Lets Make an Impact Investing Deal Monday, October 16, 2017 - - PowerPoint PPT Presentation

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Let’s Make an Impact Investing Deal

Monday, October 16, 2017 Monday, October 16, 2017 9:30 a.m. 9:30 a.m. – 11:45 a.m. 11:45 a.m.

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Overview

3 | Responsible Investment at AB

Impacting the Headlines

“Why Measuring Social Impact Matters to Investors” —Josh Cohen, Entrepreneur.com “Philanthropy’s New Tools for Innovation and Impact” —Susan Desmond-Hellmann, Stanford SOCIAL INNOVATION Review “5 Ways to Boost Impact Investing in Family Offices” —Bernice Napach, ThinkAdvisor.com “Making a case for impact investing” —James Lumberg, InvestmentNews “Impact Investing: What Will It Take to Get to Scale?” —Fran Seegull, Conscious Company “Impact Investors Plan to Deploy $17.7 bil. in 2016” —Chris Cumming, The Wall Street Journal

4 | Responsible Investment at AB

Impact Assets Continue to Grow

Global ESG AUM $22,890 bil. Growth of Strategies 2014–2016

Canada $1,086 bil. Aus/NZ $516 bil. Japan $474 bil. Asia $52 bil Europe $12,040 bil. Africa* US $8.723 bil.

 101% increase in AUM globally, from 2012–2016  91% of the market AUM is in Europe and the US  Japan and Australia/New Zealand had largest regional growth  Exclusions and integration dominate

Source: Global Sustainable Investment Review 2014 *New data not available for 2014, and excluded from report

5 | Responsible Investment at AB Source: Impact Engine, The Forum for Sustainable and Responsible Investment (USSIF)

Investors Have a Range of Options

Philanthropy Social and/or environmental needs

• utweigh any

consideration for financial return Screening ESG Integration Sustainability Impact Emphasis on social or environmental needs, often results in financial tradeoffs Investment in companies linked to long term sustainable themes Explicit inclusion of ESG risks and

• pportunities

into traditional financial analysis and investment decisions Some consideration

• f ESG risk

and/or personal values to screen out investments. Traditional Investing Emphasis on profit Generally, ESG factors are not considered Absence of ESG ESG Risk Management ESG Opportunities Maximum-Impact Strategies

Responsible Investing Spectrum

6 | Responsible Investment at AB

Making an Impact While Driving Your Mission

Source: AB; and Essentials of Impact Investing, Produced by Arabella Advisors, Exponent Philanthropy, Mission Investors Exchange.

Setting Goals  DEFINE

 What kind of impact do you want to make?  What specific issues align with your organization’s mission?

 ASSESS

 Risk/Return assessment and trade-offs  Direct / Indirect

 IMPLEMENT

 Identify investment opportunities  Ongoing reporting and measurement

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Direct Investing

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Impact Investing Happens Here

Early-Stage Impact Investments

• Saving lives through

cardiovascular disease and diabetes prevention

• Empowerment of

women entrepreneurs

• Quality job creation

Boston Heart Diagnostics

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Impact Investing Happens Here

Early-Stage Impact Investments

• Carbon emissions

reduction

• Meaningful

employment and upward mobility for the formerly incarcerated and other vulnerable populations

Wash Cycle Laundry

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Traditional Venture Investment Portfolio Theory

Alternative assets should make up to 10% of assets

The Rule of 10’s

Diversify in 10+ investments Aim for 10x return

• n each deal, expect

1‐2 homeruns in 5‐7 years

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Impact Investing Happens Here

Early-Stage Impact Investments

• Traditional equity

angel investment

• Grew quickly and

raised additional rounds led by Bain Capital

• Grew from $120K to

$97MM in revenue

• Acquired by Eurofins

for up to $200MM

Boston Heart Diagnostics

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Traditional Venture Investment Portfolio Theory

The business has to look like it can end up here

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Average Portfolio Return = 2.3x

Home Run ‐10x (1 per 10 investments) Doubles/Triples 5x (2 per 10 investments) Singles 1x (3 per 10 investments) Strike out ‐ 0x (4 per 10 investments)

Traditional Venture Investment Portfolio Theory

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Alternative Portfolio Strategies

• Must we expect the “traditional” exit?
• Can we achieve reasonable returns with less risk and/or

more liquidity?

