June 2007

1. ‘SUSTAINABLE’ INVESTINGMartin Grosskopf, MES MBAAssociate Portfolio Manager and Manager of Sustainability ResearchMichael Peck, CFAVice President, Institutional June 2007

2. AGENDA • Introduction • Environmental, Social, Governance (ESG) Conundrum • Research of Significance • Investment Context: Key Drivers • Investment Strategies • Summary

3. ACUITY INTRODUCTION • Founded in 1990, Acuity is a discretionary investment management firm that offers a full array of clearly differentiated, value-added solutions and mandates. • Ownership Structure: Private Firm – Partners own 100%; Partners are all active with Acuity • Acuity has been a leader in developing client driven sustainable investing strategies since 1991 • Recently awarded Canadian environmental theme mandate from large US Pension plan • Acuity Resources: • 14 Investment Professionals • 1 Strategist • 5 Portfolio Managers • 8 Investment Analysts • 1 Trader and 1 Assistant Trader • Assets Under Management: $9.4 billion at May 15, 2007

4. ESG CONUNDRUM: EXAMPLE OF CLIMATE CHANGE • The world’s climate is changing dramatically: • Short term impacts – weather events • Long term impacts – global warming? Source: Centre for Health and the Global Environment, Harvard Medical School

5. MAINSTREAM FOCUS SRI FOCUS ESG CONUNDRUM: EXAMPLE OF CLIMATE CHANGE • Mainstream community concerned with short term weather impacts and largely ignores longer term energy use impacts Investors have approached this environmental issue from different perspectives • SRI community has been focused on corporate action on Climate Change and largely ignores short term commodity fluctuations

6. Values? Performance? Ethical Investing Clean Tech Sectoral Themes Community Investing Momentum/ Technical Trading ESG Issues Integrated Engagement Strategies ESG CONUNDRUM • Application and weighting of ESG criteria occurs across a continuum of strategies: • Institutional asset owners in agreement that the ‘G’ is important • Reasonable discussion in Canada on application of environmental and social issues within the investment process has been lacking due to preconceived notions • While many camps would claim otherwise, there is no evidence of a ‘right’ investment approach! ESG issues should be considered where they are material and this is open (rightly) to interpretation.

7. RESEARCH OF SIGNIFICANCE • UNEP Asset Management Working Group (14 asset managers including: BNP Paribas, Citigroup, Group AMA, HSBC, Morley and Acuity) • Sell side research indicating materiality of certain ESG issues (Goldman Sachs, UBS et al) • Legal research questioning narrow interpretation of fiduciary responsibility (Freshfields report) • Performance studies largely neutral on impact of ESG applications (HSBC) • Most recent publication: Case studies highlighting the roles played by leading pension plans worldwide concerning ESG issues • Environment Canada / Coalition for Environmental Cooperation • Interviews with investment professionals in Canada, U.S. and Mexico indicate lack of drivers for linking environmental factors to investment performance • Yale University • Repetto study of mining industry indicates poor disclosure of environmental risks prior to significant adverse events Conclusions: • There has been little depth or interest in E and S amongst mainstream analysts until recently • Companies respond to analyst inquiries – they will not routinely offer up ESG data • E and S factors tend to fly under the radar • Fund performance is a red herring: no evidence of over/underperformance - depends on the manager

8. KEY DRIVERS: RESOURCE STRAIN • Pressures in the long term will rise: Source: United Nations Population Fund • It is not the same investment world as in 1960. One billion more consumers every 12 years. • Environmental/social implications are immense and highly relevant to investment decisions. • Demand for water, energy, food, materials entails some understanding of carrying capacity.

9. KEY DRIVERS: COMMODITY CYCLE • Pressures in the short term will increase: Source: Stifel Nicolaus • Increased consumption = increased extraction = increased environmental/social impact

10. KEY DRIVERS: CHANGING DEMAND CONTEXT Source: RBC Capital Markets Source: BCA Research • China’s commodity demand is only beginning. As a non-democratic regime, its influence on social/environmental standards world wide is of some concern.

11. KEY DRIVERS: CHANGING DEMAND CONTEXT Source: Energy Information Association • 50 years ago the U.S. imported 12% of its oil needs. Today it is nearing 70%. • Yet oil is increasingly sourced in regions of the world which are hostile to the U.S.

