Orrice oF THE Gity TREASURER KURT A. SUMMERS, JR. + TREASURER + GITY OF GHICAGO Thursday, May 16, 2019 Dear Colleague: As fiduciaries of public assets, we have a tremendous responsibilty and ability to impact financial markets. In fact, across the United States, state and local governments manage $3.2 trillion in financial assets. This means we are one of the largest groups of investors in the world. The collective size of our assets is greater than the annual gross domestic product of the United Kingdom as well as some of the largest economies in the world. Nearly five years ago, as | became Chicago's Treasurer and took over management of the city's $8 billion investment portfolio, | began thinking more seriously about this responsibility. So too has the industry as a whole, prompting the development of new, innovative solutions and driving the enormous growth of Environmental, Social, and Governance (ESG) integration in the United States and across the world. The new ESG strategies have enabled us to conduct traditional financial and technical analysis through variables such as price, yield, and credit quality as well as those risk factors represented in thorough ESG analysis. ‘As numerous studies have found, and the results from our own portfolio support, the integration of ESG factors into the investment process leads to a material impact on the portfolio. This is a result of identifying both potential risks and opportunities within individual investment options. Our experience with ESG integration has fundamentally impacted the way we evaluate investment opportunities, providing for more sophistication, rigor, and quality in our process. Given our paradigm-shifting results, | wanted to share our experience in more detail with you. As we recognize the magnitude of our responsibility and potential for financial impact, | believe we must ask ourselves what more we can do to manage our assets effectively, mitigate risk, and have the greatest impact possible for our constituents. Included for you in this packet is a published white paper on ESG integration for public treasuries, which my office has produced in hopes that other state and local investors will use this to evaluate how they might incorporate and benefit from ESG integration in their own portfolios. ESG integration presents an enormous value proposition to us as public-sector investors, not only driving more favorable risk-adjusted returns but also empowering us to align our investments with our broader policy priorities. We must evolve as investors and create new standards for ourselves as we evaluate opportunities to invest on behalf of the public. If we come together around that shared goal, then we will not only help drive better outcomes from our corporate partners and investments, but also improve the lives of the people we represent for decades to come. Please contact me or my staff if you would like to discuss this work further, or reach out to leading organizations such as US SIF: The Forum for Sustainable and Responsible Investment or the United Nations-supported Principles for Responsible Investment. We are confident that all public-sector investors stand to benefit from some form of ESG integration, and we are happy to assist where we can. Hopefully, this white paper is just the beginning of a longer conversation for you and your team. rn Respectfully, = furt A. Summers, Jr. Treasurer, City of Chicago 121 Nort LaSatte Sracer, Room 106 + Cwicaco, lt 60602 + TecerHone: 312.744.9356