• Can we better align with entrepreneurs to achieve our

impact objectives?

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Impact Investing Happens Here

Early-Stage Impact Investment

• Foundation member

made seed-stage grant

• Angel investors made

equity investments to grow into second market

• Foundation member

made impact-driven debt investment

• On track to expand to

Boston

Wash Cycle Laundry

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What is impact to you?

• Inherent or intentional?
• “Baked in” or “icing on the cake?”
• Product/service and/or workforce/supply chain?
• Innovation or accessibility?

What do you care about?

• Specific industry (example: education)
• Specific outcome (example: more low income students

enrolling in college)

Getting Started: Impact

Impact Investing Happens Here

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How will you build your portfolio?

• Resources to invest
• Active investing (and return) timeline
• Time and interest in engaging with companies

What are your investment objectives?

• What is your return expectation?
• What type of risk are you willing to take?
• What are your liquidity needs?
• How do your impact goals influence your risk, return, and

time to liquidity expectations?

Getting Started: Investments

Impact Investing Happens Here

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• Find incubators and accelerators that focus on the

industries, geographies, and impact areas you care about

• Attend pitch events and conferences that highlight

early-stage investment opportunities

• Join groups with like-minded capital providers who

share investments opportunities and work together on due diligence, investment, and portfolio management

Getting Started: Finding Deals

Impact Investing Happens Here

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Impact Investing Happens Here

• Boston Heart Diagnostics
• Number of patients served
• Number of diagnoses made
• Wash Cycle Laundry
• Amount of laundry processed
• Number of jobs created and promotions given

Getting Started: Measuring Impact

Work with entrepreneurs to track key metrics:

Tons ‐ CO2 Reduced

26,000 1.5M

ENVIRONMENT

Lives Saved

HEALTH

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Equity & Fixed Income

Sustainable Global Thematic | 21 Source: United Nations Conference on Trade and Development – World Investment Report 2014

U.N. Sustainable Development Goals

A Powerful Framework for Sustainable Theme Selection

 The UN Sustainable Development Goals (UNSDG’s) represent an aspirational view of what the world could look like by 2030  The 17 UNSDG’s address:

 Economic prosperity  Environmental sustainability  Social inclusion

 193 nations collectively created and committed to achieving the goals, signaling broad political consensus  The estimated costs to achieve the UNSDG’s are massive, at roughly $6 trillion annually  Business alignment with the SDG’s can enhance long-term growth potential and reduce risk  We invest exclusively in themes derived from the UNSDG’s

22 | Responsible Investment at AB *Our portfolio holdings must fit within themes that are directly aligned with one or more UNSDG's. We believe that such alignment implicitly excludes several product categories from ownership consideration including those listed here. We also monitor companies for conduct-based violations, as generally defined by the UN Global Compact.

Sustainable Investment Themes

 Weapons  Coal, Nuclear Power  Alcohol, Tobacco  Pornography  Gambling  GMO’s  Conduct-Based Violations  Financial Inclusion  Gender Equality  Economic Infrastructure  Enabling Technologies  Medical Innovation  Access to Affordable Care  Healthy Lifestyles  Food Security  Physical Safety  Low Carbon Generation  Energy Efficiency  Clean Transportation  Water  Sanitation & Recycling  Sustainable Production

Climate Health Exclusions* Empowerment Themes Are Derived from the UN Sustainable Development Goals

