Making the Promise of Our Purpose Real

Expanding Choice. Enhancing Diversity. Enriching Lives.

A deep sense of purpose drives our commitment to our clients, our shareholders, our communities and one another.
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We’ve been ESG investing through our affiliates for years.

See how long.

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30 years of ESG investing through affiliates

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We put a large portion of our investments into ESG.

See how much.

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25% of FY2017 long-term assets under management were invested in ESG/SRI products or investment strategies.

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Our affiliates are committed to responsible investing.

See how many.

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8/9 Affiliates are signatories of United Nations-supported Principles of Responsible Investing (PRI).

About This Report

Legg Mason's 2017 CSR (Corporate Social Responsibility) Report

  • Covers the fiscal year ended March 31, 2017
  • Aligns with the Global Reporting Initiative (GRI) G4 framework that emphasizes materiality
  • Takes a metrics-driven approach that displays baselines, goals and progress to date
  • Focuses on metrics most relevant to key stakeholders — in this case, community investments, diversity and inclusion, energy efficiency and governance — while, also reporting on financial results, water use and discharge, waste and recycling, and local suppliers

Most metrics focus on Legg Mason’s overall corporate performance. We include the activities and performance of our independent investment affiliates, and have highlighted affiliate points of view to support key materiality factors.

Our top metrics were refined and now feature: community investments and philanthropy; diversity and inclusion; energy efficiency; ESG products and strategy; governance and regulatory compliance, anti-corruption and privacy; and talent management.

We also adjusted our materiality matrix this year on the basis of internal and external stakeholder discussions. This matrix can be found in the materiality section.

Legg Mason departments with primary responsibility for driving CSR are Communications and Engagement, Corporate Real Estate and Human Resources. The Environmental Sustainability Council and Executive Diversity Council also play key roles.

CSR reporting at Legg Mason reflects the combined contributions of many professionals within the firm and across our affiliates, with the proud support of senior management.

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CSR Highlights

icon$159 billion of total long-term AUM — roughly 25 percent — is invested in ESG products or strategies.

icon“Most Just” in Capital Markets
JUST Capital and Forbes Magazine named Legg Mason the "Most Just" company in Capital Markets for its 2016 Just 100 rankings.

iconEight of nine of our independent investment affiliates are signatories of the United Nations-supported Principles of Responsible Investing (PRI).

iconCEO Action for Diversity & InclusionTM
Our CEO, Joe Sullivan, signed Legg Mason onto the largest CEO-driven business commitment to advance diversity and inclusion within the workplace. The initiative brings together more than 300 CEOs of America’s leading organizations.

iconBest Places to Work in Asset Management
Named to Pensions & Investments’ list of “Best Places to Work in Asset Management,” joining affiliates Brandywine Global, ClearBridge Investments and Western Asset.

icon95% Score for Human Rights Commission (HRC) Corporate Equality Index. This index ranks employers on their engagement with and support of the LGBTQ community.

iconA Level CDP Score
Legg Mason received an A-level rating in 2016 from not-for-profit CDP for its commitment to climate disclosure and overall climate performance. We have been reporting to CDP since 2008.

iconLegg Mason celebrated the 7th Anniversary of its Board Leadership Program, which provides training and matches Legg Mason professionals interested in charitable board service with nonprofit organizations.

iconThe Legg Mason Charitable Foundation launched a global matching gift program in 2017 to support employee-driven philanthropy.

iconClearBridge Investments and Martin Currie each received A+ Ratings from PRI, based on their responsible investing activities for the calendar year 2016.

iconLegg Mason achieved a 79% reduction of Scope 1 & Scope 2 greenhouse gas (GHG) emissions against the 2007 base year.

iconPledged an initial $1 million donation to support our multi-year commitment to the East Baltimore community. We have expanded our partnership with Living Classrooms Foundation’s POWER House and set a goal of 2,000 volunteer hours focused on improving the neighborhood.

iconBLocal Signatory
In collaboration with 25 other Baltimore-based organizations, Legg Mason continued to build on its commitments to advance economic inclusion through "build, buy and hire" initiatives.

iconThrough our LM developU program, Legg Mason announced an internal goal for full-time employees to dedicate the equivalent of one full work week to the growth and development of new skills.

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Letter from the CEO

Joseph A. Sullivan | Chairman and CEO

Each day, we work to improve the lives of our clients, financial stakeholders, employees and the communities in which we live and work.

Increasingly, today’s investors expect competitive investment returns while expecting their investments to have a positive impact. Consumers are demanding high-quality, high-performing, customized products and services in conjunction with a higher purpose: they want to do well while doing good.

According to industry consultant Cerulli Associates, nearly a quarter (22%) of the $40.3 trillion in total AUM tracked by the firm incorporate ESG principles.

At Legg Mason, we are proud that our ESG commitment is broad, spanning investment management, our approach to business overall and our mission through:

  • Fundamental investment belief
  • Investment Affiliate commitment
  • Demonstrated expertise and
  • Corporate commitment, including our mission of Investing to Improve LivesTM

We begin with the ability and, more importantly, the commitment to integrate ESG factors into our investment process, a commitment that is fundamental to our active investment approach. At ClearBridge Investments and Martin Currie, the ESG program is fully integrated into the fundamental investment process, while Brandywine Global and Western Asset offer customized solutions based on specific client criteria. Clarion Partners, EnTrustPermal, RARE Infrastructure and Royce & Associates all have distinct approaches incorporating ESG into their expertise.

Further, ESG as a fundamental tenet of our broader investment philosophy is but one example of our affiliates’ commitment to ESG. Eight of nine Legg Mason investment affiliates are signatories to PRI. Both ClearBridge and Martin Currie have dedicated ESG leaders — Mary Jane McQuillen, Head of ESG Investment, and David Sheasby, Head of Governance and Sustainability, for ClearBridge and Martin Currie, respectively. Mary Jane and David are well known and highly regarded in this important field.

This combination of fundamental investment belief and affiliate commitment is the foundation of Legg Mason’s differentiated ESG investment expertise. Almost $160B AUM or nearly 25% of total long-term AUM as of March 31, 2017 are in ESG products and/or strategies incorporating ESG.

This year, we celebrated our inaugural ESG ETFs with the launch of two active ClearBridge strategies. This launch caps off 30 years of ESG investing through ClearBridge, one of the first and largest mainstream asset managers to commit to sustainable investing.

Not surprisingly, the many years of ESG investment experience, combined with our strategy of expanding client choice, has enabled us to develop and provide investors with a choice of vehicles — mutual funds, separately managed accounts, ETFs and customized solutions — for our ESG investors.

Lastly, and that of which I am deeply proud, is our corporate mission of Investing to Improve Lives, emblematic of our broader commitment to ESG. Each day, we work to improve the lives of our clients, financial stakeholders, employees and the communities in which we live and work.

As part of that mission, we have identified diversity and inclusion as a corporate strategic priority.

Diversity and inclusion is more than just the right thing to do; it is also a business imperative for better financial performance and enhanced overall decision-making.

On behalf of Legg Mason, I signed a personal pledge to PWC’s CEO Action for Diversity & Inclusion™ along with over 300 U.S. CEOs.

And while we recognize that we are not yet where we aspire to be in addressing D&I, we are confident that our commitment and dedication to improvement will be successful over the long term.

We were ranked #1 among capital markets companies in the inaugural Forbes The JUST 100, a list of the best corporate citizens in America for 2016, and Legg Mason was included in Pensions & Investments Best Places to Work, alongside our affiliates — ClearBridge, Brandywine and Western Asset.

