Carbon, climate change and asset allocation what does the future hold? Mark Fulton, Deutsche Bank Climate Change Advisors

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1 Carbon, climate change and asset allocation what does the future hold? Mark Fulton, Deutsche Bank Climate Change Advisors

Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 $/Barrel GDP per

Population drivers, scarce resources Leading to carbon emissions Source: Population Reference Bureau,

Hurricane Katrina Sep 2005 Japan Nuclear Crisis March 2011 Global Recession 2008 2009 No.

.. Annual Nuclear Capacity Growth 60 40 20 0 Political Unrest/Wars in Middle East/Africa 2006 2008

2 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 $/Barrel GDP per Capita, Thousands of $ Parts per Million (ppm) Climate Change Drivers Have Created a Megatrend Population drivers, scarce resources Leading to carbon emissions Source: Population Reference Bureau, 2008 And rising fossil fuel prices Panic Buying / Market Dislocation Summer 2008 Hurricane Katrina Sep 2005 Japan Nuclear Crisis March 2011 Global Recession No. of Years Ago from Present Source: Nature Journal, DeAM analysis. While nuclear risks have increased... Annual Nuclear Capacity Growth Political Unrest/Wars in Middle East/Africa Political Unrest/Wars in Middle East 2011 Source: Bloomberg Brent Crude Spot Source: Fukushima: Entering the next phase, HSBC, April

3 Energy Markets Affect our Health, Safety, Security and the Environment A comparative analysis of energy fuel sources, based on current technology Fuel Health Concerns Safety Concerns Energy Security Concerns Environmental Concerns Oil / Petroleum High High Very High Very High Coal Very High High Low Very High Nuclear Medium High Low Medium Natural Gas Low High Medium / Low Medium Hydro Very Low Medium Very Low Low Bioenergy Very Low Low Very Low Medium Geothermal Very Low Low Very Low Low Wind Low Very Low Very Low Very Low Solar Very Low Very Low Very Low Low Source: DBCCA analysis 2011

Broad Universe with Strong Interest from Capital The investment universe is wide and deep Cleaner Energy Power Generation Clean Tech Innovation Transport Sustainable

Efficiency Enabling Technologies Environmental Services Environmental Protection Business Services Carbon Credit Developers With increasing emphasis from investors as

4 Broad Universe with Strong Interest from Capital The investment universe is wide and deep Cleaner Energy Power Generation Clean Tech Innovation Transport Sustainable Biofuels Coal to Gas Switch Environmental Resources Water Agriculture Waste Management Energy & Material Efficiency Advanced Materials Building Efficiency Power Grid Efficiency Enabling Technologies Environmental Services Environmental Protection Business Services Carbon Credit Developers With increasing emphasis from investors as displayed by UNPRI & INCR AUM... UN Principles for Responsible Investment Investor Network on Climate Risk Note: As of July Source: UN PRI, 2011 Note: As of July 2011 Source: Ceres INCR

billions of tons Investment in Climate Change Sectors Presents a Rich and Diversified Investment Universe BAU water supply will not meet growing demand Agricultural production

business-asusual Existing Accessible reliable supply Demand Scenario Assumptions 2030 low case: Increase of total demand driven only by population growth 2030 high case: Per

5 billions of tons Investment in Climate Change Sectors Presents a Rich and Diversified Investment Universe BAU water supply will not meet growing demand Agricultural production must double to meet future needs 20% Demand with no productivity improvements Historical improvements in water productivity 60% Remaining gap 20% Increase in supply under business-asusual Existing Accessible reliable supply Demand Scenario Assumptions 2030 low case: Increase of total demand driven only by population growth 2030 high case: Per capita food consumption and caloric intake aligned to European level; high biofuel expansion Source: McKinsey, 2009: Charting Our Water Future ; DBCCA Analysis, 2010 Source: McKinsey

Investment in Climate Change Sectors Presents a Rich and Diversified Investment Universe (cont d) Significant amounts of capital are entering clean energy.

6 Investment in Climate Change Sectors Presents a Rich and Diversified Investment Universe (cont d) Significant amounts of capital are entering clean energy... Opportunities abound in energy efficiency Global Emissions in the IEA 2009 Reference and 450 Scenarios by Region Abatement by Technology, 2030 Efficiency 57% Renewables & Biofuels 23% Nuclear 10% CCS 10% OECD+ = OECD plus other EU OME = Other Major Economies OC = Other Countries Sources: Bloomberg New Energy Finance, 2011; DBCCA Analysis 2011 Source: OECD/IEA 450 Scenario, World Energy Outlook 2009

Shift Towards Cleaner Sources of Energy Increase in natural gas reserves tcf Switch from coal to gas and renewables Contributions to Energy Supply Growth Source: Natural Gas Supply The Role of Shale