23 | Responsible Investment at AB

Yuli is a 26-year-

• ld single

shopkeeper in Surabaya

Research Example: Indonesia

24 | Responsible Investment at AB

Low Carbon Footprint and High Sustainable Revenue Exposure

Sustainable Investing: Measuring Impact

As of March 31, 2017 *Portfolio-level carbon emissions are not applicable to fixed income and multi-asset class portfolios. These metrics utilize an ownership methodology not relevant to bond holders. †An index or portfolio’s revenue exposure to sustainable themes is the weighted average of each company’s percent of revenue generated by themes. Sustainable Global Thematic revenue exposure represents AB’s proprietary estimates of portfolio holding’s revenue exposure to AB’s sustainable themes of climate, health and empowerment. MSCI uses their own definition of Sustainable themes, which includes climate change, resource scarcity, basic needs and empowerment. Note that these definitions are similar, but are not the same. MSCI only calculates revenue estimates for less half of Sustainable Global Thematic holdings. Therefore a direct comparison between our portfolio and the benchmark using the same theme definitions is not possible. Source: MSCI and AB

Carbon Footprint of The Portfolio Measured as Tons CO2e/USD Millions Invested*

Sustainable Global Thematic MSCI ACWI

Revenue Exposure to Sustainable Themes† Percent Revenue Exposure to Sustainable Themes

86 6 15 Sustainable Global Thematic MSCI ACWI 200 160 120 180 140 100 80 60 40 20 160

25 | Responsible Investment at AB There can be no assurance than any investment objectives will be met. See a Word About Risk and Important Information and Disclosures at the end of the presentation. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed

• r used as a basis for other indices or any securities or financial products. This document is not approved, reviewed or produced by MSCI.

As of December 31, 2016 Source: AB and MSCI

Third-Party Research is Growing Rapidly

Provider Asset Class/ Product Service Description MSCI Fixed Income GMI ESG rating and research data MSCI Equity and Fixed Income MSCI ESG Manager rating and research data Negative screening to implement client restrictions Sustainalytics Equity Frontier market focused services ISS-Ethix Luxemburg Fund Platform Controversial weapon screening Bloomberg Fixed Income Built proprietary Sovereign issuer screening FTSE Equity FTSE4Good Ethical Target Date Funds equity exposures ISS Equity Proxy Research Morningstar Equity Mutual Funds Scoring

26 | Responsible Investment at AB

Green Bond Annual Issuance

0.8 0.4 0.9 3.9 1.2 3.1 11.0 36.6 42.2 81.0 150.0 20 40 60 80 100 120 140 2007 2009 2011 2013 2015 E2017

As of July 31, 2017 Source: Climate Bonds Initiative and AB

USD Billions

Green Bonds—Issuance Has Taken Off in the Past Several Years

27 | Responsible Investment at AB Source: The Future of Green Bonds: Standards and Incentives, Climate Bond Initiative and Bloomberg and E3G, October 2016. Source: AB

Issuance is Dominated by Development Banks, the US, Europe and Rapid Growth in China

28 | Responsible Investment at AB

Municipal Credit Risk Compares Favorably to Other Sectors

Muni Defaults Have Been Rare

Historical analysis does not guarantee future results. As of December 31, 2015 Payment defaults only Source: Distressed Debt Newsletter, J.P. Morgan, Moody’s, Nelson A. Rockefeller Institute and AB

0.0 0.0 0.2 1.0 1.7 5.3 18.9 US Tsy IG Muni BBB Muni IG Corp BBB Corp HY Muni HY Corp

Five Year Cumulative Average Default Rates

1970–2015 (Percent)

29 | Responsible Investment at AB

Environmental and Social Considerations Vary by Sector

As of March 31, 2017 Source: AB

Environmental Social

Mass Transit

 Carbon emission reduction  Access to low-income

populations

Governance

• Stewardship of Capital
• Transparency

Energy

 Transition to renewables  Access/outreach for low-

income populations

Economic/Community Development

 “Green” use of proceeds  Underserved communities

Water/Sewer

 Conservation, water quality  Access/outreach for low-

income populations

Healthcare

 Charity care  Quality/safety of care

Education

 Graduation rates,

attendance, outreach

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Bancroft Neurohealth (NJ)

32 | Responsible Investment at AB

For investment professional use only. Not for inspection by, distribution to, the general public As of August 31, 2016 *Includes hydroelectric. **As of September 2015 Opinions and estimates expressed are our present opinions only, reflecting prevailing market conditions. Such opinions involve a number of assumptions which may not prove valid, and are subject to change without notice. Not all investments in the securities identified should be assumed to be profitable and future recommendations may not be profitable. Source: Fitch, Moody’s, S&P and AB