Legg Mason’s commitment to ESG is broad-based and demonstrated by our investment management, our business approach and our mission.

Investing to Improve Lives™ informs what we do, how we do it and for whom we do it.

Although we are pleased with our efforts and those of our Affiliates, we are not satisfied with our success thus far and look forward to reporting on our continued progress next year.

Joe Sullivan signature

Joseph A. Sullivan
Chairman & CEO
Legg Mason, Inc.

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Fostering a Culture of Trust and Openness

Stakeholder Engagement Efforts

Transparency is a valued and critical aspect of our business. As a global asset management firm, Legg Mason, Inc. engages regularly with many stakeholder groups. Below are some ways we engaged with top stakeholders in fiscal year 2017.

Clients plus

How We Engage

  • In-person and virtual meetings with clients
  • Tailored ESG-focused investment strategies
  • Participation of Affiliates in sustainability organizations

Examples from FY 2017

  • Eight of nine Affiliates are PRI signatories
  • Two Affiliates’ employees on PRI steering committees
  • Launched two active ESG ETFs with ClearBridge Investments
Community Leaders plus

How We Engage

  • Commitment to the City of Baltimore
  • Commitment to diversity

Examples from FY 2017

  • Signatory to Johns Hopkins’ BLocal Baltimore program
  • Signatory to CEO Action for Diversity & InclusionTM
Employees plus

How We Engage

  • Distribute company news internally daily
  • Regularly update company intranet
  • Leadership regularly connects with employees through internal e-mails and conference calls
  • Town Hall meetings led by senior leadership
  • Employee Resource Groups
  • Enhanced hands-on and virtual training opportunities
  • Quarterly performance reviews, with 360-degree reviews for management

Examples from FY 2017

  • Host four Town Hall meetings annually, each in a different Legg Mason office (New York, London, Baltimore, Stamford)
  • LM developU offers over 50 different classes
  • Employees are offered eight hours of additional time-off to volunteer however they choose
  • Initiated a program encouraging 40 hours (one work week) of outside learning
Regulators plus

How We Engage

  • Committed to best practices and transparency in regulatory filings for prospectuses, updates to statements of additional information and other related forms to maintain registration of our mutual funds and products
  • File and resolve comments on registration statements with regulatory points of contact

Examples from FY 2017

  • Completed approximately 600 U.S. Securities and Exchange Commission (SEC) filings during Fiscal Year 2017
Shareholders / Investors plus

How We Engage

  • Investor Relations website
  • In-person meetings, conference calls, e-mails, targeted events
  • Annual report, proxy statement, SEC filings
  • Monthly Assets Under Management and quarterly earnings press releases
  • Hosted quarterly earnings conference calls with opportunity for Q&A

Examples from FY 2017

  • Hosted sell-side lunch and conference call for analysts and shareholders
  • Legg Mason senior leadership spoke at seven industry conferences in FY 2017
  • Senior management held more than 20 analyst meetings

Yes, It Is Possible to Do Well by Doing Good

Overview of PRI

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Is ESG important to U.S. investors?

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$1 out of every $5 is involved in SRI in the U.S.

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How many Legg Mason affiliates are PRI signatories?

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8 of 9 affiliates

The United Nations-supported Principles for Responsible Investment (PRI) was launched in 2006. It has quickly become a leading network for global asset managers, asset owners and service providers to publicly demonstrate their commitment to responsible investing.

Legg Mason and our affiliates recognize the increasing importance of sustainability and a greater awareness of how our investments impact the world around us.

According to data from the U.S. Sustainable Investing Forum, more than one out of every five dollars under management in the U.S. today is involved in Socially Responsible Investments (SRI).

In answering a significant need for strategies that align with personal standards, we have integrated ESG issues into our business and investment options, furthering our commitment to expand client choice.

As PRI signatories, eight of our affiliates have publicly committed to adopt and implement the following principles where they are consistent with their fiduciary responsibilities, and to bolster PRIs over time by evaluating their effectiveness, improving their content and encouraging their adoption by fellow investors.

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Incorporate

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Incorporate ESG issues into investment analysis and decision-making processes

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Be active

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Be active owners and incorporate ESG issues into ownership policies and practices

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Seek

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Seek appropriate disclosure on ESG issues by the entities in which they invest

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Promote

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Promote acceptance and implementation of the Principles within the investment industry

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Work

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Work together to enhance their effectiveness in implementing the Principles

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Report

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Report on their activities and progress toward implementing the Principles

While some of our affiliates have been members of the PRI since its inception, we are proud that as of 2017, eight of our nine independent affiliates are signed on.

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Not Just Numbers, But the Sum of Our Principles and Priorities

Overview of Materiality

Each year, we measure ESG topics that are meaningful to our key stakeholders. These subjects, which can change from year to year, are sourced following detailed review processes and thorough engagement discussions. Topics that remained the same continue to resound loudly for our firm and ESG investors across the globe, such as workplace diversity and corporate governance, which advance the interests of Legg Mason and our clients.

We have been conducting an in-depth materiality analysis since our fiscal year 2015 to properly weight topics valued by our core CSR stakeholders, identified in the matrix below.


More Material for Legg Mason and Shareholders

  • Climate Change
  • Community Investment
  • Philanthropy
  • Diversity and Inclusion
  • Energy Efficiency
  • ESG Products & Strategy
  • Governance
  • Regulatory Compliance
  • Anti-Corruption and Privacy
  • Talent Management

More Material for Legg Mason

  • Financial Results
  • Anti-Competitive Behavior
  • Waste and Recycling

More Material for Shareholders

  • Executive Compensation
  • Indirect Economic Impacts
  • Local Senior Management
  • Local Suppliers
  • Political Contributions
  • Public Policy Positions
  • Supply Chain Impacts

Factors Not Material to Legg Mason’s Operations

  • Occupational Health and Safety
  • Biodiversity
  • Child Labor
  • Collective Bargaining
  • Environmental Compliance
  • Environmental Mitigation
  • External Grievance Mechanisms
  • Forced or Compulsory Labor
  • Human Rights
  • Indigenous Rights
  • Infrastructure Investments
  • Product and Service Labeling
  • Safety Impacts of Products and Services
  • Security Practices
  • Water Use and Discharge

Protecting Our Environment

Climate Change

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How does ClearBridge combat climate change?

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Meeting face-to-face with management of companies they invest in

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How does RARE combat climate change?

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RARE invests in WaterAid, to deliver safe water to rural villages in East Timor.

Despite a likely pull back of funds and policies to combat climate change by regulators and policy-makers in Washington, we believe the private sector, cities and states will continue to lead on these efforts. Through our investment affiliates, we are afforded the opportunity to educate investors on the ways in which their choices can impact the world.

“Clean energy” technologies like wind and solar have become more cost-effective and efficient, and they are in demand by consumers. And, companies can become more efficient by utilizing such technologies and taking advantage of growing scale.

Two of our affiliates, ClearBridge Investments and Martin Currie, took a deeper dive into “green infrastructure” on April 19, 2017, in partnership with the New York Green Bank. The key takeaway from this panel was that there are plenty of opportunities in the private sector for investors who are hoping to leave a green footprint on the world.

ClearBridge Investments speaks directly with the leadership at the companies it invests in, to ensure they are doing right by the environment.

Mary Jane McQuillen, Head of ESG and Portfolio Manager at ClearBridge Investments, believes that having face-to-face discussions on issues such as climate change can make management aware this is a priority for investors long-term.