7 Shift Towards Cleaner Sources of Energy Increase in natural gas reserves tcf Switch from coal to gas and renewables Contributions to Energy Supply Growth Source: Natural Gas Supply The Role of Shale Gas, Navigant Consulting; December 2009 Global expansion in waste to energy facilities Source: BP Energy Outlook 2030, January 2011 * Includes biofuels Global Waste-to-Energy Capacity Nearly 780 WTE facilities process approximately 140 million tons per year (TPY) worldwide Source: Jefferies March 2010 U.S. 87 facilities Western Europe 388 facilities Asia 301 facilities

Global Vehicle Sales (thousands) Global HEV/PHEV/EV Penetration Rate And Energy Efficiency Growth in green buildings US Green Building market, USD billions +20%

2015 +45% 42 55-71 Three to five fold growth in five year for major green retrofit projects Energy efficiency in two-thirds of retrofit projects, expected to

8 Global Vehicle Sales (thousands) Global HEV/PHEV/EV Penetration Rate And Energy Efficiency Growth in green buildings US Green Building market, USD billions +20% Drive for energy efficiency retrofits Projected Retrofit/Renovation Green Building Market Size Global market expected to be worth ~400 USD billions in % Three to five fold growth in five year for major green retrofit projects Energy efficiency in two-thirds of retrofit projects, expected to become the norm E Source: McGraw Hill, 2009 Construction Report Growth in hybrid vehicle markets 2015F Source: Credit Suisse, October 2009

9 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 Policy is Important in Some Sectors Where does policy help? Bringing renewables to grid parity Addressing the externalities of fossil fuel Creating incentives for diversifying transportation fuels and encouraging fleet upgrades Mandating energy efficiency Policy momentum is still evident CEM less China, US Fed and EU CEM EU CEM Countries (UK, France, Germany, Italy, Spain, Denmark, Sweden, Finland) 450 Cumulative US Major Net Binding States (CA, & Accountable NJ, TX) Climate Policies China 400 EU Gov US Federal 350 CEM less less China, China, US Fed US and Fed EU CEM and EU CEM EU CEM Countries (UK, France, Germany, Italy, Spain, Denmark, Sweden, Finland) 300 US Major States States (CA, NJ, (CA, TX) NJ, TX) China 250 EU Gov US Federal Country Emissions Control Binding Emission s Target RES Capital Investment Longterm EE Plan FiT Financial Support Longterm Govtbased Green Bank Tax Benefit Longterm Funding Program Grid Improve -ment Plan Budget Strength China -1.6% Germany -3.6% United Kingdom United States -11.5% COP Acc % California X -1.0% - Texas X X X -2.2% - Brazil X -2.2% 42.3 South Korea 6COP Acc X -1.1% 31.2 India Need to have skill to understand TLC 6COP Acc Australia South Africa 6COP Acc X -5.5% 27.1 X Statelevel Statelevel Statelevel Statelevel Statelevel Statelevel Statelevel Statelevel -4.2% 9.8 X X 6-5.3% 0.4 CEM less China, US Fed and EU CEM EU CEM Countries (UK, France, Germany, Italy, Spain, Denmark, Sweden, Finland) US Major States (CA, NJ, TX) China EU Gov US Federal Notes: EU CEM includes UK, France, Italy, Spain, Denmark, Sweden, Finland Source: DBCCA Analysis 2011 Notes: 6 = tentative / unconfirmed policy; RES = Renewable Electricity Standard; EE Plan = Energy Efficiency Plan; FiT = Feed-in Tariff; Budget strength = deficit as % of 2010 GDP; Capital Investment = (Billions $US ) Source: DBCCA Analysis 2011

10 Generation (TWh) Generation (TWh) Retail Cost ($/kwh) Retail Cost $/ kwh Renewables are Trending Towards Grid Parity Conventional technologies have started out at very high cost and have only achieved cost reduction with economies of scale Solar and Wind are still more expensive than fossil generation and require interim support until adequate scale is reached 2, , , , , , , U.S. Electricity Generation and Retail Cost by Energy Source Coal, Natural Gas, and Nuclear required massive achievements in improving scale to achieve current favorable cost structures Solar and Wind are experiencing significant improvements in their cost structure with small increases in scale Coal Generation Gas Gas Generation Nuclear Generation Solar Solar Generation Wind Generation Coal Cost Trend Coal Cost-trend Gas Cost Trend Gas Cost-trend Nuclear Cost Trend Nuclear Cost-trend Solar Cost Trend Solar Cost-trend Trend Wind Cost-trend Source: Hudson Clean Energy Partners Analysis, 2011

11 Summary of Investment Drivers Climate change, energy security and job creation in clean energy, water and agriculture sectors will persist as long-term drivers of policy and economies Investing in clean tech sectors is a theme that provides an attractive long-term source of alpha and portfolio risk mitigation Commodity price increases will contribute to interest as the global economy recovers Risk factors: Budget constraints on government incentives; world economic stagnation driven by debt market problems

