DJSI Sustainability Assessment 2015 1 Economic Dimension 1.1 Corporate Governance Corporate governance systems ensure that a company is managed in the interests of shareholders (including minority shareholders). On the one hand this includes checks and balances that enable the Board of Directors to have appropriate control and oversight responsibilities. Empirical evidence suggests that over a period of 5 years, the difference of return on equity between well-governed and badly-governed companies can be as much as 56% (source: GMI 2007). On the other hand management incentives have to be set in such way that management interests are aligned with shareholder s interests. RobecoSAM s questions focus on board structure, composition of the board and relating committees, board effectiveness and measures to ensure the alignment with the longterm interest of shareholders, which includes transparency and structure of executive remuneration as well as share ownership requirements. 1.1.1 Board Structure Please indicate in the following table the number of executive and non-executive directors on the board of directors/supervisory board of your company. Please find additional clarification on one-tier and two-tier systems in the information button. Board Type Please select whether your company has a one or two-tier board ONE-TIER SYSTEM. For companies with board of directors. Executive directors 1 Non-executive directors (excl. independent directors) Independent directors 10 Total board size 11 Number of members 0 TWO-TIER SYSTEM. For companies with supervisory board. SUPERVISORY BOARD Non-executive directors (excl. independent directors) Independent directors Employee representatives (if not applicable, please leave the field empty) Number of members MANAGEMENT BOARD/ EXECUTIVE MANAGEMENT Senior executives 2 of 144, Copyright RobecoSAM AG, 2001-2015
Board Independence Statement Number of members TOTAL SIZE OF BOTH BOARDS Please indicate if your company has an independence statement for the board of directors in place. Please provide a supporting public reference : Yes, we have a publically available independence statement and it includes the following: An explicit definition of what determines that a board member is independent. Please specify: The Board is responsible for determining whether or not each director is independent within the meaning of such term set forth in National Instrument 58-101. A target share of independent directors on the board. Please specify: We do not have a public independence statement for the board of directors For the May 12, 2015 Annual and Special Meeting of Shareholders, the Board of Directors of the Corporation set the number of directors to be elected at the meeting at 11. The shareholders elected as directors are the 11 listed in the Notice of 2015 Annual and Special Meeting of Shareholders and Information Circular, p. 8-14. Encana's Board of Directors has appointed five committees: Audit; Corporate Responsibility, Environment, Health and Safety; Human Resources and Compensation; Nominating and Corporate Governance; and Reserves. The Reserves Committee is particular to the oil and gas industry. The Nominating and Corporate Governance Committee gives consideration to the appropriate size of the Board. Encana believes that the current size and composition of the Board is sufficient to provide a diversity of expertise necessary to organize all five committees, yet small enough to facilitate efficient meetings and decision making. Mr. Suttles, Encana's President & CEO, is the only board member that is a member of the Corporation's management and is considered to be non-independent due to his position as President and CEO of the Corporation. Notice of 2015 Annual and Special Meeting of Shareholders and Information Circular, Notice of 2015 AGM and Information Circular.pdf (Pages: 68) 1.1.2 Non-executive Chairman/Lead Director Is the board of directors/supervisory board headed by a non-executive and independent chairman and/or an independent lead director? If an independent lead director is appointed, please provide his / her name in the following comment box: 3 of 144, Copyright RobecoSAM AG, 2001-2015
Chairman is non-executive and independent. Please specify for how many years this approach has been adopted: 13 Role of CEO and chairman is split and former CEO/chairman (presently in a non-executive position) is now chairman Role of CEO and chairman is split and chairman is non-executive but not independent Role of CEO and chairman is split and former CEO/chairman is now chairman, but independent lead director is appointed. Please indicate name in the provided comment box at the top of the question. Role of chairman and CEO is joint, but independent lead director is appointed. Please indicate name in the provided comment box at the top of the question. Role of chairman and CEO is joint or chairman is an executive director The chairman is non-executive and independent. This approach has been in place since the Corporation's inception in 2002. Pursuant to the Corporation's By-Law No. 1, the Chair and Chief Executive Officer shall not be the same person, except in very limited circumstances. In the Document Library, see the Notice of 2015 Annual and Special Meeting of Shareholders and Information Circular, p. 68. 1.1.3 Board Nomination Process Please indicate whether diversity and the complementarity of skills are considered in your company's board nomination process. Please also indicate whether or not this policy is publicly available and what criteria are covered. Policy Please indicate if diversity and complementarity of skills are key criteria in your board nomination process. Please attach supporting documents and indicate whether these documents are available in the public domain: Yes, our policy is publicly available. Please provide weblink: Yes, our policy is internally available. Please provide supporting evidence: No, our board nomination process does not cover diversity or complementarity of skills Diversity Criteria 4 of 144, Copyright RobecoSAM AG, 2001-2015
