ESG FTSE PUBLICATIONS

1 ftse ESG RatingsIntegrating ESG into investments and stewardshipESG ftse PUBLICATIONSA dding value to your investmentThis document:(i) Summarises the ftse ESG Ratings methodology, which is used to compile the ESG Ratings and as the engine driving the selection of constituents for the FTSE4 Good Index Series.(ii) Provides an overview of the range of ways that investors can and are using this data to inform investment decision making and ftse ESG Ratings comprise of an overall ESG Rating that breaks down into underlying Pillar and Thematic Scores that themselves are built on more detailed indicator assessments which allow investors to understand a company s ESG practices in multiple dimensions. The model consists of three pillars; Environment, Social and Governance. These Pillars are divided into fourteen Themes which are applied to a large global universe of stocks applying the methodology set out here to produce ESG Scores and Ratings.

2 There is a growing demand for Environmental, Social and Governance (ESG) factors to be incorporated into investment decision making and stewardship. The ftse ESG Ratings provide objective ESG exposure and performance data that is based on clear and easy to apply Assessments: measuring relevance and materialityScore Assessments: measuring practice and performanceThe Exposure is measured primarily through (a) the ICB Subsectors where a company is active and (b) its presence in specific countries. The specific Subsectors and countries which are applicable varies by Theme. All the Theme Exposures are determined using a rules based methodology that is derived from publically available information and data sources. For Exposure each company is categorised as High, Medium, Low or Not Applicable for each of the 14 diverse range of indicators are employed to tailor for all areas of a given Theme. These cover (i) qualitative indicators assessing quality of management and approach, (ii) quantitative indicators measuring corporate data disclosure, (iii) sector specific indicators tailored for different industrial sectors and (iv) performance indicators that use the quantitative data to make performance judgements.

3 The ftse ESG Model is under constant review and will be updated on an annual value to your investmentFTSE ESG Ratings: Data Structure OverviewData is compiled at four hierarchical levels, for each stock this allows for;Data hierarchyScore assessmentExposure assessmentData rangeTop Level1 ESG RatingAbsolute ESG Rating: 0-5 to 1 decimal pointESG Supersector relative ESG Rating: 1-100 percentileSecond Level3 Pillar ScoresEnvironmental, Social, Governance3 Pillar ExposuresMeasures the relevance of each of the 3 Pillars to each companyAbsolute ESG Pillar Score: 0-5 to 1 decimal pointAbsolute ESG Pillar Exposure: 0-5 to 1 decimal pointESG Supersector relative ESG Pillar Score: 1-10 decile Third Level14 Theme Anti-Corruption, Climate Change, Health & Safety14 Theme ExposuresMeasures the relevance of each of the 14 Themes to each companyAbsolute ESG Theme Score: 0-5 to 1 decimal pointAbsolute ESG Theme Exposure.

4 0-5 to 1 decimal pointFourth Level350 IndicatorsTypically 10-35 per ThemeAn average of ~ 125 indicators apply per companyIndicator applicability is relative to Theme ExposurePoints assigned per indicator metStrategy and PracticeQuantitive, Sector Specific and Performance Climate ChangeGHG* emissions and energy reductionCollaborative initiativesBoard oversightShort-term quantitative targetsLong-term quantitative targetsAdaptation to physical impactsQuantified progress against targetsFinancial quantification of costs and R&DIndependent verification of GHG or energyIntensity of GHG emissions reportedTargets to reduce fleet GHG emissionsProgress against targets on product GHGGHG emissions per unit of revenue GHG emissions per MWh produced Coal reserves per unit revenue Total energy consumption Disclosure of oil and gas reserves Fleet fuel efficiency by country/regionWater Use Policy commitment to address water use Risk assessment in water stressed regionsActions taken to reduce water useQuantified progress against targetsIndependent verification Collaboration with others on efficient water usageTotal water usagePercentage of water

5 RecycledQuantified water usage targets BiodiversityPolicy commitment on biodiversityCommitment to net positive biodiversity impactBiodiversity targets Assessment of biodiversity risksBiodiverse habitats near operations, or restoredBiodiversity Action Plans (BAPs) and auditsParticipation in biodiversity certification schemesCommitment to rehabilitation of mining sitesRound Table for Sustainable Palm Oil (RSPO)Percentage certifications for palm oil Percentage certifications for forest products Percentage certifications for responsible/sustainable seafoodPollution & ResourcesPolicy to reduce pollution, waste, resources Targets to reduce pollution, waste, resources Progress on targets for pollution, waste and resourcesQuantified water discharge and resource use Independent verification Financial quantification of costs and R&D Life cycle assessments and industrial ecologyNOx and SOx emissions Volatile Organic Compounds Recycled and non-recycled waste Cost of environmental fines and penalties Percentage of sites covered by ISO14001 or EMAS*Environmental Supply Chain Policy addresses energy use and GHG emissions Policy addresses water use and biodiversity Policy addresses environmental issues and pollution Policy addresses waste and resources Risk assessment and due diligenceMonitoring including audits and resultsCommunication and training of suppliersEncourage suppliers to reduce and reportProperty portfolio policy on environmental issuesProperty portfolio targets on GHG, energy .