12 Illustrative Risk Adjusted Portfolio Allocation Asset Class Selection Risk, Target return, Liquidity, Geography Asset Allocation Bonds Public equity Infrastructure PE / VC Investment Process Sector Selection Cleaner energy Energy efficiency Transport Agriculture Waste Water Risk Adjusted Portfolio Allocation Risk Exposure Market Price, Policy, Climate, Economic, Technology Source: DBCCA analysis 2011

13 Overview of Risk Analysis by Asset Class for Climate Change Strategies Market/ Economic Risk Technology Risk Climate Policy Risk Composite Risk Return Potential Fixed Income Corporate N/A Carbon Tilt* Fixed Income Government N/A Carbon Tilt* Public equities PE / VC Infrastructure Low Med High Very High Notes: Carbon Beta TM is a product of MSCI, formerly Risk Metrics and Innovest. Source: DBCCA analysis 2011

14 Australia's Climate is Changing Australian average temperatures have risen by about 1 C since mid-century and heatwaves have become more common. Source: Bureau of Meteorology Source: Bureau of Meteorology

Murray- Darling Basin is expected to fall.

15 Australia's Rainfall Patterns Have Changed Australia s rainfall will be lower in all emissions scenarios and water availability in the Murray- Darling Basin is expected to fall. Source: CSIRO, Bureau of Meteorology Source: Australian Government Intergenerational Report 2010

half of Australia has world-class wave energy resources.

16 Australia is Rich in Renewable Resources Australia has the highest solar radiation per square metre of any continent and the southern half of Australia has world-class wave energy resources. Source: Australian Energy Resource Assessment Source: Australian Energy Resource Assessment

Source: Australian Treasury and higher electricity prices will drive increased energy efficiency

17 Australia is Moving to Price Carbon With a carbon price in place, the task of reducing Australia s emissions will fall across sectors Note: Emissions reduction by sector from 2010 to 2050 Source: Australian Treasury and higher electricity prices will drive increased energy efficiency Note: Projected household electricity prices under carbon pricing scenarios Source: Australian Treasury

18 Annual Build (MW) Forecast Renewables Deployment to 2020 AUD 28 Billion necessary to finance projected renewables deployment and satisfy Australia s Large-scale Renewable Energy Target (LRET) 3,000 2,500 2,523 2,678 2,000 1,682 1,763 1,610 2,011 1,500 1,258 1,312 1, E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E Pre-Committed Wind Solar Thermal Solar PV (utility-scale') Landfill Gas Geothermal Biomass Note: Pre-Committed refers to financed wind farms, and solar PV / thermal plants expected to be build from government programs; data does not include small-scale PV Source: Bloomberg New Energy Finance 2011

19 Australia is a Significant and Growing Player in Global Gas Markets Australia has a relatively small share (1.6%) of proven global natural gas reserves However, on a reserves-to-production ratio, Australia has >72 years of production remaining, and is a growing exporter of LNG, mostly to Japan and China In 2009, exports accounted for almost half of Australia s gas production Global Trade Movements in Natural Gas (bcm) Source: BP Statistical Review of World Energy 2010

20 Important Information Issued by Deutsche Asset Management (Australia) Limited ABN Australian Financial Services Licence Holder (AFSL ). DB Climate Change Advisors is the brand name for the institutional climate change investment division of Deutsche Asset Management This document is only for the information of professional investors. An investment is not a deposit with or any other type of liability of Deutsche Bank AG ARBN , Deutsche Asset Management (Australia) Limited or any other member of the Deutsche Bank AG Group and the capital value of and performance of an investment is not in any way guaranteed by Deutsche Bank AG, Deutsche Asset Management (Australia) Limited or any other member of the Deutsche Bank AG Group. Investments are subject to investment risk, including possible delays in repayment and loss of income and principal invested. Deutsche Asset Management is not an Authorised Deposit Taking Entity authorised under the Banking Act 1959 and is not regulated by APRA. Although non-deutsche specific information has been prepared from sources believed to be reliable, we offer no guarantees as to its accuracy or completeness. Past performance is not an indicator of future results. Any performance forecasts are not promises of future performance and are not guaranteed. Opinions expressed may change. This document describes some current internal investment guidelines and processes. These are constantly under review, and may change over time. Consequently, although this document is provided in good faith, it is not intended to create any legal liability on the part of Deutsche Asset Management, and does not vary the terms of any relevant investment management agreement or Product Disclosure Statement. All dollars are Australian dollars unless otherwise specified. All indices are copyrighted by and proprietary to the issuer. I

Natural Gas and Renewables in the U.S. Post-Fukushima Presented by Mark Fulton Global Head of Climate Change Investment Research September 23, 2011

Natural Gas and Renewables in the U.S. Post-Fukushima Presented by Global Head of Climate Change Investment Research September 23, 2011 9/20/2011 2010 DB Blue template 2011 Key Energy Event: Japan s Nuclear