Please state the three most important criteria related to board composition and board diversity that are included in your nomination policy and that aim to create variance in these criteria. Please provide supporting evidence for the options you have marked. Age Educational background Ethnicity Gender Level of independence Nationality Industry experience Tenure in the industry Other, please specify: The Nominating and Corporate Governance Committee does not have a formal policy on board diversity. The Committee takes into account various criteria in the nomination process. Three of the Corporation's eleven directors are female. Two of the five committee chairs are female. Diversity in Board Nomination Process Please indicate which of the following aspects are formally part of the nomination process and provide a link if this information is found in the public domain. If not publicly available, provide internal documents to support your answer. A skill matrix of the current board (describing the current mix of skills represented by different board members) is available In the Document Library, see the Notice of 2015 Annual Meeting of Shareholders and Information Circular, p. 72, director skills matrix. A gap analysis between the current mix of skills and the target mix of skills has been performed and serves as the basis for the review of candidates by the nomination committee An analysis of the current mix of skills and the target mix of skills is completed by the Nominating and Corporate Governance Committee on an annual basis and is a component of the Board effectiveness review. In the Document Library, see the Notice of 2015 Annual Meeting of Shareholders and Information Circular, p. 65, Corporate Governance Practices. The recommendations of the Nomination Committee explicitly address in which way the candidates recommended address the skills gap. Please indicate where this publicly available. Board Industry Experience Please indicate the number of board members that have relevant working experience in your company's sector according to GICS level 1 sector classification. See information button for additional information. 8 We do not consider these aspects in our board nomination process Not applicable. Please provide explanations in the comment box. 5 of 144, Copyright RobecoSAM AG, 2001-2015
Notice of 2015 Annual and Special Meeting of Shareholders and Information Circular, Notice of 2015 AGM and Information Circular.pdf (Pages: 65-72) 1.1.4 Gender Diversity Please indicate the number of women on your company's board of directors/supervisory board? 3 There were three female directors nominated and elected as directors of the Corporation at the Annual and Special Meeting of Shareholders held on May 12, 2015. 1.1.5 Responsibilities and Committees Board Committees, p lease indicate in the table below the functions and associated committee names, for which the board of directors/supervisory board explicitly assumes formal responsibility: Function Responsibilities Name of committee Audit, accounting, risk management Selection and nomination of board members and top management All members are non-executive directors All members are non-executive directors Audit Committee (primarily financial risks) - all risks fall under the mandate of the Board of Directors Nominating and Corporate Governance Committee Remuneration of board members and top management All members are non-executive directors Board Level Responsibility for Sustainability Is there a board committee formally responsible for sustainability? Nominating and Corporate Governance Committee (for Board members) and Human Resources and Compensation Committee (for senior management) Yes we have a board committee formally responsible for sustainability which consists only of board members. Please specify the name of the board committee: The Corporate Responsibility, Environment, Health & Safety Committee 6 of 144, Copyright RobecoSAM AG, 2001-2015
No, we do not have a specific board committee formally responsible for sustainability but we have a sustainability committee which includes at least one board member. Please specify the name of the committee and the board member: No, we do not have such a committee in place Sustainability Committee Composition If you do have a sustainability committee in place, please indicate which of the following senior executives (maximum one level away from the CEO) are on the committee: Chief Executive Officer Chief Financial Officer Other Senior Executive(s), please specify: Responsibility for Sustainability Please indicate the name, position and reporting line of the highest ranking individual responsible for sustainability (e.g. Head of Corporate Social Responsibility or similar) in the company (excluding CEO). Name Position Number of levels from CEO 2 Reporting Line Dave Lye Vice-President, Policy, Environment and Sustainability Reports to the Vice-President, Communications and Investor Relations, who reports to the CEO. We do not have any committees that assume responsibility for the functions descibed above Encana also has a Reserves Committee appointed by the Board of Directors. All members of this committee are independent directors. The mandate of the committee can be found at: http://www.encana.com/pdf/about/boardgovernance/mandate-reserves.pdf. 1.1.6 Board Effectiveness How does your company ensure the effectiveness of your board of directors/supervisory board and the alignment with the (long-term) interests of shareholders? 7 of 144, Copyright RobecoSAM AG, 2001-2015
Number of meetings attended in percentage last business / fiscal year Number of other mandates of the board of directors / supervisory board members. This only applies to nonexecutive and independent directors, not executive directors or employee representatives. Performance assessment of board of directors/ supervisory board members. Election of board members Indicators/measures Average board meeting attendance: 96 % of meetings of board of directors/supervisory board. Minimum of attendance for all members required, at least (in %) Number of non-executive/ independent directors with 4 or less other mandates: 10 Number of other mandates for non-executive/ independent directors restricted to: Regular self-assessment of board performance. Please specify or provide documents: The Nominating and Corporate Governance Committee is responsible for assessing the effectiveness of the Board and Committees of the Board. Regular independent assessment of board performance. Please specify or provide supporting documents: Board members are elected and re-elected on an annual basis Board members are elected individually (as opposed to elected by slate) Nominating and Corporate Governance Committee Mandate, Mandate - Nominating and Corporate Governance.pdf (Pages: 1-4) Notice of 2015 Annual and Special Meeting of Shareholders and Information Circular, http:// www.encana.com/pdf/investors/financial/annual-reports/2015/information-circular.pdf (Pages: 76 and Appendix E) p. 76 - Assessments of the Board; Appendix E - Board of Directors' Mandate 8 of 144, Copyright RobecoSAM AG, 2001-2015