It’s been Ms. McQuillen’s experience that CEOs can be very responsive, particularly to shareholder proposals requesting corporate changes to policies impacting the environment.

RARE Infrastructure

RARE Water Aid

RARE recognizes that infrastructure is an essential service for society. As such, the firm takes Corporate Social Responsibility seriously. Their passion for infrastructure has been extended by investing in community projects with WaterAid, Red Cross and Sydney’s Wayside Chapel, providing essential services to communities in need.

RARE believes that access to safe water is a fundamental human right, and that infrastructure is a means to support poverty reduction and improve lives. This is why the firm has committed to a long-term partnership with WaterAid. Since 2013, RARE has funded the completion of three infrastructure projects that deliver safe water, sanitation and hygiene education to rural villages in East Timor.

Regardless of whether it is a result of war or natural disaster, people are often most vulnerable when tragedy strikes. RARE recognizes this, which is why they support Red Cross with Disaster Relief and Recovery projects. These projects provide funding for short-term infrastructure projects such as water treatment plants for communities shaken by natural disaster or displaced due to conflict or war.

CLearBridge

Technologies That Save Energy and Battle Climate Change

ClearBridge Investments believes that public companies can be impactful by virtue of their product or service. Companies that are driving the growth of electric vehicles (“EV”) are bringing about a fundamental shift in the energy mix of the world. According to the Institute for Energy Research, oil currently meets 36% of U.S. energy demand, with 71% directed to fuels used in transportation – gasoline, diesel and jet fuel. When EVs displace traditional internal combustion engines, the demand for oil is likely to dramatically shift. Based on current forecasts for EV adoption, sales of pure combustion engine cars could peak by 2020, resulting in oil demand peaking as early as the next decade.

The adoption of electric vehicles will result in a significant increase in demand for electricity. Given projected shifts in sources of future energy production, the contribution of electric vehicles on the burning of fossil fuels should be a net positive. ClearBridge bases this on an expected decline in dependence on coal from a current 40% of global electricity generation to 13% by 2030, as well as the growth of renewable energy (solar and wind) from a current 5% to a projected 40% of total generation by 2030.

The relatively clean energy profile of natural gas compared to coal – new, efficient natural gas power plants emit 50 to 60% less carbon dioxide compared with emissions from a typical new coal plant – will make a positive difference for the environment.

A public equities strategy where one may choose to reduce their allocation to fossil fuel intensive companies and add exposure to EV-related businesses can significantly move the needle when it comes to combatting climate change. This strategy could also prove to be financially advantageous as the ripple effects of this structural shift to low-carbon technologies impact incumbents in many industries including utilities, materials, energy and capital goods.

A recent study by Goldman Sachs research estimates as much as 25% of the MSCI ACWI universe of stocks could be impacted, which adds up to over $10 trillion in market capitalization.
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Embracing Our Communities and Our Differences

Legg Mason is staunchly committed to supporting the communities in which it operates – with both time and financial support. Legg Mason’s Charitable Foundation has raised more than $22 million since it was established in 2000, and we offer several opportunities for corporate volunteerism through our CSR department. Not only that, but Legg Mason employees, and those of our affiliates, regularly give back through outside-of-work opportunities. Our employees logged more than 5,000 volunteer hours over the past fiscal year.

Community Investment

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How does Legg Mason support community partners?

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Legg Mason Charitable Foundation made over $22 million in grants to community partners since 2000.

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What areas are priorities for Legg Mason’s giving efforts?

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63% of foundation giving directed toward education programs.

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Do Legg Mason’s employees donate to charity?

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325 employees used our “Matching Gift Program” to donate to 200 organizations. $284,000 combined employee and Legg Mason matching gift contributions.

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Do your affiliates donate to charity?

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Yes! Martin Currie, specifically, raised more than £30,000 through its inaugural Challenge Programme.

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Not only do we donate money, we give our time.

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In FY2017, full-time employees volunteered 5,000 hours in support of nonprofit organizations.

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How does helping to grow baby oysters improve lives?

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Cleaner water. There are now upward of 13,000 more oysters living in the Chesapeake Bay — enough to filter nearly 650,000 gallons daily.

Legg Mason has a long history of supporting a variety of community initiatives that positively impact disadvantaged populations in and around the geographic areas where Legg Mason’s largest employee populations reside (Connecticut, United Kingdom, Maryland and New York), and we allocate resources accordingly.

Offering both human and financial resources to our communities are manifestations of how we are investing to improve lives, the mission that is central to all that we do.
Legg Mason Charitable Foundation plus

Established in 2000, the Legg Mason Charitable Foundation has made more than $22 million in grants to community partners. In FY2017, we allocated 63% of foundation giving to education, especially programs that provide opportunities for underserved youth.

Our belief is that, over time, this investment will help brighten the futures of many disadvantaged students while growing the pool of potential local employees for Legg Mason.

We focus on areas where we can create the greatest potential impact. We strive to provide:

  • Principals and teachers with support in the classroom
  • Scholarships to empower inner-city students with the ability to attend high-ranking schools
  • Pre-K, after-school and summer programs
  • Youth education about the importance of saving for education and retirement
  • Valuable lessons in budgeting, banking, credit and savings through our mentoring programs

The Legg Mason Charitable Foundation follows a rigorous screening process to select community partners and allocate charitable gifts, with a focus on smaller, local, “grassroots” organizations. Each of our core partners submits a detailed plan of action that is reviewed and approved by the Foundation board, as well as a report that includes what the organization achieved relative to its stated objectives.

East Baltimore Initiative plus

Following the 2015 unrest in Baltimore, Legg Mason launched an 18-month listening tour that involved meeting with community residents, political and religious leaders and nonprofit organizations to truly understand the issues and hear ideas that would guide our work.

This input informed Legg Mason's decision to make a multi-year commitment to the East Baltimore neighborhood that sits just a few blocks from our Harbor East headquarters. Our commitment, which is built upon an ongoing “connector” philosophy – the thoughtful joining of various resource, leadership and network threads to improve lives in our communities – includes a significant four-year financial investment in community projects led by three partners: Living Classrooms Foundation, TRF Development Partners and East Baltimore Revitalization Project. In addition, we have set a goal of providing 2,000 employee volunteer hours focused in East Baltimore.

Employee Giving Program plus

A core value at Legg Mason is giving back to our communities. The gift of our time and talent, both as a firm and as individuals, is just as important as our financial contributions. Legg Mason launched its Employee Giving Program in the U.S. in June 2016 and expanded the program internationally in May 2017. The program provides eligible employees with a giving platform designed around the different ways they prefer to manage their giving activities. It also makes it easier for employees to give — and amplifies the impact of our collective and individual work in the community.

Our Matching Gift Program is designed to make giving more convenient and meaningful for Legg Mason employees. For eligible employees making a financial contribution of at least $25 to a qualified charity, Legg Mason matches 50% of gifts, up to $1,000. In its first full year, the U.S. program saw more than 325 employees contribute to nearly 200 organizations, resulting in over $284,000 in combined employee and Legg Mason matching gift contributions.

The program also features an online giving portal, where employees can search and register for opportunities to participate and track financial gifts and volunteer hours. Employees receive eight hours of paid time to be used exclusively for volunteer activities and are also able to volunteer additional time with manager approval.

Employee Engagement plus

Legg Mason encourages our employees to be advocates and lend their hands to organizations across the global communities in which we live and work. The active role they play helps make our philanthropic interests and community outreach successful and sustainable. In FY2017, full-time employees volunteered 5,000 total volunteer hours (approximate) in support of nonprofit organizations.