Chicago Water (IL)  Nearly 50% of accounts unmetered—impedes tracking of non-revenue water and consumption  Very limited efforts at conservation

Not All Municipal Issuers Deliver Positive Impact

American Muni Power (OH)  Wholesale power supplier with large coal exposure  Purchase of an existing hydroelectric dam on the Ohio River does not alter the stock and flow of greenhouse gas emissions

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Impact Implementation & Measurement

THIS PRESENTATION CONTAINS GENERAL INFORMATION RELATING TO THE INVESTMENT ADVISORY AND MANAGEMENT SERVICES OF SONEN CAPITAL LLC (“SONEN”), AN INVESTMENT ADVISER REGISTERED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”) HAVING ITS PRINCIPAL PLACE OF BUSINESS IN THE STATE OF CALIFORNIA. THE SERVICES AND STRATEGIES DESCRIBED IN THIS PRESENTATION MAY NOT BE SUITABLE FOR ALL INVESTORS. THIS PRESENTATION IS INTENDED ONLY FOR THE ELIGIBLE INVESTORS TO WHOM IT IS DIRECTLY DISSEMINATED. THE INFORMATION PRESENTED HEREIN IS SUBJECT TO CHANGE WITHOUT NOTICE, AND SHOULD NOT BE RELIED UPON OR CONSIDERED AS A SOLICITATION TO BUY OR SELL ANY SECURITY. SONEN AND ITS REPRESENTATIVES ARE IN COMPLIANCE WITH CURRENT REGISTRATION REQUIREMENTS INCUMBENT UPON REGISTERED INVESTMENT ADVISERS IN STATES WHERE SONEN MAINTAINS EMPLOYEES AND CLIENTS. ANY DIRECT COMMUNICATION SUBSEQUENT TO THE DISSEMINATION OF THIS PRESENTATION WITH A PROSPECTIVE CLIENT SHALL BE CONDUCTED BY AN AUTHORIZED SONEN REPRESENTATIVE WHO IS EITHER REGISTERED OR WHO QUALIFIES FOR AN EXEMPTION OR EXCLUSION FROM REGISTRATION IN THE STATE IN WHICH THE PROSPECTIVE CLIENT RESIDES. FOR INFORMATION RELATING TO THE REGISTRATION STATUS OF SONEN, PLEASE CONTACT US AT SERVICE@SONENCAPITAL.COM OR REFER TO THE INVESTMENT ADVISER PUBLIC DISCLOSURE WEBSITE AT WWW.ADVISERINFO.SEC.GOV. NEITHER THE SEC NOR ANY OTHER STATE SECURITIES AGENCY OR OTHER REGULATORY BODY HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PRESENTATION OR ANY OTHER INFORMATION THAT MAY BE FURNISHED TO A PROSPECTIVE INVESTOR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS OVERVIEW DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY, EQUITY, DEBT, OR OTHER INVESTMENT. THE INFORMATION SET FORTH HEREIN DOES NOT PURPORT TO BE COMPLETE OR UP TO DATE. ALL INFORMATION INCLUDED HEREIN IS PRELIMINARY AND SUBJECT TO CHANGE, WITHOUT PRIOR NOTICE. SONEN HAS ASSUMED NO DUTY TO THE RECIPIENT HEREOF, INCLUDING NO DUTY TO UPDATE THE INFORMATION. INFORMATION PRESENTED IS CONFIDENTIAL AND FOR DISCUSSION PURPOSES ONLY AND IS MADE AVAILABLE SUBJECT TO RECIPIENT’S AGREEMENT TO MAINTAIN THE SAME ON A CONFIDENTIAL BASIS. CERTAIN INFORMATION CONTAINED HEREIN IS PROJECTED AND BASED ON ASSUMPTIONS AND ESTIMATES AS TO FUTURE EVENTS THAT MAY OR MAY NOT OCCUR. ALL INVESTMENTS CARRY A RISK OF LOSS, INCLUDING LOSS OF PRINCIPAL. THE CONTENTS OF THIS PRESENTATION ARE NOT INTENDED TO SERVE AS LEGAL, TAX, OR INVESTMENT ADVICE. RECIPIENTS OF THIS PRESENTATION SHOULD CONSULT THEIR OWN COUNSEL, ACCOUNTANT OR FINANCIAL ADVISER AS TO LEGAL, TAX, AND RELATED MATTERS CONCERNING ANY INVESTMENT. CERTAIN INFORMATION CONTAINED IN THIS OVERVIEW (INCLUDING CERTAIN FORWARD-LOOKING STATEMENTS AND PROJECTIONS) HAS BEEN OBTAINED FROM PUBLISHED SOURCES AND/OR PREPARED BY PARTIES NOT AFFILIATED WITH SONEN. IN CERTAIN CASES, THIS INFORMATION HAS NOT BEEN UPDATED THROUGH THE DATE HEREOF. WHILE SUCH SOURCES ARE BELIEVED TO BE RELIABLE, SONEN DOES NOT ASSUME ANY RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION.