1.1.7 Executive Compensation - Success Metrics and Vesting Please indicate your company's pre-defined corporate indicators relevant for the variable compensation of Senior Executives as well as guidelines on time vesting and performance period for variable CEO compensation. Success Metrics for Variable Senior Executive Compensation Internal Financial Success Metrics (e.g. cashflow, EBIT, revenues), please specify: Total Capital, Liquids Production, Gas Production, Total Costs, Capital Allocation Focus, Exit Production Mix, Net Debt, Cash Flow Per Share Growth External Financial Success Metrics (e.g. share price, Tobins Q), please specify: Share price/relative Total Shareholder Return External Perception Metrics (e.g. reputational risks, customer satisfaction, feedback from stakeholder engagement), please specify: Reputational risks, feedback from stakeholder engagement Environmental metrics (e.g. corporate emission reduction indicators), please specify: environmental and regulatory performance Social figures (e.g. corporate health & safety indicators), please specify: safety performance Performance Period for Variable CEO Compensation What is the longest performance period applied to evaluate variable compensation (based on predefined targets, either variable or absolute), covered in your executive compensation plan? Is there a clawback policy in place? Please note that compensation that only is time vested is not considered as performance based compensation in this part of the question. Please indicate the longest performance period covered by your executive compensation plan: 4 years We have a clawback provision in place. Please specify: We have an incentive compensation clawback policy that applies to all executives. Time Vesting for Variable CEO Compensation Please indicate the timeframe for payout of variable CEO compensation. If payout depends on future performance please use target payouts to calculate the percentage. Timeframe for variable payout of CEO compensation 0-3 years 100 longer than 3 years % of total variable compensation Please indicate the longest time vesting period for variable CEO compensation: 4 years We do not have a performance based incentive system For clarity, the answers provided refer to awards under Encana's Short-term Incentive (or "bonus") program and Long-term Incentive (LTI) program. Percentage amounts refer to compensation awarded in 2014 only. Answers 9 of 144, Copyright RobecoSAM AG, 2001-2015
to the performance period and longest vesting period questions herein include a performance stock option grant made to our CEO upon hire in 2013, which is eligible to vest in four years (2017) if certain Board-approved performance thresholds are achieved. Approximately 90% of our CEO's 2014 annual compensation is based on annual bonus eligibility, determined by the Board of Directors based on Encana's performance relative to the metrics and targets (approved by the Board) contained in our annual Company Scorecard and our share price. For purposes of our bonus program, operational performance categories include: (i) Operating Performance; (ii) Portfolio Transition; and (iii) Balance Sheet strength, which are comprised of measures including annual production, capital efficiency, operating costs, exit production volumes, environmental and regulatory performance, annual safety performance and financial performance. Approximately 64% of our CEO's 2014 compensation was comprised of LTI awards, for which 85% is subject to a full deferral of vesting for three years. Compensation opportunity under these LTI grants is determined by Encana's TSR performance (over three years) relative to a peer group of companies and Board approved thresholds, as well as the absolute performance of our share price. 1.1.8 Transparency of Executive Compensation Does your company communicate the remuneration/compensation of your board of directors/supervisory board members and other highest paid directors / senior executives (e.g. CEO) externally? Yes, on an individual level for each board member and CEO and additional highest paid senior executives, please indicate weblink: http://www.encana.com/pdf/investors/financial/annual-reports/2015/information-circular.pdf Yes, on an individual level for each board member and CEO, please indicate weblink: Yes, on an aggregated level for non-executive directors AND on aggregated level for executive directors, please indicate weblink: Yes, on an aggregated level for the board/supervisory board, please indicate weblink: No, we do not communicate this information externally Does your company communicate what part of total compensation for senior executives consist of variable pay and under what conditions payments are received? Yes, we publically disclose the ratio between fixed and performance based compensation (i.e. a clear indication of the share of total compensation which is at risk and performance-based). Please indicate weblink: 10 of 144, Copyright RobecoSAM AG, 2001-2015
http://www.encana.com/pdf/investors/financial/annual-reports/2015/information-circular.pdf Yes, we publically disclose what performance metrics are relevant for performance based variable compensation. Please indicate weblink: http://www.encana.com/pdf/investors/financial/annual-reports/2015/information-circular.pdf Yes, we publically disclose the weightings between performance metrics for perfomance based variable compensation. Please indicate weblink: http://www.encana.com/pdf/investors/financial/annual-reports/2015/information-circular.pdf Yes, we publically disclose the performance targets that need to be met for performance based variable compensation. Please indicate weblink: http://www.encana.com/pdf/investors/financial/annual-reports/2015/information-circular.pdf No, we do not have performance based variable pay, but we disclose this publically. Please indicate weblink: No, we do not communicate this information externally The Statement of Executive Compensation, pp. 24-57, of the Notice of 2015 Annual Meeting of Shareholders and Information Circular was made in compliance with the requirements of Form 51-102F6, Statement of Executive Compensation. 1.1.9 Disclosure of Median or Mean Compensation of all Employees & CEO Compensation Please provide the annual compensation for the Chief Executive Officer and the median of the annual compensation of all other employees as well as the ratio between the two. If you are unable to provide the median, please provide figures for total mean compensation and the ratio using the mean. The currency provided should be consistent for all figures. CEO Compensation Total CEO Compensation Employee Compensation Median Employee Compensation Mean Employee Compensation Please indicate the total annual compensation of the Chief Executive Officer, or any equivalent position 11 of 144, Copyright RobecoSAM AG, 2001-2015