Mentoring/Internships plus

It is truly rewarding to support young adults and help them succeed. Mentoring has always been a cornerstone of our volunteerism platform — and an expression of our philanthropic commitment to education. We have established multiple mentoring and internship programs in our U.S. locations to work with an array of middle school, high school and college students. Additionally, we have hosted students from several schools and organizations for “shadow days,” during which students can learn about business by following a mentor.

In Baltimore, we have received numerous Greater Baltimore Committee (GBC)/Mayor’s Business Awards for our work with city youth, and we engage in the following programs:

  • Big Brothers Big Sisters/Patterson High School Workplace Mentoring Program: A cohort of approximately 15 Baltimore City high school students visit Legg Mason headquarters once a month to work with their mentors and participate in skill-building workshops and field trips.
  • Crossroads School Mentoring Program: 13 Legg Mason mentors visit this chartered middle school twice a month to work with the students through various activities, including tutoring.
  • Cristo Rey Internship Program: In FY2017, this annual workplace program included six high school interns (four in our Baltimore office, one in New York and another in Stamford).
  • Urban Alliance Internship Program: Legg Mason hosts two high school students annually. The students work afternoons throughout the academic year and six weeks in the summer while receiving weekly professional development mentoring via Urban Alliance.
  • YouthWorks Summer Internship Program: Legg Mason annually hosts high school students for six weeks each summer through this city-wide internship program.

In New York, Legg Mason employees partner with Big Brothers Big Sisters of New York City to host a workplace mentoring program for middle school youth. Now in its eighth year, the program pairs students with a Legg Mason mentor to either visit our office in Midtown Manhattan or go on local field trips twice a month to help build confidence and life skills.

Martin Currie

Martin Currie Challenge Programme

With an ambitious fundraising target of £20,000, Martin Currie launched its Challenge Programme in early 2017, as part of its Corporate Responsibility Programme.

The programme offered three tiers of challenge events to Martin Currie’s people, ranging from a company Activity Day to Charity Event Sponsorship, whereby employees were supported to participate in an external event for a charity of their choice, and finally an Adventure Challenge, which involved 13 employees from Edinburgh, Singapore and Melbourne traveling to Peru in September to volunteer at the Chichuchas School for Girls and then cycle and hike their way to Machu Picchu.

  • The Fiona Walker Fund (UK) — Cancer research
  • The Chichuchas School for Girls (UK) — Children’s education (Peru)
  • Berry Street (Australia) — Disadvantaged children
  • Habitat for Humanity Singapore (Singapore) — Poverty housing

Martin Currie exceeded its fundraising target, with £30,000 raised as of August 31, 2017. This was achieved through various events organized by Martin Currie people, including Skydiving, Race Night, 24 Hour Cycle Challenge, Quiz Night, Gin Tasting, Bridge Day, Bake Sales, Dress Down Days, personal donations and many more.

As well as the financial achievement, the Martin Currie Challenge Programme has delivered a series of inclusive fundraising and training events encouraging collaboration, creativity and achievement of its people, something the firm is very proud of.

Corporate Volunteerism: More Ways to Make A Difference

Legg Mason employees have many opportunities to engage in volunteerism at the team, departmental and corporate level. Our programs include:

Childcare Learning Centers plus

Since 2007, Legg Mason has partnered with Childcare Learning Centers to support their early education programs for low-income preschoolers and their families in the Stamford community. In FY2017, 20 Legg Mason volunteers visited the center every month during the school year to read to the children and lead hands-on learning activities. These experiences help children enter school ready to learn and more likely to succeed.

Greater Baltimore Oyster Partnership plus

In the program’s fourth year, a team of Legg Mason employee volunteers worked to grow baby oysters that can cleanse the water in the Chesapeake Bay and provide a marine habitat for other species. Over nine months, these volunteers tended oyster cages hung near the surface of the water, cleaning their cages and measuring their growth. Thanks to the hard work and dedication of our FY2017 oyster team, there are now upward of 13,000 more oysters living in the Chesapeake Bay. That’s enough oysters to filter nearly 650,000 gallons of water every day (when fully grown).

Earth Day Celebration and Harbor Cleanup plus

Legg Mason celebrates its commitment to sustainability during Earth Week, offering activities and information designed to engage and educate employees on our sustainability efforts. In FY2017, employees in our Baltimore offices participated with Living Classrooms, teaming up with middle school students at The Crossroads School. Activities included removing trash and debris from the water adjacent to Legg Mason headquarters, wetland restoration and planting, and garden maintenance. Additionally, employees participated in an informative discussion relating to healthy hot topics facilitated by The Institute for Integrative Health, which addressed healthy eating, label reading, the diminishing bee population and more.

Our Stamford office worked with SoundWaters for a day of education and volunteer projects that benefited the Long Island Sound. Offices also enjoyed on-campus yoga classes and an e-cycling drive that collected unused mobile electronic devices and computer equipment.

9/11 National Day of Service plus

Baltimore employees honored the 15th anniversary of September 11th by working on projects in the Johnston Square neighborhood of Baltimore City, an area in need of community resources. Projects included preparing the football field at St. Francis High School, garden clean-up with Charm City Farms, mural construction with Art with a Heart and greenspace revitalization and community beautification. For the fifth year, we worked with The 6th Branch, an organization creating a national model of a Veteran Sponsored Community, utilizing the leadership and organizational skills of military veterans to execute aggressive community service initiatives at the local level.

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Striving for a Workplace Representing Richness of Diversity

Diversity and Inclusion

Diversity of Employees

Diversity

Board Diversity

13 Directors Including 4 minorities and 2 women

  • 2 Women
  • 2 African American
  • 2 Asian

Building an inclusive environment for all is an imperative at Legg Mason. We know that diverse perspectives help broaden our vision, heighten innovation and drive better results. We are taking steps to ensure a workplace that represents the richness of diversity across our global communities.

Over 10 years ago, Legg Mason began a journey to enhance diversity and inclusion when we created the first Diversity & Inclusion Leadership Council (DILC). We also expanded our roster of Employee Resource Groups (ERGs), which have contributed tremendously to the fabric of our firm’s culture. In addition, over the past two years, we have identified diversity and inclusion as a corporate strategic priority.

Through the work of the Executive Diversity Council (EDC), we have taken our commitment to and understanding of diversity and inclusion to an even higher level.

We are and will continue to be committed to embracing and fostering diversity as demonstrated by diversity of our people and an inclusive work environment.

The EDC has been hard at work developing concrete and actionable goals for the firm and its employees in order to evolve diversity and inclusion at Legg Mason from “initiative to philosophy.” The EDC is chaired by Executive Committee member and Global Head of Communications and Engagement Fran Cashman. The group’s guiding mission is “to achieve an inclusive culture which embraces our differences and delivers true diversity of thought.”


CEO Action for Diversity & InclusionTM

In conjunction with the EDC’s areas of focus, Joe Sullivan, Legg Mason’s Chairman and Chief Executive Officer, signed on to the CEO Action for Diversity & Inclusion™, pledging to take action to advance diversity and inclusion in the workplace. More than 300 CEOs across 70 industries in all 50 states have joined the CEO Action for Diversity & Inclusion network. The intention of this pledge is to rally the business community to advance diversity and inclusion within the workplace by working collectively across organizations and sectors.