6 Water useCertification to a building management standard Green leases for tenants of property portfolioBuilding management systems, smart meters, biodiversityAggregate GHG emissions on properties Aggregate energy data on properties Aggregate water usage data on properties Health & SafetyPolicy addresses health & safety and contractorsCommitment to continuous improvementTargets to reduce incidentsBoard oversight and presence of H&S CommitteeAddress global health (HIV/AIDS, malaria, TB)Performance and progress against targetsRisk assessment and due diligenceEmployee involvement in improvementsPerformance monitoring and management Incidents investigated, reported and action takenIndependent verification Programme for a global health issuePolicy and procedures for unplanned plant shut-downsPolicy and procedures for radiation incidents and eventsPolicy and procedures for radiation hazard assessmentPolicy and procedures for radiation to employees and communityPolicy and procedures radioactive wasteWork-related fatalities over 3 years per 1000 employees Percentage of sites with OSHAS* 18001 certificationNumber of staff trained on health and safety standardsLost time incident rate over last 3 yearsNumber of unplanned plant shut downs over 3 years Number of incidents on IAEA INES* event scale Total weight/volume of radioactive waste over 3 years Radiation exposure for community and employees over 3 yearsLabour StandardsPolicy addresses core ILO* conventionsPolicy addresses non-discriminiation Policy addresses working hours and living wageCommitment to

7 Frameworks on labour standardsPolicy on under-privileged and youth unemploymentPolicy translated and communicatedRisk assessment and due diligenceActions to address labour issues and improve diversityIncidents of non-compliance and action takenBlack Economic EmpowermentFull time staff voluntary turnover rates Percentage of employees that are contractors or temporary Amount of time spent on employee development trainingFTSE ESG Indicator Table High Level Summary *GHG Greenhouse Gasses; EMAS Eco-Management and Audit Scheme; OSHAS Occupational Health and Safety Advisory Services; IAEA International Atomic energy Agency; INES International Nuclear and Radiological Event Scale; ILO International Labour Organisation*WHO World Health Organisation; BMS Breast Milk Substitutes; UN PRI United Nations Principles for Responsible Investment; BIS Bank for International SettlementsStrategy and PracticeQuantitive, Sector Specific and Performance Human Rights & Community IndicatorsSupport for international standardsUN Guiding Principles on Business and Human RightsChildren s Rights and the Business PrinciplesCommitment to local employment Impact assessment on new and existing operationsStakeholder engagement consultations and reportsGrievance mechanisms in placeDisclosure of human rights incidents and actions Participation in external schemesOutput of community investments quantifiedPolicy addresses freedom of expressionPolicy addresses data privacyPolicy/Principle/Code on indigenous rights Policy addresses security guard issuesDonations/community investments made to not-for-profit organisationsCustomer ResponsibilityResponsible advertising and marketing Policy on negative impact on customers Membership of industry initiatives or use of CodesGuidelines and training Vulnerable groups or their issues

8 RecognisedInitiatives to protect vulnerable groupsResearch and developmentResponsible selling for client-facing sales staffAccess to medicine strategy and programmesAccess to nutrition strategy and programmesAdoption and adherence to WHO* Code on Infant FormulaNon-compliance and corrective action on BMS* marketing Verification and reporting on marketing of BMSS ocial Supply Chain Policy addresses the core ILO ConventionsPolicy addresses working hours and living wagePolicy addresses health and safetyPolicy translated and communicated Risk assessment on new and existing suppliers Results of supplier monitoring/auditingPolicy integrated into buyer training and purchasingCapacity building in suppliersMember of recognised supply chain initiativeProperty policy on social issues and community engagementProperty accessibility: disabled persons, also public transportSignatory and reporting to UN PRI* ESG integration into investment, and long term investmentEngagement with companies in portfolio on ESG issuesSignatory and reporting to Principles for Responsible InsuranceESG integration into insurance processSignatory to UN SSEI (Sustainable Stock Exchange Initiative)

9 Support ESG products, and guidance for issuers on ESG disclosureMember of and reporting to the Equator PrinciplesESG integrated into lending policies and strategiesResults of supplier monitoring/auditing and actions on non-complianceAnti-CorruptionPolicy addressing countering briberyPolicy addressing anti-corruptionBoard oversight of anti-corruption policyRisk assessment of operations and intermediariesDue diligence of new business partnersWhistle-blowing mechanism in placeCommunication and training Procedures for high risk operationsPolitical contributions made Number of staff dismissals due to non-compliance with anti-corruption policyCost of fines, penalties, settlements in relation to corruptionTax TransparencyPolicy commitment to tax transparencyAlign tax payments with revenue generating activityTax policy oversight by Board Public statements on tax transparency by CEO/CFOV erification of tax dataDisclosure of corporation tax paid globallyRisk ManagementCode of Conduct Risk management frameworkReference to external standards Board oversight over Code and risk managementWhistle-blowing mechanism in placeNon-compliance procedures and reportingReviews of Code compliance against Code of Conduct Committee or senior executive responsible for risk Scenario planning and stress testingResponse plans and emergency proceduresLegal and compliance leads have Board accessBoard oversees risk managementNon executive board risk management expertiseRepeated fines/settlements >$100m BIS* Tier 1 Capital Ratio BIS Core Tier 1 Capital Ratio Leverage Ratio (Tier 1 Capital to Total)

10 Exposures) Liquidity coverage Ratio (LCR) Provisions for fines and settlements in audited accountsCorporate GovernanceSeparate chairman and CEOD etails of Directors expertise and experienceCommitment to diversity on the BoardBoard meeting frequency and attendance rateCommittee and Charter for remunerationRemuneration has long-term mechanisms and ESGD isclosure fixed and variable remunerationDisclosure of fees paid to auditorsShareholder voting rights Provisions to protect minority shareholdersDisclosure of voting resultsPart of variable remuneration deferred for 3 years or moreClaw-back or malus exists for remunerationBonuses are capped at a particular % of salaryVariable compensation considers performance relative to riskPercentage of Independent Directors on the board Percentage of women on the Board Number of days before AGM agenda published Maximum number of years for which executive remuneration is deferred Percentage executive remuneration