CEO Compensation Total CEO Compensation Employee Compensation Median Employee Compensation Mean Employee Compensation Please indicate either median or mean annual compensation of all employees, except the Chief Executive Officer (or any equivalent position) Please indicate the ratio of the mean or median employee compensation and the total annual compensation of the Chief Executive Officer Please specify the currency used in the table: We do not track the ratio of the median or mean employee compensation and the total annual compensation of the Chief Executive Officer We plan to start tracking these figures during 2015 Encana does not disclose median compensation of employees relative to CEO compensation. The disclosure described in this question is not required disclosure under applicable Canadian securities laws and regulations. Encana's executive compensation disclosure, in the Notice of 2015 Annual Meeting of Shareholders and Information Circular, was made in compliance with the requirements of Canadian Securities Administrators (CSA) Form 51-102F6, Statement of Executive Compensation. 1.1.10 Management Ownership Requirements Please indicate if your company has specific stock ownership requirements for the CEO and other executives. Please attach supporting evidence for the selected option(s): Yes, there are specific requirements in place. Please indicate at which levels this exist and indicate the share ownership requirements as a multiple of the annual base salary. The CEO has to build up a share ownership of 5 times the annual base salary Other executive managers (other than the CEO) have to build up a share ownership of 3 12 of 144, Copyright RobecoSAM AG, 2001-2015
times the annual base salary No, there are no share ownership requirements but the CEO holds company shares corresponding to times the annual base salary No, there are no share ownership requirements and the CEO does not hold any company shares Since 2002, Encana has implemented Share Ownership Guidelines (the Guidelines ) to align the long-term interests of our executives with those of our shareholders. Under the Guidelines, executives and designated Vice- Presidents are required to meet minimum share ownership levels, calculated as a multiple of base salary, within a five year period. In the event a participant is promoted and his or her target is increased, a further two-year period is provided to meet the new share ownership target. Notice of 2015 Annual and Special Meeting of Shareholders and Information Circular, Notice of 2015 AGM and Information Circular.pdf (Pages: 44) Executive Share Ownership Guidelines 1.1.11 MSA Corporate Governance In this section we include a performance score on the Corporate Sustainability Monitoring with the objective to verify the company's involvement and management of crisis situations that can have a damaging effect on reputation. The evaluation will be filled in by the responsible analyst of your industry. No additional information is required from your company. Please disregard the comment box. 1.2 Risk & Crisis Management Effective risk and crisis management is vital for long-term financial planning and organizational flexibility. It has especially gained importance since the recent financial crisis. Companies need to implement internal control processes to comply with existing regulations and be proactive in developing the control mechanism. RobecoSAM's questions focus on some structural and key elements of the risk management system, such as group-wide uniformity, risk definition, risk visualization, and risk response strategies. Additionally, we perform a real-time check to assess the system works with our internal MSA (Media and Stakeholder Analysis). 13 of 144, Copyright RobecoSAM AG, 2001-2015
1.2.1 Risk Governance Please indicate which persons, departments and committees are responsible and accountable for enterprise risk management in terms of risk appetite & tolerance as well as risk monitoring & reporting. Please also indicate the expertise and training applicable to non-executive directors as well as the corporate structure of risk management functions. Risk appetite & tolerance Risk monitoring & reporting Highest responsible person or committee: (please indicate name and position) Doug Suttles, President & Chief Executive Officer and Executive Leadership Team [Corporate Risk Mitigation Policy] Darcy Collings, Vice-President, Financial Compliance, Governance & Risk Reporting Line: (please indicate who the person or committee reports to) Board of Directors Sherri Brillon, Chief Financial Officer Number of non-executive members of board of directors/supervisory board with expertise in (enterprise) risk management. Please specify number of non-executive directors: 2 Regular education for non-executive directors ensured. Please specify: We provide continuing education opportunities for all directors to enhance their skills and to ensure each has a current understanding of Encana's business environment. The risk management function is structurally independent of the business lines. Please specify: The Vice-President, Financial Compliance, Governance & Risk is responsible for the risk management function. This position is corporate and reports to the Chief Financial Officer, independent of the business lines. There are no such responsibilities in place Not applicable. Please provide an explanation in the comment box below.. 1.2.2 Risks Correlation 14 of 144, Copyright RobecoSAM AG, 2001-2015
