EXPERT COMMUNITY ADVISORY COMMITTEE STATEMENT

Our role as a committee is to encourage, counsel and challenge IAG by providing an independent perspective on IAG’s corporate responsibility and sustainable development. Our purpose is to:

• Advise IAG on economic, social, environmental and cultural issues through the lens of independent scrutiny;
• Encourage IAG to address difficult issues; and
• Provide advice and counsel on the content of the IAG Sustainability Report, particularly with respect to assessing whether it covers key materiality issues.

In the past year, the committee has met three times, once with the full executive and with at least one executive present at other meetings. Considerable exchange and other briefings have occurred outside the formal meetings.

During these meetings and exchanges we have questioned the basis for selecting key performance indicators and setting targets, challenged the company about the social and economic impacts of its activities in Australia and internationally, and encouraged IAG to extend its offer of ‘sustainable’ insurance products.

We wish to acknowledge the respect shown to ECAC, the responsiveness to matters it has raised and the changes that have resulted from these exchanges.

Report assessment
We acknowledge IAG for continuing to produce reports catered for different stakeholders and embracing ethical practice alongside the company’s obligation to deliver increasing financial returns. This requires IAG to perform in a manner that ensures that what is good for IAG is good for society and address the broader issues such as the impact of climate change. IAG reports this year on its positive response to challenges set by this committee in our 2006 commentary.

The committee considers the reporting highlights this year:

• Leadership in raising awareness of climate change risk and addressing its own impacts with an 18% reduction in CO₂ emissions for its Australian business and a plan to be carbon neutral across all businesses by 2012;
• Ongoing and immediate support for communities devastated by natural disasters, such as the Hunter Valley storms which are expected to be one of the largest natural disasters in Australia, with commitment to developing a flood risk management model with governments;
• Development of a code of ethics through engagement with external stakeholders;
• The implementation of a management remuneration package whereby most Australian managers receive a bonus for delivering on the company’s stated values;
• Continued work in launching products which enable customers to reduce their environmental impact, e.g. fuel efficient vehicle discount; contents collection service;
• Investment in better medical treatment programs, e.g. pain management research, stress related illnesses and accident care evaluation; and
• Working to improve the sustainability of suppliers and continued effective advocacy for sustainability (e.g. Australian Business Roundtable on Climate Change).

We will continue to challenge the executive as we have over the past 18 months to consolidate its leadership by addressing:

• Key performance indicators that publicly account for what IAG is doing to improve access to insurance in Australia and in its growing international markets which now represent 30% of its business;
• Implementation of the Code of Ethics and how this will define its approach to investment of funds with a clear policy around where the company will and will not invest;
• Ramping up its product development offering so that it maximises consumer appetite for products and services which encourage positive behavioural change;
• Further refine the key performance indicators to include a measure of the impact of IAG’s operations on entry to and exit from new markets and new locations;
• Crystallise IAG’s international corporate identity and reconcile it with its Australian origins;
• Clearly articulate corporate strategy to include aspirational as well as operational goals;
• Linking of sustainability targets to individual group outcomes;
• Deliver a global strategy linking IAG values and business practice to sustainability in Asia with particular emphasis on how IAG’s climate change policy will be implemented in these markets; and
• Be proactive by investing in health promotion and management to address local and global issues such as obesity, stress and the risk of pandemics.

We hope that these will be a priority for 2008. Emerging topics which we will be looking to see covered in future reports include:

• How the company will insure or immunise itself against the potential impact of climate change; and
• The insurance company’s role in encouraging more sustainable consumption trends, for example, ensuring that replacement purchases are energy efficient and/or designed for the environment and enable customers to reduce their environmental impact and promote good social outcomes.

This commentary is based on our knowledge of IAG’s activities during the report period from discussions with IAG’s executive and from information provided and does not constitute an assurance report. We recommend this advisory process to other corporations.

Submitted by
IAG’s Expert Community Advisory Committee
Yvonne Grant (Chair), Simon Divecha,
Professor Peter Grabosky, Lyn Mayes, Professor Sharon Moore,
Warren Mundine, Professor Hayden Raysmith

Background information on the Expert Community Advisory
Committee members

Yvonne Grant Chair — IAG Expert Community Advisory Committee
Ms Grant is a distinguished lawyer who has expertise in company law, corporate finance and public interest matters. She has acted as a magistrate and has served on the NSW Fair Trading Tribunal, the Victims Compensation Tribunal and as a Member of the Operations Review Committee of the Independent Commission Against Corruption (ICAC). For almost a decade, Ms Grant served as a member of numerous professional Health Boards. Ms Grant has an outstanding background across a wide range of community concerns including in a number of voluntary capacities.

Sharon Moore is a Professor of Sustainable Business Studies, Sydney Graduate School of Management (SGSM), University of Western Sydney. Sharon is an international leader in Triple Bottom Line approaches, a Sustainable Business strategist, academic and researcher. Professor Moore's 25 year career spans public affairs and business development to corporate social responsibility, in Chief Executive and Board Directorship roles.

Professor Moore has authored 90 publications on sustainable business, globalisation and business strategy, government relations and public affairs, and new sustainability and stakeholder approaches.

Warren Mundine is Chief Executive Officer of NSW Native Title Services Ltd, National President of the Australian Labor Party, the Chair of NSW Labor's Indigenous Policy Committee and a Board member of the National Aboriginal Islander Skills Development Association (NAISDA) College. Mr Mundine is a former Deputy Mayor of Dubbo, Commissioner of the NSW Local Government Grants Commission and State Board member of the NSW Police & Community Youth Clubs (PCYC). He has been awarded the Centenary Medal for services to the community and Local Government as well as Honorary Life Membership of the NSW Local Government Aboriginal Network.

Peter Grabosky is a Professor in the Regulatory Institutions Network (REGNET) of the Research School of Pacific and Asian Studies, at the Australian National University. He was previously Deputy Director of the Australian Institute of Criminology, where he worked from 1983 to 2001. Professor Grabosky holds a PhD in Political Science from Northwestern University, and has written extensively on criminal justice, regulation, and public policy.

Hayden Raysmith is an expert on civil society and social capital concerns, and is the founding Chairman of Australia's first independent community foundation, the Melbourne Community Foundation and Chairs the Board of The Abbotsford Convent Arts & Cultural precinct. Professor Raysmith was the first Director of Youth Affairs for the Victorian Government followed by a five year stint as the Director of Public Health in Victoria. Professor Raysmith is also a former Director of the Victorian Council of Social Service (VCOSS) and is currently involved in the development of social, economic, environmental, cultural and governance indicators.

Simon Divecha is Director of GreenMode, former CEO South Australian Conservation Council, and former senior campaigner with Greenpeace Australia. Mr Divecha is a well respected environmentalist known for his ability to liaise with all sectors of society in producing powerful outcomes. His current work focuses on building environmental businesses, such as through the recently announced Solar City project in South Australia. Mr Divecha is an elected member of the Council of the Australian Conservation Foundation.

Lyn Mayes is a Director of Mad World Ltd which is a supply chain and issues management consultancy of which the primary focus is sustainable development. Clients include the New Zealand Business Council for Sustainable Development; Packaging Council NZ; local and national government departments; small and medium sized companies as well as multinational corporations. Ms Mayes has over 20 years' industry experience across supply chain management, mergers and acquisitions and public affairs and is committed to sustainability reporting both as a writer, commentator and judge. Ms Mayes has a MA in modern languages from Trinity College, Oxford.

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