Legal Disclosure

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A Portfolio Approach

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Challenges and Opportunities

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• 1. UN Water Facts and Trends. World Business Council for Sustainable Development

Impact Thesis: Population growth, climate change, industrial pollution, and

• verconsumption have led to rapid deterioration

in our natural water and land resources. With the human population expected to continue to expand, and with the industrialization of large emerging economies, significant measures need to be taken in order to restore and preserve limited resources. » The success of the world’s economy depends on the sustainable management of water resources, adequate water supply and sanitation services globally (UN) » Irrigation accounts for 90% of water consumption and frequently drives water stress.1 » Promote technologies that increase water productivity and water savings, and avoid practices which further stress water resources.

Step 1: Understanding Key Drivers

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» Inefficiency among utilities: water losses >40%. 1

» 60% loss in agriculture from waste and inefficiency2 » $90T future infrastructure spend globally3

Large Scale Drivers

» Urban population to grow by 3 billion by 2050, 90% in Asia and Africa4 » Up to $34 economic return generated for every $1 spent on water and sanitation5

Social Impact Drivers

» 50% of inland freshwater ecosystems lost during 1900s.6 » Financial and ecological benefits of green infrastructure

Environmental Impact Drivers

Sources: 1) Sensus Water 2020; 2012; page 1 2) FAO.org: http://www.fao.org/docrep/003/t0800e/t0800e0a.htm#TopOfPage 3) The Sustainable Infrastructure Report. The New Climate Economy, (2016) 8. 4) World Urbanization Prospects; United Nations; 2014; page 1 5) United Nations: http://www.un.org/waterforlifedecade/financing.shtml 6) Millenium Ecosystem Assessment; page 6 http://www.millenniumassessment.org/documents/document. 358.aspx.pdf

Step 2: Develop Outcomes

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Outcome One Outcome Two Outcome Three

» Increased water efficiency and re-use occurring at scale » Reduce water poverty » Greater water availability through natural ecological function

Step 3: Identify Investment Strategies

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Outcome One: Increased water efficiency and re-use occurring at scale

Investment Strategies

» Modernize and rehabilitate urban infrastructure to reduce inefficiency » Invest in companies that are reducing water use and increasing water efficiency in operations » Invest in technologies that increase water efficiency and water re-use

Step 4: Identify Investment Options

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The investment types above are presented for informational purposes only. This presentation is not to be construed as a recommendation to buy or sell a specific security or type of security within a specific asset class.

Step 5: Test Efficacy Through Impact Reporting

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CHART SOURCE DATA: MSCI ESG RESEARCH AUGUST 2016. MEASURING AND COMPARING INTENSITY (UNIT/$MM REVENUES) ALLOWS FOR A COMPARIS BETWEEN SECURITIES WITH SIGNIFICANTLY DIFFERENT SCALES OF OPERATIONS OR MARKET CAPITALIZATIONS. AT THE TIME OF THIS PUBLISHING, 2014 THE LATEST AVAILABLE YEAR OF DATA FROM MSCI ESG RESEARCH. NOTE: NOT EVERY COMPANY INCLUDED IN THESE INDICES REPORT ON WATER USE. EACH OF THESE CHARTS REFLECTS AVAILABLE DATA FOR THE STRATEGY AND ITS BENCHMARKS.