Do you perform a correlation analysis of the key risks identified? Please provide supporting documents. Yes, we perform a correlation analysis, only for financial risks. Yes, we perform a correlation analysis for financial and business risks. Please specify which business risks are included in risk correlation analysis. We do not perform a correlation analysis 2014 Annual Report, annual-report-2014-20150512-132608.pdf (Pages: 36-39) Management's Discussion and Analysis, Risk Management Section 1.2.3 Sensitivity Analysis and Stress Testing (incl. Water and Climate) Does your company perform sensitivity analysis and stress testing on a group level? Please attach supporting documents. Yes, on changes in financial risks, such as exchange and interest rates Yes, on changes in carbon pricing Yes, on changes in water availability or water quality Yes, on other risks (e.g. operational risks, market risks, strategic business risks, compliance risks). Please specify: No, we do not perform sensitivity analysis and stress testing at the group level 2014 Annual Report, annual-report-2014-20150512-132608.pdf (Pages: 36-39) Management's Discussion and Analysis, Risk Management Section 15 of 144, Copyright RobecoSAM AG, 2001-2015
1.2.4 Emerging Risks Please indicate two important long-term (3-5 years+) emerging risks that your company identifies as having the most significant impact on the business in the future, and indicate any mitigating actions that your company has taken in light of these risks. For each risk, please provide supporting evidence from the public domain where the risk, the business impact and any mitigating actions are described. Emerging Risk 1 Emerging Risk 2 Description of risk, as reported in the public domain: No, we do not report on long-term, emerging risks Potential business impact of the risk, as described in the public domain: Mitigating actions, as described in the public domain: Supporting evidence from the public domain on risk, business impact and mitigating actions We identify emerging risks internally and report to the Board and the Audit Committee. However, these are not provided in the public domain. No references attached 1.2.5 Risk Culture What strategies does your company pursue in order to promote and enhance an effective risk culture throughout the organization? Please indicate the relevant options below and specify where prompted. Financial incentives which incorporate risk management metrics, please indicate for which employees this applies For senior executives, please specify: For line managers, please specify: 16 of 144, Copyright RobecoSAM AG, 2001-2015
Focused training throughout the organization on risk management principles, please specify: Focused risk management training on high risk areas and general training are provided for the company as a whole. Inclusion of risk management criteria in the HR review process for employee evaluations Measures allowing individual employees proactively to identify and report potential risks throughout the organization, please specify: All staff have risk management responsibilities. The Corporate Risk Management Policy commits all staff to consistently apply risk assessment processes and to take professionally assessed risks based upon high-quality work. The company risk matrix tool should be considered when assessing, measuring and reporting risks. All risks are to be reported to the Director/Senior Manager level. Increasing levels of risks are reported higher in the organization as set out in the risk matrix "risk reporting" step. Measures allowing continuous improvement in risk management practices through involvement of employees in structured feedback process, please specify: The Risk Network group is comprised of subject matter experts in leadership roles who meet regularly and provide feedback for continuous improvement. Incorporating risk criteria in the product development or approval process Other means of measuring or innovating for an effective risk culture, please specify: We have assessed our company against industry's risk management best practices and have prioritized areas for improvement. We have regular (at least quarterly) meetings with cross functional subject matter expert senior leaders in the company to have risk management discussions. No, we do not have any strategies to promote and enhance an effective risk culture 1.2.6 MSA Risk & Crisis Management In this section we include a performance score on the Corporate Sustainability Monitoring with the objective to verify the company's involvement and management of crisis situations that can have a damaging effect on reputation. The evaluation will be filled in by the responsible analyst of your industry. No additional information is required from your company. Please disregard the comment box. 17 of 144, Copyright RobecoSAM AG, 2001-2015
1.3 Codes of Conduct/Compliance/Corruption&Bribery Economic crime is consistently harmful to a company's intangible assets (e.g. negative impact on the company's reputation, on staff morale and on business relationships). Internal controls appear to be inefficient when looking at how economic crimes are actually discovered, suggesting that internal systems are often co-opted, circumvented or overridden. Companies active in countries with weak anti-corruption laws are exposed to additional reputational and legal risks. Evidence of corrupt practices can result in exclusion from contracts financed by institutions that blacklist suppliers of bribes (e.g. World Bank's list of debarred firms), potentially impacting future earnings as well as higher risk premiums for debt or equity. The key focus of the criterion is on the Codes of Conduct, their implementation and the transparent reporting on breaches. 1.3.1 Codes of Conduct: Focus Please indicate for which areas corporate codes of conduct have been defined at a group level (including subsidiaries). Please attach supporting documents. Corruption and bribery Discrimination Confidentiality of information Antitrust/anticompetitive practices Money-laundering and/or insider trading/dealing Environment, health and safety Whistleblowing No group-wide code of conduct Encana regularly reviews its corporate governance model and creates and amends policies and practices to ensure that Encana s expectation for compliant and ethical behaviour is firmly supported by a strong ethics and compliance infrastructure. The Business Code of Conduct and supplemental policies can be found at http:// www.encana.com/about/board-governance/policies/. Primary policies specific to these areas include: Business Code of Conduct, Corporate Responsibility Policy, Environment Policy, Health & Safety Policy, Integrity Hotline. The Business Code of Conduct establishes Encana's commitment to conducting business ethically and legally and addresses topics such as compliance with laws and regulations, conflict of interest, anti-fraud, disclosure, 18 of 144, Copyright RobecoSAM AG, 2001-2015
