Portfolio and Asset Management American International Group, Inc. Domestic Life Insurance Business Unit Insurance Companies Foreign Life Insurance Business Unit Insurance Companies Domestic General Insurance Business Unit Insurance Companies Foreign General Insurance Business Unit Insurance Companies Insurance Portfolio Management Investment Grade Corporates MBS/CMBS/ABS Municipal Bonds Derivatives Private Placements CDO/CDS Multi-Currency Global Equities High Yield Corporates Sovereign Debt Money Markets Alternative Investments Asset Management Matched Investment Program Bank Loans Emerging Market Debt Mortgage Loans Real Estate
    6. 6. AIGGIG > Milestones in AIGGIG Sustainable Investment Fall 2006 Innovative Sustainable Future PE fund created AIGGIG becomes first investment arm of an insurer to join Investor Network on Climate Risk (INCR) Project AIGGIG asked to consider policy options Aug 2006 Agreement obtained for Policy from CSR Committee Spring 2005 Question re emissions, climate, SRI Initial ESG vendor assessment Planning and funding proceed for implementation Autumn 2004 Oct 2005 Shareholder requests to AIG seeking disclosure on climate change is directed to AIG AIGGIG policy of sustainable investment written Sustainable Investment Steering Committee [SC] established Nov 2006 Policy of Sustainability recommended to AIGGIG Executive Mgmt Jan 2006 Policy to AIG CSR Board Jan 2007 Feb 2007 Mar 2007 SC develops protocols and formalizes its governance structure Asset Class review, Presentation to Dubai Conference
    7. 7. Project AIGGIG on Sustainability > A Call To Action at AIGGIG Project AIGGIG [2005]: It’s time to speak of the elephant in the room……. Sustainability and its implications for investing evident as recurring theme.
    8. 8. Sustainability as an AIGGIG Value <ul><li>“ Sustainability … the notion that environmental stewardship, social responsibility, ethical behavior and economic viability are all important to the pursuit and attainment of long term growth and value creation.” [Internal Project AIGGIG Task Force Document, October 2005] </li></ul><ul><li>Alignment of stakeholder [shareholders, clients, AIG affiliates, employees] interest must take into account and address both short/long term economic costs and benefits relating to activities of a business </li></ul><ul><ul><li>Critical elements in creating long term shareholder value, driving value-added products and promoting the best interest of all of AIGGIG’s stakeholders and the viability of our franchises </li></ul></ul><ul><ul><li>ESG-informed behavior will create and safeguard value for all stakeholders, current and future. </li></ul></ul><ul><ul><li>Offers a clear path forward for business in face of regulatory, market and societal forces building for corporate responsibility </li></ul></ul>
    9. 9. Sustainability in AIGGIG > What It Is and Is Not <ul><li>IT IS ABOUT </li></ul><ul><li>New business reality for all firms. </li></ul><ul><ul><li>Firms striving to become more competitive, more innovative, more environmentally responsible </li></ul></ul><ul><li>Risk management </li></ul><ul><ul><li>Complying with emerging values of global market place </li></ul></ul><ul><li>Understanding potential liabilities </li></ul><ul><ul><li>Scrutiny by analysts, underwriters and shareholders </li></ul></ul><ul><li>New business opportunities </li></ul><ul><ul><li>Being innovative and seeking returns in renewable energy, “clean tech”, carbon projects and developing new SRI-related products </li></ul></ul><ul><li>Matching moves of peers </li></ul><ul><ul><li>“ Goldman Sachs, Citibank, JPMorganChase, ABN Amro are embedding social, and environmental criteria in their risk-assessment procedures.” [Bloomberg, WBCSD Summer 2005] </li></ul></ul><ul><li>Broader ethical underpinnings </li></ul><ul><ul><li>New definitions of doing business and responsible corporate behavior to counter reputation risk </li></ul></ul><ul><li>IT IS NOT ABOUT </li></ul><ul><li>Arbitrary Limits </li></ul><ul><ul><li>Constraining business activity, divesting or identifying “bad” sectors/industries </li></ul></ul><ul><li>Riding a trend </li></ul><ul><ul><li>Being “green”, negative screening, bad industries, getting religion or tree hugging! </li></ul></ul>“ Sustainability as an Engine of Innovation”
    10. 10. Investment Architecture > Critical Design Elements <ul><li>Clear and compelling value proposition to adjust current philosophy and processes to new dynamics of the business of money management. </li></ul><ul><li>Underlying risk management ethos leads to demand for scalable solution that is auditable across organization. </li></ul><ul><li>Robust solutions dependent less on “bleeding-edge” approaches and more on tested and reliable components that can deliver against heavy inflows. </li></ul><ul><li>Modular to incorporate updating with minimum legacy issues. Ability to operate asset classes independently and inter-dependently. </li></ul><ul><li>Develop dashboard to deliver project performance metrics and develop quantitative behavior in an inherently qualitative field. </li></ul>
    11. 11. Project Management > Corporate and Reporting Structure ESG Architect and Advisor Marlys Appleton VP Sustainability Initiatives Chair, AIGGIG SI Steering Committee [15] AIG BOARD CSR AIG Office of Environment and Climate Martin Sullivan AIG PRES & CEO Win Neuger AIG CIO AIGGIG CEO Investment [AIGGIG] Corporate [AIG] Sustainability Initiative