Illustrative Landscape of Impact Themes

Sonen Capital :: 2017 CONNECT Conference 42 This information is provided for illustrative purposes only, and shall not be construed as a recommendation to buy or sell any particular security.

Impact Investing in Water

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The investment types above are presented for informational purposes only. This presentation is not to be construed as a recommendation to buy or sell a specific security or type of security within a specific asset class.

Public Equity Municipal Bond Private Equity PRI

Rehabilitate and strengthen the life of existing infrastructure » 3,300 municipal clients in North America.

Source: Aegion

$231 Million for waste water and drinking water infrastructure projects » Rehabilitation of 75 year old water system

Source: Manager (Cedar Ridge)

Water treatment and purification technology » Reduces industrial water use by 50%

Source: WM

Rural distribution of potable water and modular purification stations » Reduces incidence of water-related disease

Source: Healthpoint

Types of Impact Creation - Defined

Sonen Capital :: 2017 CONNECT Conference

Systemic Change Incremental Change

Policies or activities implemented at scale and that influence long-term

• utcomes

Unit or step-wise activities (e.g. ESG practices, technologies, services) with measurable changes or impacts; Near-term and at smaller relative scale

Systems Incremental

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Types of Impact Creation - Defined

Sonen Capital :: 2017 CONNECT Conference

Direct Impact Indirect Impact

› Specific underlying activities or impact

• bjectives

› Investors help cause impact EX: Private Equity, Thematic Municipal Bonds › Large pools of investor resources › Unspecified projects or activities › Investors participate in impact creation EX: Public Equity, General Issue Corporate Bonds Indirect Direct

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Indirect Direct Systemic Impact Incremental Impact

Thematic Public Equity (Water) Thematic Public Equity (Water)

Bubble size denotes Real or Potential Scale

• f Impact

Privat e Equity Privat e Equity

Thematic Municipal Bonds Thematic Municipal Bonds

Program Related Investment Program Related Investment

Types of Impact Creation by Asset Classes

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AIMS Across Asset Classes - Water

Public Equity Municipal Bond Private Equity

• Prog. Related Inv.

Infrastructure Rehabilitation Water and sewerage infrastructure Water treatment technology Rural distribution of potable water Additionality

Low Medium High High

Intentionality

Low High High High

Measurability

Low Low/Medium Medium High

Scale

High High Low Low

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Due Diligence

Investment Approach

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Top-Down Bottom-Up

» Investment strategy and process » Team sector and strategy expertise » Alignment of interests » Track record and current portfolio analysis » Governance and operational resources

IMPACT INTEGRATION

» Fundamental research on macroeconomic trends » Sector and value chain analysis » Country and regional analysis » Competitive landscape and peer fund analysis » Regulatory and policy drivers » Currency, tax, capital repatriation, political risk assessment Fundamental macro research on impact issues Examine impact thesis and strategy Analyze capability for meaningful environmental and social impacts Evaluate impact reporting and measurement skills Develop data aggregation and impact reporting methodology

Generating Deal Flow – The Hard Part

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PROFESSIONAL NETWORKS Individual networks of industry and personal relationships PROFESSIONAL NETWORKS Individual networks of industry and personal relationships

AFFILIATIONS & SUSTAINABLE INVESTMENT NETWORKS US SIF, UN PRI, GIIN, B LAB, CDP, CERES INCR, PDC, TONIIC, Thirty Percent Coalition, Confluence Philanthropy AFFILIATIONS & SUSTAINABLE INVESTMENT NETWORKS US SIF, UN PRI, GIIN, B LAB, CDP, CERES INCR, PDC, TONIIC, Thirty Percent Coalition, Confluence Philanthropy DATABASES eVestment, Morningstar, Bloomberg, Preqin, ImpactBase DATABASES eVestment, Morningstar, Bloomberg, Preqin, ImpactBase SUSTAINABILITY DATA PROVIDERS MSCI, Bloomberg, Trucost, Sustainalytics, ECPI, IRIS, GIIRS SUSTAINABILITY DATA PROVIDERS MSCI, Bloomberg, Trucost, Sustainalytics, ECPI, IRIS, GIIRS CONFERENCES AND INDUSTRY EVENTS Sustainable Responsible Impact Investing (SRI), SOCAP, CFA, CAIA CONFERENCES AND INDUSTRY EVENTS Sustainable Responsible Impact Investing (SRI), SOCAP, CFA, CAIA