12. INVESTMENT STRATEGIES • Common Strategies • Screening of certain sectors reflecting interests of investor base • Overweighting of companies with strong ESG performance • Use of third party research (Jantzi, Innovest etc.) for investment decisions • Leveraging of ownership stake to drive management change on key issues (may be any of E, S or G) • Use of assets to influence political decisions (South Africa, Sudan, Burma, CO2, asbestos etc.) • Uncommon Strategies • Integration of ESG factors within investment decisions • Modeling ‘themes’ (sulphur, mercury, water, carbon) – Acuity Clean Environment Funds • Adjusting ESG factors for small vs. large cap portfolios, growth vs. value • Buying the laggards who are ‘catching on’ • Using ESG criteria to assist in ‘shorting’ companies

13. INVESTMENT STRATEGIES: THEMATIC APPROACH • Sulphur emissions are a major regulatory issue and significant investment theme impacting: • Coal utilities: scrubbers, sulphur capture • Auto: catalytic converters and engine technology • Refining: conversion to cleaner fuels • Materiality of this issue is significant (short term and long term) – drives major capital spending and research budgets • Relevant to all geographies • Investment Examples: • Praxair, Marsulex, Canadian Hydro Developers, Foster Wheeler SULPHUR EMISSIONS

14. CONCLUSIONS: ESG RELEVANCE • ESG relevant to: • Fundamental stock selection • Helps in assessing management quality, particularly in the extractive industries and consumer products • Identifying industry trends early • Sulphur, mercury, cyanide, water etc. • Risk mitigation • Avoiding the next asbestos: lead paint, mercury, transfats? Push back on ‘externalities’ • Ensuring proper systems/controls in place – environmental management systems etc. • Not generally relevant to: • Top down economic analysis • Sector rotation • Technical analysis • Momentum strategies • Short term trading strategies

15. ACUITY’S APPROACH TO ESG ISSUES • Principle #1: Determine the investment impact • What is the materiality of the issue: magnitude and relevance • Interpret the qualitative impact – what is the likely public/market reaction to these issues – reputation, regulatory approvals etc. • Principle #2: Determine the portfolio impact • Who is well positioned on this issue • Principle #3: Relegate ‘ethical’ debates to the background • Not a question of right or wrong but rather whether the issue has a material impact on the valuation of the security in question • Acuity’s internal capabilities: • Manager of Sustainability Research is a member of Acuity’s Investment Committee. Coordinates all of Acuity’s initiatives regarding ESG investments. Provides insight on how sustainable criteria can affect investment alternatives • Supported by eight analysts, including a dedicated ESG analyst, Rachel Davies • Acuity’s Scientific Advisory Council, composed of prominent external environmental and business professionals, provides input on sector-specific issues • External resources: • Acuity also works with third party research providers (Jantzi, ISS) to define and apply specific criteria for evaluation purposes

16. ACUITY’S ESG INVOLVEMENT Acuity Investment Management offers a range of ESG solutions for its clients. • Acuity launched the Clean Environment Fund family in 1991 and the Social Values Funds in 2000. • As a Partner owned independent firm, Acuity invests significant time and money to provide continuing support of products that further ESG integration • Acuity was selected as the only Canadian company to participate as a member of the United Nations Environment Program Asset Management Working Group • Acuity is a signatory to the UNEP Finance Initiative • Our firm is a founding member of the Social Investment Organization, a national non-profit organization dedicated to the advancement of socially responsible investing in Canada • In 2003, Acuity was awarded the Globe Foundation’s inaugural Capital Markets Award for Sustainable Investing and Banking • Member of the Canadian Coalition for Good Governance • Advisor to Environment Canada and Coalition for Environmental Cooperation • Signatory to the Carbon Disclosure Project

17. DISCLAIMER and CONTACT INFORMATION The views expressed here are those of Acuity Investment Management team, and are subject to change. They are being provided for informational purposes only and should not be construed as investment advice. FOR FURTHER INFORMATION PLEASE CONTACT: Michael Peck, MBA, CFAVice President, Institutional Acuity Investment Management Inc.Phone: 416-867-2559Fax:  416-366-2568Michael_Peck@acuityfunds.com