This pledge includes three initial goals that we hope will catalyze further conversation and action around diversity and inclusion within the workplace, and foster collaboration among our organizations:

  1. Continuing to make our workplaces trusting places to have complex, and sometimes difficult, conversations about diversity and inclusion;
  2. Implementing and expanding unconscious bias education: Experts tell us that we all have unconscious biases — that is human nature. Unconscious bias education enables individuals to begin recognizing, acknowledging, and therefore minimizing any potential blind spots he or she might have, but was not aware of previously; and
  3. Sharing best practices, and even unsuccessful practices, to help one another to evolve and enhance our current diversity strategies and leverage the experience of other companies.

While these three goals are not the complete answer, collectively we believe they are important, concrete steps toward building more diverse and inclusive workplaces.

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Doing What We Can to Control Our Carbon Footprint

Energy Efficiency

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Is Legg Mason serious about reducing its carbon footprint?

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Yes! We have lowered energy use by 67% (in MWh).

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What is Legg Mason’s Carbon Disclosure Project (CDP) rating?

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Proud of our A- or a CDP "Leadership" designation based on the new CDP scoring methodology.

Energy use in MWh

Chart
  2010 2011 2012 2013 2014 2015 2016
MT CO2e (Scope 1 & 2) 12,820 11,751 6,535 4,921 4,406 3,998 3,748
MT CO2e (Scope 3) 2,506 2,130 2,064 6,565 3,961 4,412 4,002
kWh per ft2 per year (Scope 1 & 2) 33.2 31.2 23.5 25.2 21.4 23.7 22.9
kg CO2e per ft2 per year (Scope 1 & 2) 12.1 11.9 7.4 7.9 7.1 7.8 7.4

Environmental efficiency is an important component of driving competitiveness and long-term returns.

Legg Mason has a dedicated Environmental Sustainability Council (ESC) focused on creating a sustainable future through reducing energy use – in turn lowering costs and reducing our carbon footprint and reinforcing our reputation. The ESC is comprised of 15 Legg Mason professionals, spanning business units and including affiliate participation. The Chair of the Council is Alan Magleby, Head of Investor Relations.

The group, which meets every other month, has a C-Suite Executive Sponsor (our CFO, Pete Nachtwey) and works in partnership with the firm's Corporate Social Responsibility function to advance sustainability across the firm. Members of this group participate in a periodic external stakeholder engagement process facilitated by Ceres, an environmental NGO and longtime partner.

Recently, Legg Mason launched an Environmental ERG to further engage our colleagues who are interested in this important topic.

The Global Responsibility & Environmental Education Network (GREEN) aims to "educate and create awareness around topics of sustainability; and to provide information and tools for Legg Mason employees to live an environmentally friendly lifestyle."

Energy Use And Greenhouse Gas Emissions

Legg Mason is committed to doing what we can to control our carbon footprint. However, this footprint is minimal because we:

  • Own very few physical assets
  • Lease all our global offices
  • Have a limited supply chain
  • Have small data centers that use low amounts of energy
  • Require no physical distribution for our products

As part of our annual CDP Response, we collect energy usage data from the Legg Mason-controlled office space globally.

In 2017, we were extremely pleased to achieve a A- grade or a CDP “Leadership” rating based on the new CDP scoring methodology.

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Expanding Client Choice – Aligning Values and Returns

ESG Related Products & Strategy

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You said earlier $1 of $5 is invested in SRI… but what’s that figure in total AUM?

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It’s significant – $8.72 trillion (or more!) is invested in ESG assets.

+

Has the total AUM in SRI assets number remained flat year over year?

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-

Not at all… in fact, it’s risen over 76% from 2012 to 2014. AND since 2014, it’s increased another 33%.

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How involved are PMs with the companies they invest in?

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Over the last year, ClearBridge’s 35 portfolio managers and 29 fundamental research analysts conducted over 1,000 meetings with portfolio companies.

Investors Should Not Have to Sacrifice Their Values or Their Returns

At Legg Mason, we see a world ahead where market returns are unlikely to meet the future needs of clients. This challenge pushes us to innovate and expand choice for our clients by offering more diverse product strategies, wrappers and access portals. These include solutions that can help investors achieve their financial goals and support their beliefs.

The Rise of Sustainable Investing

Recent studies have examined the performance aspects of integrating ESG factors and concluded that ESG portfolio performance should be comparable to the performance of conventionally managed portfolios. As investors have realized this, sustainably invested assets in the United States have risen considerably.

According to the Forum for Sustainable and Responsible Investment (U.S. SIF), by the end of the year 2015, “more than one out of every five dollars under professional management in the United States — $8.72 trillion or more — was invested according to SRI strategies.” The same study reported that from 2012 through 2014, those ESG assets rose 76% to nearly $6.6 trillion.

Even after 2014’s dramatic increase, there has been another 33% increase in assets invested in ESG strategies.

Nearly a quarter (22%) of the $40.3 trillion in total AUM tracked by Cerulli Associates is involved in ESG. Clearly, this is not just a trend but, rather, the new normal.

ClearBridge

ClearBridge ESG ETF Launch

This year, we expanded vehicle choice through our ETF development with independent affiliate ClearBridge Investments. On May 23, 2017, Legg Mason, in partnership with ClearBridge, launched its first two actively-managed, ESG-focused ETFs.

  • The ClearBridge Large Cap Growth ESG ETF (Nasdaq: LRGE) seeks to invest in large-capitalization companies with the potential for above-average earnings and cash flow growth and a strong commitment to ESG principles.
Check out the product page
  • The ClearBridge Dividend Strategy ESG ETF (Nasdaq: YLDE) seeks to invest in high-quality companies with a strong commitment to ESG principles that can pay attractive dividends and have the potential to grow dividend payments over time.
Check out the product page

Overview of ESG Capabilities Across Affiliates

Brandywine Global

Brandywine Global’s status as a signatory of PRI underscores the firm’s longstanding commitment to incorporating ESG factors into the investment decision-making process consistent with investment guidelines and to furthering active ownership efforts while striving for the best possible return outcomes. As fiduciaries and responsible stewards of clients' assets, Brandywine Global recognizes that relevant and material ESG issues can meaningfully affect long-term investment performance, and that these factors are components of disciplined, integrated analysis and ongoing monitoring. In addition to the Firm’s engagement with the PRI, Brandywine Global has been managing customized equity and fixed income portfolios for clients with specific ESG and socially responsible investment requirements for over 25 years.

Clarion Partners

Clarion Partners is committed to being a leader in responsible investing and environmental stewardship. As an investment firm focused on real estate, it seeks exceptional investment returns by responsibly investing in and managing assets, where appropriate, that provide healthy, safe and productive places to live, work, shop and stay. Clarion seeks to lead by example and is an active participant in the Global ESG Benchmark for Real Assets (GRESB) and other industry organizations focused on advancing responsible real estate investing. Clarion also sponsors social responsibility initiatives in the markets where it works and invests.

ClearBridge

Since 1987, ClearBridge Investments has been on the forefront of sustainable investing, engaging with companies in which it invests to promote the benefits of ESG best practices. Over the last year, its team of 35 portfolio managers and 29 fundamental research analysts conducted more than 1,000 meetings with portfolio companies. Engagement themes included data privacy and security, as well as the fair treatment of workers across global supply chains. As noted above, in 2017 the firm launched the ClearBridge Large Cap Growth ESG ETF (LRGE) and ClearBridge Dividend Strategy ESG ETF (YLDE), two of the first ETFs to combine active management with integrated ESG research.