Due Diligence Process: Deal and Impact

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» Past track record, current performance versus plan & future expectations » How do they think and learn » Understanding unit economics and true drivers of long term growth / return » Strategy review, evolution, consistency and articulation » Quality and repeatability » Diversification policy, risk » Organizational Viability & Background » Team Dynamics & Alignment » Legal, Governance, and Operational » Site visits and professional reference checks » Assess impact fit with strategy » Evaluate extent internal impact evaluation and reporting » Identify other impact-related activities » Evaluate use and sources of relevant impact data » Identify ESG or Thematic Key Performance Indicators used » Assess how impact data are integrated into the process » Identify social or environmental impact objectives » Evaluate approach to ESG risk and opportunities

Impact DD Financial DD

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Investment Process for Analyzing Deals

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Measuring the Results Case Study: Real Assets

Outcomes-Based Impact Reporting

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Impact Outcome Definition Sustainability

» Environmental infrastructure and natural assets that promote resource optimization and the conservation of limited natural resources » Satisfying essential human and ecological needs amidst growing demand for natural resources, food, energy and growing urbanization alongside an ever-increasing global population

Efficiency

» Infrastructure, technologies and services that optimize the use of limited natural resources » Meeting the growing demand for energy and natural resources while continually decreasing the impact and footprint of the use of these resources

Renewability

» Expanded availability of renewable energy sources as part of the growing global demand for electricity and related infrastructure, particularly in emerging market economies, where demand will be greatest. » Increased use of recycled and repurposed materials and resources to reduce waste and require fewer raw materials for production

Restoration

» Protected land and water resources from the pressures of population growth and urbanization » Increased global stock of natural ecosystems providing vital ecosystem services for the climate and for current and future generations

Impact Framework and Measurement

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Sector Core Impact Indicators Supplemental Impact Indicators International Standards Possible Certification Clean Power

› MWh generated through renewable sources › GHGs offset through renewable production (tons) › Geographic location and type of renewable energy source › Number of people with new access to clean power › Clean power beneficiaries, by income strata or geographic region › Gold Standard for carbon mitigation projects › Project Protocol accounting standard › Geography-specific renewable energy portfolio standards

Sustainable Timberland

› Total land area under sustainable management › Trees planted (native species) › Units/Volume of sustainable timber sold › Ecological Restoration Management Area (Ha) including streams › Ecosystem services › Jobs maintained at supported enterprises › FSC Certification › Programme for Endorsement

• f Forest Certification

(PEFC)

Green Real Estate

› Energy saved/conserved (KWh) via property improvements › Total area with energy efficiency improvements (ft2) › % of property with sustainable certifications › Percent of properties located in low-income geographies/census tracts,

• r providing services to

disadvantaged populations (e.g. elderly, low-income) › LEED Certification › Energy Star Certification › National Green Building Standard (US)

Real Assets: Clean Power

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Data reflects investments made through 2016 for Sonen’s Global Sustainable Real Assets strategy

Real Assets: Sustainable Timber

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Data reflects investments made through 2016 for Sonen’s Global Sustainable Real Assets strategy

Real Assets: Green Real Estate

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Data reflects investments made through 2016 for Sonen’s Global Sustainable Real Assets strategy

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Contact Info

Travis Allen Senior Portfolio Manager Bernstein Private Wealth Management Washington, DC travis.allen@bernstein.com 202-261-6777 Alexandra LaForge Interim executive director Investors’ Circle Durham, NC alaforge@investorscircle.net 919-296-1166 x107 Raúl Pomares Founder & Managing Director Sonen Capital San Francisco, CA rpomares@sonencapital.com 415-534-4444