Sustainability Guide 2013 Company and Sector Analysis of the STOXX® Europe 50 Index Featuring the new Inrate Sustainability Assessment Impact is at the heart of the Inrate Sustainability Analysis Foreword The publication of the 2013 Inrate Sustainability Guide of companies and sectors in the STOXX® EUROPE 50 index is an important step in the validation of our work. It is the outcome of a three year Research and Development project which has brought to fruition developments in our methodology we have long believed in. Sustainability analysis is often criticized, for focusing too much on the facade erected by companies rather than on the Philippe Spicher, true impact of the building which lies behind it. This approach CEO Inrate was perhaps justified in the beginning, when sustainability initiatives reflected a genuine awareness and commitment on the part of companies. But as soon as environmental and so- first analyze and understand a company’s business activi- cial communication became fashionable it was often the case ties as well as the environmental and social issues at stake. the more the building was cracked, the more the facade was For example, child labor is a fundamental issue for clothing decorated. brands and chocolate manufacturers but it is marginal for many other companies. Global warming affects the entire The phenomenon of green washing is one reason why highly economy but not always to the same extent. To complicate controversial companies are sometimes found at the top of matters further, few companies are confined to a single busi- current sustainability rankings. Another reason is the im- ness activity and many companies have diversified their busi- proper application of best-in-class methodology which sim- ness over several industries. ply establishes industry rankings (and not true sustainability). A portfolio may include an oil company with a slightly higher The developments in our methodology, which form the back- ranking than its peers but exclude a software company with a bone to the 2013 Sustainability Guide, were not undertaken lower peer group ranking for purely sector allocation reasons. lightly and we are particularly proud of what we have achieved. But the software company is inherently more sustainable But our efforts will not stop here: we are committed to further than the oil company and any sustainability analysis needs to innovation and development so we can address the needs of reflect that fact. the broader investment industry by focusing on the issues of materiality and the financial risks related to sustainability. We That is why Inrate places the environmental and social impact look forward to sharing these developments with you in due at the heart of its sustainability analysis. It means we must course. Inrate Sustainability Assessment 1 Table of contents Interview with Tobias Jung: “Inrate identifies • Daimler ............................................................................ 39 market players which are on a sustainable path” .... 4 • Deutsche Bank .............................................................. 40 • Deutsche Telekom ......................................................... 41 Overview of the STOXX® Europe 50 sectors ............... 7 • Diageo .............................................................................. 42 • E.ON ................................................................................. 43 • Chemical sector ............................................................ 8 • ENI .................................................................................... 44 • Clothing sector .............................................................. 9 • Ericsson .......................................................................... 45 • Communication sector ................................................ 10 • GlaxoSmithKline ........................................................... 46 • Energy sector ................................................................. 11 • Glencore Xstrata ........................................................... 47 • Financial services sector ............................................ 12 • HSBC ................................................................................ 48 • Health sector ................................................................. 13 • Imperial Tobacco Group ............................................... 49 • Household and personal products sector ............... 14 • ING Group ....................................................................... 50 • IT equipment and electronics sector ........................ 15 • LVMH ................................................................................ 51 • Machinery and industrial equipment sector .......... 16 • National Grid .................................................................. 52 • Nutrition sector ............................................................. 17 • Nestlé .............................................................................. 53 • Resources sector .......................................................... 18 • Novartis ........................................................................... 54 • Software sector ............................................................. 19 • Reckitt Benckiser .......................................................... 55 • Transportation sector .................................................. 20 • Rio Tinto .......................................................................... 56 • Roche ............................................................................... 57 Overview of the STOXX® Europe 50 • Royal Dutch - Shell ....................................................... 58 companies ........................................................................... 21 • Sanofi-Aventis ............................................................... 59 • SAP ................................................................................... 60 • ABB ................................................................................... 22 • Schneider Electric ........................................................ 61 • Air Liquide ....................................................................... 23 • Siemens .......................................................................... 62 • Allianz .............................................................................. 24 • Standard Chartered ..................................................... 63 • Anheuser-Busch InBev ................................................ 25 • Telefonica ........................................................................ 64 • AstraZeneca ................................................................... 26 • Tesco ................................................................................ 65 • Banco Santander .......................................................... 27 • Total ................................................................................. 66 • Barclays .......................................................................... 28 • UBS .................................................................................. 67 • BASF ................................................................................ 29 • Unilever ........................................................................... 68 • Bayer ................................................................................ 30 • Vodafone ......................................................................... 69 • BBVA ................................................................................ 31 • Zurich Insurance Group ............................................... 70 • BG Group ......................................................................... 32 • BHP Billiton .................................................................... 33 Disclosures ......................................................................... 71 • BNP Paribas ................................................................... 34 • BP ..................................................................................... 35 Inrate analyst team • British American Tobacco ........................................... 36 and sector responsibilities ............................................. 72 • Compagnie Fin. Richemont ......................................... 37 • Credit Suisse Group ...................................................... 38 Inrate contacts .................................................................. 74 Inrate Sustainability Assessment 3 “Inrate identifies market players which are on a sustainable path” Interview with Tobias Jung, Head of Research, on the methodology of the new Inrate Sustainability Assessment Inrate assesses sectors and companies. What’s the conceptual basis for your company assessment? Assessing the sustainability performance starts with a proper understanding of the company and its activities. For that, we categorize the various activities of a company according to a proprietary classification. Based on our analysis of sectors, we then identify the most relevant sustainability challenges that the company faces. Tobias Jung, Head of Research We assess the impact of the company on environment and so- ciety. This includes the impact of its operations, of its supply chain and of its products once they’re in the hands of consum- ers. Furthermore, we analyze what steps the company under- What’s the consequence of this? takes to monitor