EnTrust Permal

A leading global alternative asset manager, EnTrustPermal assesses the long-term sustainability characteristics of its investment mandates and those of the funds it selects. As part of its due diligence process, EnTrustPermal asks underlying managers to complete a pre-meeting questionnaire to determine if the manager complies with ESG guidelines.

Martin Currie

This Edinburgh-based firm places effective stewardship of capital at the heart of its client proposition. Martin Currie believes in an investment approach that makes ESG factors real, with analysis and active ownership fully embedded in the investment process and implemented directly by portfolio managers. In making investment decisions, Martin Currie considers material ESG factors that may impact the ability of companies to generate sustainable returns over the long term. Investment decisions involve understanding the governance structures and culture of a company, employing a broad view of changes taking place in the world, and assessing the impact these can have on a company’s cash flows, balance sheet, reputation and, ultimately, corporate value.

The firm looks to positively influence corporate behavior and governance through active ownership and engagement, living these values through the management of their own businesses.

Emphasizing the G of ESG


There are three factors represented in ESG – Environmental, Social and Governance. Often, an emphasis is placed on the E and S, but Governance should not be ignored. Affiliates Martin Currie and Royce & Associates both focus deeply on corporate governance practices when evaluating equities.

Martin Currie’s Head of Governance and Sustainability, David Sheasby, values transparency and clear, accountable governing structures.

“Our analysis will always start with governance, as we believe this is a fundamental determinant of long-term performance and thus the sustainability of a business. We feel that governance is not acknowledged enough when it works well, though, ironically, it is frequently targeted when it fails. Critically, as global investors, we cannot use a one-size-fits-all approach given the different traditions and levels of corporate maturity in many parts of the world.”

Royce & Associates Portfolio Manager Charlie Dreifus has noted that looking into a corporation’s governance practice can provide a good indication of its moral compass overall:

“I came to appreciate governance along with the cynical view I take of companies in general and the deep dive into their accounting. It's intertwined clearly and companies that are accountable and transparent tend to reward investors. Yes, it's a mosaic, but the colors in the mosaic for the good companies are complementary, whereas for the bad companies, they are stark and they're all the same. Because if a company has bad conduct in one regard they're probably taking liberties elsewhere.”

QS Investors

QS Investors promotes a hierarchy of ideas, not people, and it’s proud that out of its team of 72 people, over 10 different languages are spoken. QS Investors is one of the few asset management firms to have a female CEO, CIO and CCO. This diversification of backgrounds and experiences leads to differentiating perspectives, greater creativity and, ultimately, better results for its clients.

The firm evaluates global environmental, social and governance factors within its Active Global ESG strategy by combining ESG measures with attractive fundamentals. This offers investors the chance to do good and do well.

RARE

RARE recognizes that infrastructure is an essential service for society. It also considers assessing and incorporating ESG factors as an integral part of the investment process in both research and portfolio construction. During the construction of RARE’s Investible Universes (the RARE 200, the Income Universe and the EM 150), RARE screens out stocks that pose ESG issues, such as companies that have material exposure to gaming, tobacco, mining and weapons, among other areas. RARE also uses Sustainalytics, a third-party research provider, to produce ESG scores and to report on companies within its investment universe.

Royce & Associates

At Royce, the firm’s ultimate goal is to deliver the best investment outcomes for clients. As fiduciaries of its clients’ assets, Royce employees have exacting standards around principles of governance and sustainability in the evaluation of the companies in which Royce invests, as they have proven to have a material impact on business risk and corporate performance. Evaluating and incorporating ESG factors in investment analysis offers crucial insights into the opportunities and risks for long-term, fundamental investors (such as us) and inherently provides for better-informed decision-making.

By integrating relevant governance and sustainability factors into Royce’s investment process, and effectively engaging with companies and their management teams around these principles, the firm aspires to better manage risk, enhance returns for its investors and improve global corporate sustainability.

As a signatory to the PRI, Royce is committed to integrating an assessment of ESG risks and opportunities into its investment process. The firm believes this is best achieved by considering ESG factors as an input into the investment process, not the objective. Royce's objective remains the same: to consistently deliver above-average long-term results on absolute and risk-adjusted bases for clients.

Western Asset

Western Asset believes that ESG issues can affect the performance of fixed income investment portfolios. It incorporates ESG factors in investment analysis and decision-making as a matter of good investment principles. Credit analysts consider these factors carefully when formulating the credit and risk profiles of investments and demand higher risk premiums from debt issuers to compensate for ESG risks. They also look carefully at corporate policies pertaining to ESG issues in assessing management teams and governance structures. Since 1986, the firm has built customized portfolios screened to exclude securities or investments based on client-specific SRI parameters. In 2016, Western Asset became a signatory to the PRI. Beginning in 2017, with analysts’ access to ESG quality ratings, scores, carbon emission and other sustainability metrics provided by MSCI ESG Ratings, Western Asset has also provided clients a range of positive screening ESG and Green Bond solutions.

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Walking the Walk: No Chalk

The “No Chalk” culture is hugely important to Legg Mason. Through sound corporate governance and reinforcing employees’ responsibility to adhere to regulatory requirements and internal policies, Legg Mason actively works to make sure we are respecting ethical boundaries and doing the right things for clients and each other.

Governance

Legg Mason’s Board of Directors and management are committed to sound corporate governance, and they value engagement with stockholders on our policies and practices. We invite you to read Legg Mason's Code of Conduct and other governance documents on our website.

In 2014, Legg Mason initiated a mid-fiscal year stockholder engagement program, to gain greater insights from our largest stockholders on corporate governance topics, generally and specifically on our practices and outcomes. In addition, we share certain corporate strategy, compensation and corporate governance developments of interest to stockholders. We use this process to seek stockholder feedback or support for actions that management and the Board may be considering. Our engagement team includes senior members of Legg Mason’s Investor Relations, Human Resources and Legal departments, as well as a member of our Board of Directors from time to time.

For example, in fiscal year 2017, we shared Legg Mason’s philosophy and practices relating to equity grants, and asked stockholders for input on equity plan design in connection with preparing an equity incentive plan for the Board’s Compensation Committee to consider. Stockholders approved a new equity incentive plan proposed by the Board at the annual meeting in July 2017.

During fiscal year 2017, we reached out to 16 investors holding over 46% of our shares outstanding as measured at September 30, 2016:

  • Ten of those investors, holding over 33% of our shares outstanding, responded to our outreach. We spoke with seven investors who held over 18% of our shares outstanding.
  • The remaining three investors indicated that a conversation was not necessary at that time.

Consistent with a focus on good governance, Legg Mason’s Executive Committee emphasizes to employees the importance of our “No Chalk on our Shoes” standard. The “No Chalk” standard is a continual reminder that employees should demonstrate good judgment and stay well within boundary lines of ethical behavior.

Regulatory Compliance, Anti-Corruption and Privacy

Protecting the confidentiality, integrity and availability of data is of the utmost importance to Legg Mason.

Legg Mason maintains fundamentally sound cybersecurity practices and comprehensive disaster recovery and business continuity strategies to ensure the availability and security of Legg Mason data. This approach includes state-of-the-art technologies and a layered approach to information security.

We use internal metrics to track our performance and progress regarding client privacy, but choose to keep these metrics private to support our efforts. Our Cybersecurity team constantly monitors new strategies and threats that develop around the world and makes appropriate investments to protect client, employee and corporate data.

We also maintain an active and aggressive information security posture to protect employee data. Our Cybersecurity team actively tracks data security metrics. Legg Mason also offers identity and credit monitoring that all employees can leverage for their personal lives.

