New report says advisors have a fiduciary responsibility to proactively raise Environmental, Social and Governance (ESG) issues with clients

BETHESDA, MD—July 21, 2009—A group of asset managers, representing approximately $2 trillion in assets under management, say that integrating environmental, social, and governance (ESG) considerations into investment decisions should be a legal responsibility, as outlined in a new report: Fiduciary Responsibility—Legal and Practical Aspects of Integrating Environmental, Social and Governance Issues into Institutional Investment (Fiduciary II), produced by the Asset Management Working Group of the United Nations Environment Programme Finance Initiative (UNEP FI), a unique partnership between the UN's environmental arm and over 180 financial institutions worldwide.

During today's news briefing, Calvert Investments, ClearBridge Advisors, Pax World Investments, and UNEP FI experts revealed key findings of the report and discussed the responsibility fiduciaries have to incorporate ESG factors into investment decisions.

"We finally made the case that prudent fiduciaries should consider material ESG issues as an integral part of their investment decisions. This report takes the next step by making the case that advisors must be proactive in raising ESG issues with their clients, and by collectively calling on the investment industry, policymakers and civil society to move toward responsible and sustainable capital markets to help avert a 'Natural Resources Crisis'," said Paul Hilton, Director of Advanced Equities Research at Calvert, and the Fiduciary II Co-Project Lead.

"This new report on Fiduciary Duty provides a significant, multi-faceted analysis of the legal and practical ESG developments in the global investment arena, including updated legal views from North America. With forward-looking commentary and recommendations from leading legal experts, investment consultants, and asset managers, it appears that institutional investors will have an easier time allocating to well-managed sustainable investments," said Mary Jane McQuillen, Director & Portfolio Manager, Socially Aware Investment, ClearBridge Advisors, and the Fiduciary II Co-Project Lead.

"In order for our economy to advance in a responsible, sustainable way, ESG criteria should be incorporated into every investment decision," said Dr. Julie Fox Gorte, Senior Vice President, Pax World Management Corp., Co-Chair of UNEP FI Asset Management Working Group. "This report makes a powerful case that investment managers may be putting clients at risk if ESG issues aren't considered, and should be held responsible for those decisions. There must be a shift in investment philosophy to focus more on long-term, sustainable options, rather than short-term gains."

Professional investment advisors and service providers—such as investment consultants and asset managers—may have a legal obligation to incorporate ESG issues into their investment services or face
a very real risk that they may open themselves up to legal liabilities if they do not, cites the report.

"The worst financial and economic crisis in generations pales in comparison to a looming 'Natural Resources Crisis.' Investors and financial markets should put an end to 'short-termism' and embed inherently longer-term ESG issues in their organizational DNA. Fiduciary II offers a legal roadmap for responsible investing and marks an enlightened step towards a green, inclusive and sustainable global economy," said Butch Bacani, Programme Officer, Insurance & Investment, UNEP Finance Initiative, and the Fiduciary II Project Manager & Chief Editor.

The report also provides indicative legal language that can be used to embed ESG considerations in the investment management agreements and related legal contracts between institutional investors and their asset managers.

Key Highlights of the Report

The global economy has now reached the point where ESG issues are a critical consideration for all
institutional investors and their agents.Investment consultants and asset managers have a duty to proactively raise ESG issues within their
advice and services to institutional investors.ESG issues must be embedded in the legal contracts between institutional investors and their asset
managers to hold asset managers to account, and that ESG issues should be included in periodic
reporting by asset managers. Equally, the performance of asset managers should be assessed on a longer-term basis and linked to long-term incentives.Institutional investors will increasingly come to understand the financial materiality of ESG issues and
the systemic risk they pose, and the profound long-term costs of unsustainable development and the consequent impacts on the long-term value of their investment portfolios.Institutional investors will increasingly apply pressure to their asset managers to develop robust
investment strategies that integrate ESG issues into financial analysis, and to engage with companies in order to encourage more responsible and sustainable business practices.Policymakers should ensure prudential regulatory frameworks that enable greater transparency and
disclosure from institutional investors and their agents on the integration of ESG issues into their
investment process—as well as from companies on their performance on ESG issues.Civil society institutions should collectively bolster their understanding of capital markets such that they can play a full role in ensuring that capital markets are sustainable and delivering responsible ownership practices.Market incentives that reward long-term investment must be made to help create responsible and
sustainable capital markets that would help identify future challenges in the financial system, reduce
the chances of further crises and help avert a "Natural Resources Crisis"—and accelerate the
transformational process to a green, inclusive and sustainable global economy.

The 120-page report titled: Fiduciary Responsibility—Legal and Practical Aspects of Integrating Environmental, Social and Governance Issues into Institutional Investment can be found at http://www.unepfi.org/fileadmin/documents/fiduciaryII.pdf.

About ClearBridge Advisors
ClearBridge Advisors is a U.S.-based equity manager that was established by Legg Mason in 2006 after Legg Mason acquired the former Citigroup Asset Management. ClearBridge is the largest equity manager within the Legg Mason family and is a leading provider of mutual funds and separately managed accounts for both individual and institutional investors. The firm provides a variety of separately managed accounts that integrate environmental, social and governance factors into both the proprietary fundamental research platform and the portfolio stock-selection process. ClearBridge's Socially Aware Investment Program was established in 1987 and remains one of the hallmark programs in the industry.

About Pax World Investments
Pax World, based in Portsmouth, New Hampshire, which launched the nation's first socially responsible mutual fund in 1971, seeks to invest in forward-thinking companies with sustainable business models. To identify those companies, Pax World combines rigorous financial analysis with equally rigorous environmental, social and governance analysis. The result, it believes, is an increased level of scrutiny that helps it identify better-m­anaged companies that are leaders in their industries; that meet positive standards of corporate responsibility; and that focus on the long term. Pax World avoids investing in companies that are significantly involved in the manufacture of weapons or weapons-related products, manufacture tobacco products, or engage in unethical business practices.

About UNEP Finance Initiative
UNEP FI is a strategic public-private partnership between UNEP and the global financial sector. UNEP FI works with over 180 banks, insurers and investment firms, and a range of partner organizations, to understand the impacts of environmental, social and governance issues on financial performance and sustainable development. Through a comprehensive work program encompassing research, training, events and regional activities, UNEP FI carries out its mission to identify, promote and realize the adoption of best environmental and sustainability practice at all levels of financial institution operations.

About Calvert Investments
A leader in Sustainable and Responsible Investments (SRI), Calvert Investments offers investors among the widest choice of SRI strategies of any investment management company in the United States. Each SRI strategy employs one of three proprietary approaches. Calvert Signature™ Strategies integrate two distinct research frameworks: a rigorous review of financial performance plus a thorough assessment of environmental, social and governance performance. Only when a company meets Calvert standards for both frameworks will we consider investing. Calvert Solution™ Strategies selectively invest in companies that produce products and services designed to solve some of today's most pressing sustainability challenges. Calvert SAGE™ Strategies emphasize strategic engagement to advance environmental, social and governance performance in companies that may not meet Calvert standards today, but have the potential to improve.

The Pax World Funds' sustainable investing policies may inhibit the Funds' ability to participate in certain attractive investment opportunities that otherwise would be consistent with its investment objectives and other principal investment strategies.

ClearBridge Advisors, Pax World Management Corp. and Calvert Investments are not affiliated with ALPS Distributors Inc.

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