confidentiality, securities trading and insider reporting, accountability for adherence to the Code, reporting of violations of the Code and prevention of corruption. Acceptance of Gifts Practice, Acceptance of Gifts Practice.pdf (Pages: 1-2) Anti-fraud Policy, Policy - Anti-fraud.pdf (Pages: all) Business Code of Conduct, Business Code of Conduct.pdf (Pages: 1-7) Competition and Antitrust Laws Compliance Policy, Competition and Antitrust Laws Compliance Policy.pdf (Pages: 1-2) Confidentiality Policy, Confidentiality Policy.pdf (Pages: 1-3) Conflict of Interest Policy, Policy - Conflict of Interest.pdf (Pages: all) Corporate Responsibility Policy, Responsibility Policy March 2013.pdf (Pages: all) Environment Policy, Encana Environment Policy May 2013.pdf (Pages: 1) Health and Safety Policy, Health and Safety Policy.pdf (Pages: 1) Integrity Hotline, http://www.encana.com/sustainability/corporate/integrity-hotline.html (Pages: 1) Policy and elearning Recommitment Schedule - Company Wide, Policy Recommitment Go-Forward Plan v2.xlsx (Pages: Section 1.3) Supplemental Political Contributions Policy, Political Contributions Policy.pdf (Pages: 1-2) Prevention of Corruption Policy, Prevention of Corruption Policy.pdf (Pages: 1-2) Respectful Workplace Practice, Encana Respectful Workplace Practice August 2014.pdf (Pages: 1-3) Discrimination Securities Trading and Insider Reporting Policy, Securities Trading and Insider Reporting Policy.pdf (Pages: 1-8) 1.3.2 Codes of Conduct: Systems/ Procedures What mechanisms are in place to assure effective implementation of your company's codes of conduct (e.g. compliance system)? Responsibilities, accountabilities and reporting lines are systemically defined in all divisions and group companies Dedicated help desks, focal points, ombudsman, hot lines Compliance linked to employee remuneration Employee performance appraisal systems integrates compliance/codes of conduct Disciplinary actions in case of breach, i.e. warning, dismissal, zero tolerance policy Compliance system is certified/audited/verified by third party, please specify: PWC performs entity level controls on Encana's E&C and investigations procedures. No such systems/policies in place 19 of 144, Copyright RobecoSAM AG, 2001-2015
Encana has several mechanisms in place to ensure effective implementation of the Company's codes of conduct: (1) To ensure staff compliance with Encana s corporate governance framework, all Encana employees are required to formally confirm their commitment to the Business Code of Conduct and governance framework on an annual basis. Included in the commitment is an elearning training module which covers the Business Code of Conduct which includes the following policies and practices: Acceptable Use of Information Systems; Acceptance of Gifts; Business Conduct, Corporate Responsibility & Ethics; Competition and Antitrust Laws Compliance; Conflict of Interest; Confidentiality Policy; Political Contributions; Prevention of Corruption; Privacy; Anti- Fraud; Disclosure; Lobbying; and Securities Trading and Insider Reporting. Policy and practice recommitment and elearning modules are also regularly scheduled for additional policies and practices: Alcohol and Drug; Reasonable Suspicion; Information Management; Respectful Workplace; Corporate Responsibility; Environment; Health & Safety; Travel; IT Security; Mobile Device Acceptable Use; Driver Distraction; and Social Media. Employees are required to review and declare that they have no conflicts of interest, or alternatively formally declare any potential conflicts of interest annually, as they may arise throughout the year. (2) Encana provides an effective and consistent procedure to address potential violations of company policies, practices and other regulations. The Company has an established Investigations Team, which reviews all complaints brought forward. Some complaints are forwarded to the business units for resolution. Others, if appropriate, are investigated in a confidential and timely fashion. (3) An employee s yearly compensation (bonus) can be impacted negatively by non-compliant or unethical behaviour. (4) Encana engages NAVEX Global to operate its Integrity Hotline, which provides for anonymous reporting. Concerns can also be reported to the Investigations email, which is a dedicated reporting line. Additional confidential reporting avenues regarding Encana s operations are available through the Ethics email address and the Corporate Responsibility email address. 1.3.3 Corruption&Bribery: Scope of Policy Please indicate which of the following aspects are covered by your anti-corruption and bribery policy at a group level (including subsidiaries). Please attach supporting documents. Please ensure that the marked options are both covered by your company's policy and are clearly disclosed in the attached documents. Bribes in any form (including kickbacks) on any portion of contract payments or soft dollar practices Direct or indirect political contributions Political contributions publicly disclosed. Please attach supporting documents and/or indicate web address: Government of Canada: http://www.canada.gc.ca/home.html 20 of 144, Copyright RobecoSAM AG, 2001-2015