Despite these investments, IT professionals view employee behavior and human error as the leading causes of data security breaches. For this reason, it is important for our employees to understand their key role in safeguarding the firm’s network security. To help with this, we are committed to the continuing education and training of employees.

In addition to a mandatory annual cybersecurity training module, a year-long awareness campaign helps to reinforce key educational themes designed to protect the firm’s network security, which, in turn, helps to protect client data.

Regulatory Compliance

We have a robust Global Compliance Department that oversees Legg Mason’s corporate and distribution activities and provides support to our affiliate compliance departments. The Global Compliance Department is responsible for addressing regulatory requirements or potential conflicts with the business and activities such as mutual fund support, sales and marketing material review, email surveillance, regular compliance monitoring, and mock regulatory reviews of affiliates. At a time when investment products are becoming increasingly complex, we invest significant time and effort understanding and addressing the potential risks and ensure that related information and disclosures are appropriately positioned.

Throughout the year, Global Compliance provides regular training and issues policy reminders to reinforce employees’ responsibility to adhere to regulatory requirements and internal policies and procedures, as well as our “No Chalk” culture.

Anti-Corruption

Legg Mason implemented a comprehensive Anti-Corruption Program six years ago to address global regulatory requirements and focus on the topic. The program is organized into six principles: Risk Assessment, Policy, Tone from the Top, Due Diligence, Training, and Monitoring and Review. Related activities are summarized in an annual report and presented to the Legg Mason Audit Committee. A global Anti-Corruption task force representing the various Legg Mason offices addresses and monitors related risks such as use of third parties, gifts and entertainment, charitable contributions, and travel and expenses. The global task force continues to improve the Anti-Corruption Program by collaborating with Human Resources to improve hiring practices with the implementation of a centralized referral process and internship policy and working with Risk and Technology to address vendor oversight.

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Sustaining and Strengthening Our Unique Culture

Talent Management

Employees by Age

Chart

Average length of employment — 8.8 years
Median length of employment — 8 years
Voluntary global turnover — 6%

Our employees are our most valuable asset. That’s why Legg Mason and its affiliates work diligently to establish a workplace culture that values creativity and collaboration, and rewards hard work. Our policies and practices attract and retain professionals across our many departments. In addition to retaining strong internal talent, we aim to recruit dynamic new talent that brings fresh eyes and points of view.

Legg Mason welcomes expertise, enthusiasm and originality to help propel our positive momentum. Professional and personal fulfillment is also highly considered, and we have initiated programs to help our employees learn, grow and develop their individual potential. As a result, our voluntary global turnover is 6%, which remains flat year over year.

ERG Engagement And Fundraising Statistics

Since the beginning of the year, 1,268 Legg Mason employees have participated in ERG events and community service activities, raising $36,852.

Committed to cultivating an inclusive culture, Legg Mason’s Executive Diversity Council sponsors our Employee Resource Groups (ERGs) to support diverse employee interests. These employee-led networking groups provide an opportunity for employees sharing similar interests to come together to embrace and enhance diversity and inclusion at Legg Mason, and to develop professional and leadership skills in preparation for future career opportunities.

The ERG network continues its work around diversity and inclusion training and education, professional networking and development, and community outreach initiatives. Additionally, ERGs partner with the EDC as an ongoing business resource for recruiting and other initiatives.

AHEAD and GBC Mayor’s Business Award

Boys Hope Girls Hope (BHGH) provides a safe and nurturing environment where academically capable and motivated young people can grow their potential. African-Americans Helping to Enhance and Advance Diversity (AHEAD), Legg Mason’s African-American ERG, and select affiliates have supported BHGH in a variety of impact-oriented areas since 2010. These have included board and committee leadership, corporate philanthropy, workforce pipeline development, next-generation leadership development, collaborative community service, and formal and informal mentoring initiatives. The Greater Baltimore Committee honored Legg Mason’s ongoing support of this organization at the 41st Annual Mayor’s Business Recognition Awards luncheon.

Bottom Line Partnership

Now celebrating their 20th year of one-on-one counseling and mentoring, Bottom Line has helped thousands of low-income and first-generation students get to college, stay in college and earn their degrees. Legg Mason is proud to be the first company to be honored at Bottom Line’s annual gala in 2016 for our long-term partnership through employee volunteerism, student internships, charitable foundation support and the innovative dorm registry campaign.

Our African-American and women’s ERGs partnered with Bottom Line on a “Dorm Registry” collection drive that raised $6,000 for six first-year college students. The students received gift cards used to purchase college items such as laptops, classroom supplies and furniture.

Professional Development — Networking — Community Outreach

AHEAD

African-Americans Helping to Enhance and Advance Diversity

Provides an inclusive forum that encourages all employees to share ideas and information relevant to the growth and unique experiences of African-Americans

BLN

Best Life at Legg Mason

Promotes the importance of well-being for a productive, happy, healthy work-force within Legg Mason.

DPN

Developing Professionals Network

Creates a network of support to employees in the early stages of their careers by providing them with developmental, networking and community outreach opportunities.

GPS

Global Professional Services

Enhances the professional skills and personal growth of global colleagues with a common commitment.

LEAD

LGBTQ Employees & Allies for Diversity

Broadens awareness and education in support of lesbian, gay, bisexual and transgender issues.

PALM

Parents Alliance at Legg Mason

Opens opportunities and resources for parents at Legg Mason and the families of our employees.

PALM

Toastmasters

Offers onsite training where employees meet once a week to sharpen their communication and leadership skills.

VETS

Veterans Education, Training & Support

Encourages the recruitment and development of military veterans at Legg Mason while raising awareness, advocacy and support for veterans in our communities.

WLN

Women’s Leadership Network

Espouses the value that women and their perspectives bring to Legg Mason and the asset management industry. Our first and largest ERG boasts over 300 members worldwide.

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GRI Index

GRI G4 Index

General Standard Disclosures

Response/Page #

Strategy & Analysis

1

CEO Letter

CEO Letter

2

Key impacts, risks and opportunities

 

Organizational Profile

3

Organization name

Legg Mason Global Asset Management

4

Primary brands, products and services

2017 Form 10K pages 5-9

5

Headquarters location

Baltimore, Maryland, USA

6

Where the organization operates

2017 Form 10K pages 5-9

7

Nature of ownership and legal form

2017 Form 10K page 2

8

Markets served

2017 Annual Report page 2

9

Scale of the organization

2017 Form 10K page 9

10

Total number of employees by type

Talent Management

11

Collective bargaining agreements

None

12

Supply chain description

Process involved for purchasing, transportation, customer service, supply management. Supply chain is the network of individuals, organizations, resources, activities and technology involved in the creation, sale and delivery of source materials from a supplier to our end users.

13

Organizational changes during the reporting period

2017 Form 10K page 36

15

External charters, principles or other initiatives

Select Affiliates are PRI Signatories

16

Membership associations

Ceres, CDP, others

Material Aspects & Boundaries

17

Entities included in financial statements

2017 Annual Report page 73

18

Process for defining report boundaries and content

About this Report

19

Material aspects included in the report

Materiality

23

Changes from previous reports in terms of scope and/or boundaries

None

Stakeholder Engagement

24

Stakeholder groups

Multiple

25

How stakeholders were identified

Via Legg Mason and Ceres

26

Approach to stakeholder engagement

Periodic Multi-Stakeholder Engagement via Ceres

27

Topics raised during stakeholder engagements

While we do not adress all topics raised by stakeholders in our CSR Report, please refer to the Materiality Matrix to understand which topics are most material to stakeholders and to Legg Mason.