    12. 12. Integration - What process and approach leads to success <ul><li>Powerful leadership by CEO of investment unit and leaders in each asset class/business unit </li></ul><ul><li>Clarify internal investment manufacturing or decision-making process from the market-facing BD or distribution. Approaches to ESG differ. </li></ul><ul><li>Anticipate a range of personal opinions by educated, influential and ego-driven investment professionals. </li></ul><ul><li>Anticipate challenges of understanding the investment decision-making process. AIGGIG adopted Six P model from ESG Architect. </li></ul><ul><li>Develop staged project, moving quickly to show early wins. Build network of internal advocates and informal network to reflect impact. </li></ul>
    13. 13. Integration: The 6P Model Understand and interpret ESG influences across investment management ©2007 Sinclair & Company Sinclair & Company Performance Prestige Pitch Process Philosophy People Internal proprietary approach Delivered to market
    14. 14. Simplified Asset Management Architecture Asset Class Manufacturing Legal/Regulatory Oversight = Compliance Enterprise Risk Management Universe/ Disciplines Investment Ideas Valuation Models Portfolio Construction Buy/Hold/Sell Decision Execution Performance Evaluation Review & Development Where does the philosophy, process and people integral to AIGGIG’s approach to investing create opportunities to assess, value and integrate sustainability factors/ESG inputs? Environment Corporate Governance Social Each asset class must map and determine how and where ESG factors may influence the investment management approach, and the steps to make that change happen. Sinclair & Company
    15. 15. Internal Best Practices Model 1. AIGGIG Leadership Integrated Strategy Approach Demonstrate Commitment & Focus Incorporate Sustainability Principles <ul><li>2. Planning </li></ul><ul><li>Legal Basis </li></ul><ul><li>Institutional Basis </li></ul><ul><li>Policy Assessment </li></ul><ul><li>4. Monitor/Communicate </li></ul><ul><li>Track Progress Toward Strategies </li></ul><ul><li>Understand Sustainability Trends </li></ul><ul><li>Learn and Adapt </li></ul><ul><li>Feed into AIG Policy </li></ul>Coordinate with: Budget, Other Strategies, All Levels of Governance <ul><li>3. Implementation </li></ul><ul><li>Accountability </li></ul><ul><li>Financing </li></ul><ul><li>Mix of Policy/Procedure Initiatives </li></ul><ul><li>Process Definition and IT Support </li></ul><ul><li>Training/Education </li></ul>
    16. 16. Takeaways > AIGGIG Integrating Principles of Sustainable Investment <ul><li>Why is sustainability valuable for an asset manager? </li></ul><ul><li>Engaging talent </li></ul><ul><li>Risks and opportunities. </li></ul><ul><li>Best practice varies across asset classes, regions. </li></ul><ul><li>Seeking new avenues to capture and exploit opportunities. </li></ul><ul><li>Develop better inflection points. </li></ul><ul><li>What process and approach will contribute to successful integration? </li></ul><ul><li>Powerful leadership </li></ul><ul><li>Clarify manufacturing from distribution </li></ul><ul><li>Anticipate personal opinions and ambitions </li></ul><ul><li>Model architecture for ESG </li></ul><ul><li>Staging project, momentum. </li></ul>Leadership required. Articulate and market value to investment professionals. Staged integration. Endurance trumps enthusiasm.
    17. 17. AIGGIG SI > Managing a Global Project Team Fortnightly executive sessions at AIGGIG global headquarters, 70 Pine St. Just off Wall St …
    18. 18. Thank You
    19. 19. Bio <ul><li>MARLYS APPLETON </li></ul><ul><li>[email_address] </li></ul><ul><li>Vice President: Sustainability Initiatives </li></ul><ul><li>AIG Global Investment Group (AIGGIG) </li></ul><ul><li>Ms Marlys Appleton is a Vice President with AIG’s Global Investment Group where she oversees the performance measurement function for Alternatives and Derivatives, and the calculation of option-adjusted risk measures for global fixed income holdings. </li></ul><ul><li>In August of 2006, Ms Appleton was appointed to lead the effort to embed principles of sustainable finance, in the form of ESG principles, across the major asset classes of AIGGIG. In 2005, Ms Appleton served as a member of a global task force (Project AIGGIG) charged with looking at business policy issues related to climate change and sustainability . She currently Chairs the Sustainable Investment Steering Committee and Task Force and is executing a work plan agreed upon by senior executive management and developed over a period of some 16 months. </li></ul><ul><li>Prior to joining AIGGIG 2001, Ms. Appleton was a Vice President in the Portfolio Analytics Group of BlackRock Asset Management. Before BlackRock, she was a senior fixed income advisor at a privately held interest rate consulting firm started by Professor Thomas S. Y. Ho (author of the pioneering Ho-Lee Model of Arbitrage Free Interest Rates and key rate durations), a firm which was acquired by Barra. At Barra, she continued her work with major insurance companies, asset managers, and broker dealers on implementation, analysis, communication and retention issues for Barra’s risk management applications.  Ms. Appleton has worked in institutional fixed income throughout her career, having held positions at Morgan Stanley and Swiss Bank Corporation (now UBS). Ms. Appleton has a BA Economics from the University of Washington in Seattle and received her MS in Management from the Sloan School at MIT in Cambridge </li></ul>

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