University of Pennsylvania
PAE-T2-6: Socially Responsible Retirement Plan

Penn offers a favorable long-term rate of return that reflects the investment performance of the financial markets while giving special consideration to certain social criteria. Penn’s Principal Investment Strategies include the Social Choice Account through TIAA CREF. The Social Choice Account invests in a diversified set of domestic and foreign stocks and other equity securities, bonds and other fixed-income securities, as well as money market instruments and other short-term debt instruments. The Account invests only in companies that are suitable from a financial perspective and whose activities are consistent with certain environmental, social and governance (‘‘ESG’’) criteria. Holdings in the equity portion of the Account are subject to certain environmental, social and governance (‘‘ESG’’) criteria provided by a vendor of TCIM. The research vendor currently providing ESG performance evaluation for the Account is MSCI, Inc. (‘‘MSCI’’). All companies must meet or exceed minimum ESG performance standards to be eligible for inclusion in the Account. The evaluation process favors companies with leadership in ESG performance relative to their peers. Typically, environmental assessment categories include climate change, natural resource use, waste management and environmental opportunities. Social evaluation categories include human capital, product safety and social opportunities. Governance assessment categories include corporate governance, business ethics and governance and public policy. How well companies adhere to international norms and principles and involvement in major ESG controversies (examples of which may relate to the environment, customers, human rights and community, labor rights and supply chain and governance) are other considerations. The ESG evaluation process is conducted on an industry-specific basis and involves the identification of key performance indicators, which are given more relative weight compared to the broader range of potential assessment categories. Concerns in one area do not automatically eliminate an issuer from being an eligible investment for the Account. When ESG concerns exist, the evaluation process gives careful consideration to how companies address the risk and opportunities they face in the context of their industry and relative to their peers. The social and environmental impact of corporate activities related to the production and sale of alcohol, tobacco, military weapons, firearms, nuclear power and gambling products and services are quantified and incorporated into a company’s overall ESG performance assessment. While not automatically excluded from the Account, most companies involved in these industries are ineligible for inclusion in the Account due to their poor overall ESG performance.