Charitable contributions and sponsorship Charitable contributions and sponsorship publicly disclosed. Please attach supporting documents and/or indicate web address: Community Investment: http://www.encana.com/communities/investment/ No anti-corruption & bribery policy The Business Code of Conduct includes the areas of Competition and Antitrust, Privacy and Prevention of Corruption. With regard to direct or indirect political contributions: oration will make only those financial or in-kind contributions permitted by law to a recognized political party, candidate or campaign in the provinces and municipalities where the Company has business interests and in such manner as may be consistent with the Company's approved policy on the matter. Encana will fully comply with all legal requirements for public disclosure. Encana employees, contractors and directors may choose to become involved in political activities as long as they undertake these activities on their own behalf and may, on a personal level, give to any political party or candidate. Reimbursement by the Company is prohibited. Encana Cares provides employees in Canada and the U.S. with a convenient and confidential way to plan their charitable giving. Encana Cares allows each employee to decide how and where donations are directed. Encana matches employee donations dollar-for-dollar (up to $25,000 per employee), and covers all associated administration costs so that 100 percent of donations go directly to the charities that employees support. Business Code of Conduct, business-conduct.pdf (Pages: 1-7) - Corporate Responsibility Policy, Responsibility Policy March 2013.pdf (Pages: 1-3) DRAFT Sustainability Report 2014, 2014 SR DRAFT 2015-05-26.pdf (Pages: 26) Political Contributions Policy, Policy - Political Contributions.pdf (Pages: 1-2) 1.3.4 Codes of Conduct/Anti-Corruption&Bribery: Business Relationships Please indicate the percentage of coverage of your codes of conduct and anti-corruption and bribery policy relative to the total number of: Employees group-/worldwide: 100 Contractors/Suppliers/Service providers: 100 Subsidiaries: 100 Joint ventures (includes stakes below 51%) : 21 of 144, Copyright RobecoSAM AG, 2001-2015
None of the above are covered in our anti-corruption and bribery policy or codes of conduct Encana agreements require all Contractors, Suppliers, and Service Providers to be in compliance with all anticorruption and bribery legislation. In addition, Encana expects similar codes of conduct to be followed by the same group of companies. 1.3.5 Codes of Conduct/Corruption&Bribery: Reporting on breaches Does your company publicly report on breaches (e.g. number of breaches, cases etc.) against your codes of conduct/ethics and anti-corruption and bribery policy? Please attach documents and/or web address. If your company did not have any breaches of your codes of conduct during the last fiscal year, please indicate where this is publicly reported. Yes, please refer to the reference(s) provided: No, we do not publicly report on breaches Encana does not publicly disclose code and other breaches, although a reporting protocol that deals with specific legal violations does exist through our Corporate Responsibility reporting. No references attached 1.3.6 MSA Codes of Conduct/Corruption In this section we include a performance score on the Corporate Sustainability Monitoring with the objective to verify the company's involvement and management of crisis situations that can have a damaging effect on reputation. The evaluation will be filled in by the responsible analyst of your industry. No additional information is required from your company. Please disregard the comment box. 22 of 144, Copyright RobecoSAM AG, 2001-2015
1.4 Supply Chain Management In an increasingly globalized world, when a company outsources its production, services or business processes, it also outsources corporate responsibilities and corporate risks. This means that companies need to find new strategies to manage the associated risks and opportunities that differ from the traditional risk and opportunity management of when the company has its production or services in-house. In addition the company is confronted with the need to minimize costs and time of delivery to satisfy the demand of their suppliers and increase profitability without negatively impacting the quality of the product or at high environmental or social costs. Investors increasingly see the importance of supply chain risk management and the negative consequences if it is not managed effectively. This criterion aims to identify companies that have lower supply chain risk profiles, either through the characteristics of the supply chain or through appropriate management of existing risks. In addition, RobecoSAM seeks to identify companies that are using sustainable supply chain management as an opportunity to improve their long-term financial performance. 1.4.1 Awareness Please indicate if your company is undertaking a spend analysis of its supply chain as well as the scope of this analysis. Please also provide your definition of critical suppliers as well as the results of your mapping of these suppliers. Please provide supporting documents for each of the sections. Spend Analysis of the Supply Chain Does your company undertake a spend analysis of its supply chain? If yes, please provide a brief description and attach supporting documents: Encana's Supply Management extracts relevant accounting codes from the accounting system and then groups them into specific supply management categories. Multiple supplier names are rolled up to improve the quality of spend reports. A parent-child relationship is created for suppliers with complex ownership structures. Please indicate what percentage of your total procurement spend is covered in the spend analysis conducted within the last three years: 71 Critical Suppliers Has your company defined a formal process to identify critical suppliers (e.g. high volume suppliers, suppliers of critical components, non-substitutable suppliers)? If yes, please provide a brief description of the process, as well as your definition of critical suppliers, and attach supporting documents: Suppliers generating the top 80% of Encana's spend are considered critical. 23 of 144, Copyright RobecoSAM AG, 2001-2015