Report Profile

28

Reporting period

April 1, 2016 - March 31, 2017

29

Date of most recent report

Current report: October 2017

30

Reporting cycle

Annual

31

Report contact

Kristin Kosmides, Head, Corporate Social Responsibility, kokosmides@leggmason.com

32

"In accordance" option, GRI Index and report assurance

We are reporting in alignment with GRI guidelines but not core or comprehensive levels.
Our greenhouse gas emissions data was assured (limited) by PWC.
CDP Climate Change (CC8.6, 8.6a, 8.7, 14.2, 14.2a)

33

Policy regarding report assurance

Our greenhouse gas emissions data was assured (limited) by PWC.
CDP Climate Change (CC8.6, 8.6a, 8.7, 14.2, 14.2a)

Governance

34

Governance structure of the organization

2017 Proxy page 11
2017 Annual Report page 2, 154

36

High-level accountability for sustainability topics

CFO

38

Composition of the board and its committees

2017 Proxy page 11
2017 Annual Report page 2, 154
Legg Mason Governance

39

Whether the chair of the board is also an executive officer

Yes, 2017 Proxy page 11

40

Nomination and selection processes for the board and its committees

2017 Proxy page 12

41

Board conflicts of interest

2017 Proxy page 14

48

Highest committee or position that formally reviews and approves the organization’s sustainability report

CEO

49

Process for communicating critical concerns to the board

2017 Proxy page 14

Ethics & Integrity

56

Code of conduct

Legg Mason Code of Conduct

57

Helplines or advice lines for employees

Yes

58

Mechanisms for reporting concerns about unethical or unlawful behavior

Yes

General Standard Disclosures

Economic

Economic Performance

EC1

Economic value

2017 10K page 33

EC2

Climate change risks

CDP Climate Change (CC5.1d-f)

EC3

Benefit plan coverage

2017 10K page 132

Procurement practices

EC9

Local suppliers

Community Investment and Philanthropy

Environmental

Energy

EN3

Energy consumption (Scope 1 + 2)

Energy Efficiency
CDP Climate Change (CC10.1a, 11.2, 11.3, 11.3a, 11.4, 11.5)

EN4

Energy consumption (Scope 3)

Energy Efficiency
CDP Climate Change (CC3.3b, 14.1, 14.2. 14.3, 14.3a)

EN5

Energy intensity

Energy Efficiency
CDP Climate Change (CC12.2, 12.3)

EN6

Energy reductions

Energy Efficiency
CDP Climate Change (CC1.2a, 2.2a, 12.1a, 12.2, 12.3, 14.3a)

Biodiversity

EN11

Facilities in or near areas of high diversity

Headquarters is within close proximity of the Chesapeake Bay. Volunteerism efforts noted on Community Volunteerism and Philanthropy.

EN13

Habitats protected or restored

Via volunteerism efforts outlined in Community Volunteerism and Philanthropy.

EN14

IUCN Red List species

None

Emissions

EN15

GHG emissions (Scope 1)

Energy Efficiency
CDP Climate Change (CC7.1–7.4, 8.1, 8.2, 8.4, 8.5, 8.6, 8.6a, 9.1, 9.1a, 9.2d)

EN16

GHG emissions (Scope 2)

Energy Efficiency
CDP Climate Change (CC8.3. 8.4, 8.5, 8.7, 8.7a, 10.1, 10.1a)

EN17

GHG emissions (Scope 3)

Energy Efficiency
CDP Climate Change (CC14.1, 14.2, 14.2a, 14.3, 14.3a)

EN18

GHG emissions intensity

Energy Efficiency
CDP Climate Change (CC12.2, 12.3)

EN19

Reduction of GHG emissions

Energy Efficiency
CDP Climate Change (CC1.2a, 2.2a, 12.1a, 12.2, 12.3, 14.3a)

Transport

EN30

Environmental impacts from employee travel

Captured in Scope 3 emissions calculation.
Energy Efficiency
CDP Climate Change (CC14.1, 14.2, 14.2a, 14.3, 14.3a)

Supplier environmental

EN32

New suppliers screened using environmental criteria

Yes, via Supplier RFP.

Labor Practices

Employment

LA1

Number and rate of new employee hires and turnover

Voluntary global turnover: 6%, Talent Management

LA2

Benefits provided to full-time employees

2017 10K page 132

Diversity

LA12

Composition of governance bodies and employees

Diversity and Inclusion

Human Rights

Human Rights Investments

HR2

Employee training on human rights

Stakeholder Engagement Efforts

Child Labor

HR5

Significant risk of child labor in operations and suppliers

No

Forced or Compulsory Labor

HR6

Significant risk of forced or compulsory labor in operations and suppliers

No

Security Practices

HR7

Security personnel trained in the organization's human rights policies

Not applicable

Indigenous Rights

HR8

Incidents of violations involving rights of indigenous peoples

No

Human Rights Investments

HR9

Operations that have been subject to human rights assessments

Not applicable

Human Rights Grievance Mechanisms

HR12

Grievances about human rights impacts

Not applicable

Society

Local communities

SO1

Local community engagement, impact assessments and development programs

Community Investment and Philanthropy

SO2

Negative impacts on local communities

Not applicable

Anti-corruption

SO4

Communications and training on anti-corruption

Governance

Product Responsibility

Customer Health & Safety

PR1

Health and safety impact assessments of products and services

Not applicable

PR2

Non-compliance concerning the health and safety impacts of products and services

Not applicable

Active Ownership

FS11

Percentage of assets subject to positive and negative environmental or social screening

ESG Related Products and Strategy

Show GRI Index Hide GRI Index plus

About Legg Mason

Legg Mason is a leading global investment company with over a century of experience in identifying opportunities and delivering astute solutions. As of October 31, 2017, Legg Mason has more than $755 billion in assets worldwide in a broad mix of equities, fixed income, alternatives and liquidity strategies.

Investors need thoughtful solutions in ever more complex global markets. We help clients expand beyond traditional strategies to meaningfully diversify, mitigate volatility and generate investment returns.

We do that by expanding client choice: active investment strategies in an increasing variety of investment vehicles, proven across market cycles, by a global distribution platform that offers expanded access options for investors around the world.

Our investment managers have multiple perspectives, broad capabilities and specialized expertise beyond mainstream asset classes. As a multi-affiliate asset manager diversified by design, we serve retail and institutional clients across six continents and have a presence in 39 locations. Each affiliate offers its own independent approach to research and analysis.

At Legg Mason, our mission is Investing to Improve LivesTM. We are committed to enhancing the quality of life for all our constituents — clients, shareholders, communities and one another.

We also understand how significantly environmental, social and governance (ESG) factors impact the investing process. Read more about our ESG Program here. We’ve been working alongside our affiliates in this ESG space for 30 years and as of March 31, 2017, a quarter (25%) of our total long-term assets under management were allocated to ESG strategies.

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What should I know before investing? Past performance is no guarantee of future results. Equity securities are subject to price fluctuation and possible loss of principal. Fixed-income securities involve interest rate, credit, inflation and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed-income securities falls.

All investments involve risk, including loss of principal.

Before investing, carefully consider a Fund's investment objectives, risks, charges and expenses. You can find this and other information in each prospectus, or summary prospectus, if available, which is available at www.leggmasonfunds.com. Please read it carefully.

© 2017 Legg Mason Investor Services, LLC. Member FINRA, SIPC. Legg Mason Investor Services, LLC and all entities mentioned are subsidiaries of Legg Mason, Inc.