Please indicate, in percentage and absolute numbers, how many critical suppliers you have identified as part of your tier 1 suppliers within the scope of the current spend analysis: Type of supplier Absolute number of tier 1 suppliers Critical Suppliers 354 80 Total 4850 100 % Share of total procurement spent (%) Please provide an estimate of the percentage of your critical tier 1 suppliers for which your company represents a major client (i.e. your procurement orders represent > 30 % of the suppliers' annual turnover): 82 We do not conduct any such analysis in place Critical Supplier 80% Spend, Copy of Spend Analysis #3 - Critical Suppliers top 80% spend do one for full ECA not canada us specific (3).xlsx (Pages: 1) Outlines of 80% spend with our critical suppliers MANAGED SPEND 20142015, Spend Coverage - s.ppt (Pages: 1) this graph shows our managed spend for 20142015 YTD. the % has decrease as we are taking a more focused look on our highest value suppliers and have been in a phase of major contract renegotiations due to lower WTI prices Spend Database, SMS Database.ppt (Pages: 1) Example of how accounting codes are rolled up into Supply Management Categories so we are able to manage spend across categories 1.4.2 Risk Exposure Please indicate if your company has a formalized process in place to identify risks in its supply chain as well as the scope and outcome of this process. Do you have a formalized process in place to identify sustainability risks in the supply chain? Please provide a brief description of the process and attach supporting documents: Encana has many processes to identify and mitigate sustainability risks as described in the attachments. Please indicate the scope of the sustainability risk identification analysis, i.e. share of the total number of tier 1 suppliers (both critical and non-critical) covered by the risk analysis (%): 100 Please indicate in the table below the share of your total number of tier 1 suppliers (both critical and non-critical) where a high level of sustainability risks has been identified in that particular category (economic, environmental and social risks respectively). Please also provide a definition or a description of what constitutes "high risk" for your company and indicate the nature of the most relevant risks identified in each category in the respective comment boxes. 24 of 144, Copyright RobecoSAM AG, 2001-2015
Economic risks Environmental risks Social risks High risk (%) Nature of risks identified We can only quantify the percentage of suppliers with high sustainability risk on a consolidated basis, i.e. we do not break it down into the three dimensions above. Please indicate the percentage of high risk suppliers: as well as the nature of the most important risks identified: We do not have a systematic process to identify sustainability risks in the supply chain Encana provides specific training for buyers that includes expectations for environment, health and safety performance of all service providers. Staff are required to take training in the Ethos environment, health and safety management system which applies to all aspects of the company. Vendor audits are conducted to ensure vendor practices meet or exceed Encana's EH&S standards. Contractor safety, http://www.encana.com/business/contractors/safety (Pages: 1) A safe workplace mitigates social and economic risks. Safety is a core value at Encana and we are always striving to improve our safety performance this includes ensuring the safety of our contractors and service providers (Safety orienation links) Courtesy Matters program, courtesy-matters-overview.pdf (Pages: 1) Courtesy Matters is a company-wide program focused on being a good neighbour and demonstrating respect and courtesy in the communities where we operate. Web page: Courtesy Matters, http://www.encana.com/business/contractors/courtesy-matters.html (Pages: 1) The Courtesy Matters program has been an integral part of our stakeholder engagement efforts in establishing and clarifying employee, contractor and service provider expectations around courteous conduct since its launch in 2006. 1.4.3 Risk Management Measures Please indicate which measures your company has taken in order to manage sustainability risks amongst your tier 1 suppliers. Please indicate the scope and attach supporting documents or specify where requested. REQUIREMENTS 25 of 144, Copyright RobecoSAM AG, 2001-2015
Standard/Policy/Code of Conduct for suppliers - please attach supporting documents and indicate in which of the following areas your company has established standards for suppliers across all countries of operations: Issues covered Environmental standards for supplier's processes, products or services Fundamental human rights (e.g. forced or child labor, freedom of association) (ILO conventions) Working conditions (e.g. working hours, lay-off practices, remuneration) Occupational health and safety Business ethics (e.g. corruption, anti-competitive practices) Quality of management systems Environmental management system certified to ISO 14001, EMAS or equivalent management system with external independent audits Environmental performance data available Social performance data available Guidance regarding sub-contracting (i.e. requiring to replicate own standards down the supply chain) Collaborative initiatives - working together with NGOs and/or other companies on supply chain issues. Please provide an example of an initiative that you are formally supporting, including a web link and a description of which suppliers are targeted, the focus of the initiative and how your company is contributing to it: Our Responsible Products Program works with suppliers and other peer companies around products (chemical sourcing) used in drilling and completions. (http://www.encana.com/environment/water/ fracturing/products.html) Encana developed the program and assessment tool and then shared with industry associations to disseminate to peers. Contract clauses - covering environmental, social and governance (ESG) factors. Please attach supporting documents and indicate the scope for 2014: 80 % of total procurement spent ONGOING MONITORING OF SUPPLIERS Third-party CSR management system assessment tool - Please specify and indicate the number of suppliers that have been assessed within the last fiscal year as well as which will be assessed next fiscal year: Specification of tool Number of companies assessed in FY 2014 Number of companies to be assessed in 2015 Audits - Please indicate the scope (percentage and absolute numbers) of your audits of tier 1 suppliers during 2014. Please also indicate which percentage of high risk tier 1 suppliers (as defined by your company in the previous question) this represents. Please consider all audits conducted by internal or external audit functions that are independent of the purchasing/supply chain function of the company as well as independent of the supplier: % audited of total number of tier 1 suppliers tier 1 suppliers audited (absolute number) 26 of 144, Copyright RobecoSAM AG, 2001-2015