Statement of Commitment

Transcription

1 Statement of Commitment Sustainable and Responsible Investing is an essential part of the strategic positioning and behaviour of ACTIAM Beleggingsfondsen N.V. We have been involved in SRI since 1990s and welcome the European SRI Transparency Code. This is our third statement of commitment and covers the period 01 May 2018 to 30 April Our full response to the European SRI Transparency Code can be accessed below and is available in the annual report of the retail funds and on our website. Compliance with the Transparency Code ACTIAM Beleggingsfondsen N.V. is committed to transparency and we believe that we are as transparent as possible given the regulatory and competitive environments that exist in the countries in which we operate. ACTIAM Beleggingsfondsen N.V. meets the full recommendations of the European SRI Transparency Code. Hans van Houwelingen Chief Executive Officer ACTIAM N.V. Dudley Keiller Chief Transformation Officer ACTIAM N.V. November 29 th, 2018 Utrecht

2 1. List of funds covered by the Code Name of the funds: ACTIAM Verantwoord Index Aandelenfonds Europa European equity Dominant/preferred SRI strategy (Please choose a maximum of 2 strategies) ESG Integration Norms-Based Screening Asset class Passive investing core benchmark: MSCI Europe Index Net EUR Exclusions standards and norms Controversial weapons Tobacco Arms Human rights Labour rights Gambling Pornography Animal testing CO2 intensive (including coal) Other (please specify): Corruption The environment Client and product integrity Animal welfare Global Compact OECD Guidelines for MNCs ILO Conventions Other (please specify): Abolition of Forced Labour Convention, 1957 (ILO Convention No. 105) Comprehensive Nuclear-Test-Ban Treaty Convention Concerning Occupational Safety and Health and the Work Environment, 1981 (ILO Convention No. 155) Convention on Cluster Munitions, 2008 Convention on Prohibitions or Restrictions on the Use of Certain Conventional Weapons Which May be Deemed to be Excessively Injurious or to Have Indiscriminate Effects, 2001 Convention on the Development, Production and Stockpiling of Bacteriological (Biological) and Toxin Weapons and on their Destruction, 1972 Convention on the Elimination of All Forms of Discrimination Against Women, 1979 Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on their Destruction, 1993 Convention on the Prohibition of the Use, Stockpiling, Production and Transfer of Anti- Personnel Mines and on their Destruction, 1997 Convention on the Rights of the Child, 1989 Discrimination (Employment and Occupation) Convention, 1958 (ILO Convention No.111) Earth Charter, 2000 EU Sanctions Policy, 2016 Equal Remuneration Convention, 1951 (ILO Convention No. 100) Forced Labour Convention, 1930 (ILO Convention No.29) Freedom of Association and Protection of the Right to Organise Convention, 1948 (ILO Convention No.87) IFC Performance Standards on Social & Environmental Responsibility, 2012

3 International Covenant on Civil and Political Rights, 1966 International Covenant on Economic, Social and Cultural Rights, 1966 IUCN Protected Areas Categories System Minimum Age Convention, 1973 (ILO Convention No. 138) OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, 1997 OECD Guidelines for Multinational Enterprises, 2011 Protocol for the Prohibition of the Use of Asphyxiating, Poisonous or Other Gases, and of Bacteriological Methods of Warfare, 1925 Protocol I Additional to the 1949 Geneva Conventions, 1977 Ramsar Convention on Wetlands, 1971 Right to Organise and Collective Bargaining Convention, 1949 (ILO Convention No. 98) Rio Declaration on Environment and Development, 1992 Slavery Convention, 1926 Supplementary Convention on the Abolition of Slavery, the Slave Trade, and Institutions and Practices Similar to Slavery, 1956 Treaty on the Non-Proliferation of Nuclear Weapons, 1968 UN Convention Against Corruption, 2003 UNESCO World Heritage Convention, 1972 UN Global Compact, 2000 UN Guiding Principles on Business and Human Rights, 2011 Universal Declaration of Human Rights,1948 Voluntary Principles on Security and Human Rights, 2000 Verbond van Verzekeraars Code Duurzaam Beleggen, 2012 Worst Forms of Child Labour Convention, 1999 (ILO Convention No. 182) Fund capital as at 31 December EU: EUR Other labels NA Links to relevant documents EU - (KIID): Prospectus: - Management report: - Financial and non-financial reporting: - Corporate presentations:

4 2. General information about the fund management company 2.1 Name of the fund management company that manages the applicant fund(s) Fund manager: ACTIAM 2.2. What are the company s track record and principles when it comes to integrating SRI into its processes? Please provide a hyperlink to any of the company s sustainable investment webpages How does the company formalise its sustainable investment process? Please provide a link to the sustainable investment policy. es_companies.pdf es_sovereigns.pdf Please provide a link to the voting rights policy. Please provide a link to the engagement policy How are ESG risks and opportunities including those linked to climate change understood/taken into account by company? We believe that companies that adopt responsible business practices are better prepared for the future. That is why we aim to invest actively in companies that help to create a sustainable future. To achieve this aim, ACTIAM is structurally integrating sustainability information in the investment process. This involves awarding an ESG score to all the countries and companies in which we can invest. The ESG score reflects both the entity s policy and its actual conduct. A company may have a good policy, but this policy says little about the true situation concerning sustainability if it is not actually implemented. By combining this information with financial information, ACTIAM is able to invest in companies that are appealing both in financial terms and in the area of ESG, including the ESG risks and opportunities. These risks and opportunities are, for example, targets a company has on toxic emissions or the way a company monitors employee satisfaction on a regular basis. More on how ACTIAM is integrating risks and opportunities can be found in the ESG Integration policy ( How many employees are directly involved in the company s sustainable investment activity? 7 FTE and 2 interns are working in the Sustainability & Strategy department, our Impacting Investing team consistent of 8 FTE and 1 intern. Furthermore, our Portfolio management department is directly involved in our sustainability investment activities and currently is holds 16 FTE Fixed income and 9 FTE Equities Is the company involved in any RI initiatives? General Initiatives ICCR Interfaith Center on Corporate Responsibility PRI - Principles For Responsible Investment SIFs - Sustainable Investment Fora: VBDO Other (please specify) * VBDO * PCAF * Working group SDGs on Dutch Central Bank's Sustainable Finance Forum * Eumedion: Member, contributor to the Investment Committee

5 * GIIN * GRESB * NPM (Platform for Inclusive Finance) * SMART campaign member Environmental/Climate Initiatives CDP Carbon Disclosure Project (please specify carbon, forest, water etc.) Green Bond Principles IIGCC Institutional Investors Group on Climate Change Montreal Carbon pledge Paris Pledge for Action Other (please specify) * CERES Water Hub * Working group Climate on Dutch Central Bank's Sustainable Finance Forum * EU Community of Practice Biodiversity * Advisory Board of the EU Biodiversity Platform * Working group Water Reporting Standards GRI * Multi stakeholder dialogue on Land Governance/initiative Foreign affairs ministry * UNEPFI / Natural Capital Finance Alliance Social Initiatives Access to Medicine Foundation Access to Nutrition Foundation Accord on Fire and Building Safety in Bangladesh Other (please specify) * Blockchain on Social Impact * SPTF (Social performance Taskforce) member of the Social Investor Working Group Governance Initiatives ICGN International Corporate Governance Network 2.7. What is the total number of SRI assets under the company s management? ACTIAM is a wholly owned subsidiary of VIVAT N.V.. and is an innovative and responsible asset manager with 54 billion in Assets under Management (end of 2017). In general, all our assets are SRI proof. However, due to restricting of our funds, there is a possibility this figures could be 99% on some dates.

6 3. General information about the SRI fund(s) that come under the scope of the Code 3.1 What is (are) the fund(s) aiming to achieve by integrating ESG factors? Through its responsible investment policy, ACTIAM and its partners seek to contribute to creating a liveable world, both now and in the future. We manage money over the long term, including pension capital belonging to Dutch residents that has been entrusted to us. While it is essential to ensure that pensions can be paid in future, we believe it is no less important that the planet is still healthy and liveable by the time people retire. Through its investment policy, ACTIAM, the leading responsible asset manager in the Netherlands, has actively contributed to creating a better world for many years. We first introduced our responsible investment policy in 1990, and we started to engage with companies five years later. Responsible investment is our field of expertise, and we continue to build on this. We combine our knowledge of investment with a clear view of environmental, social and governance aspects. This view forms the starting point for everything we do. We are fully aware of our responsibility towards society, and we take this responsibility seriously. As a result, we achieve high scores in all areas of responsible investment in the annual surveys of the UN-supported Principles for Responsible Investment (PRI). In 2018, we achieved the highest possible score (A+) on no less than 13 of the 14 modules. The other module received an A score. As ACTIAM, we have defined three focus themes: climate, water and land. Per theme, we have specific targets. With regard to the theme of climate, our goal is to reduce our carbon footprint by 25%, compared to 2010 levels, by 2025, and by 40% by Deforestation also plays a key role in climate. Furthermore, pollution and the growing demand for food are important and related to the theme Land. As well as the environmental consequences, this includes crucial social and administrative factors such as land rights and access to food. ACTIAM has identified the sustainable management of land as a key priority. Sustainable land management is about minimising land degradation, restoring affected areas and making optimal use of land and its resources. This is how we aim to contribute to the achievement of the United Nations Sustainable Development Goals: SDG 2 Zero Hunger, SDG 12 Responsible Consumption and Production and SDG 15 Life on land. Finally, with respect to water is our aim to contribute to achieving the Sustainable Development Goal on water: ensuring access to water and sanitation for all. We seek to achieve this aim by ensuring the theme of water is given a prominent place in our range of responsible investment tools. For example, we are currently conducting engagement with companies that are aimed at improving transparency in the area of water management. Note that, we do not have fund specific targets in ESG factors What internal or external resources are used for ESG evaluation of the issuers who make up the investment universe of the fund(s)? The start of the investment universe for ACTIAM Verantwoord Index Aandelenfonds Europa is the MSCI Europe Index Net EUR benchmark. The first step of the ESG evaluation is ACTIAM carefully determining whether a company should be excluded from its investment universe. Whenever controversies arise, our first response is always to enter into a dialogue with management. In this way, we try to work with the company to find solutions for the existing problems and prevent controversies from arising in future. In our view, exclusion is a measure that is only used as a final resort. An exception applies to specific activities in the weapons and mining industries, which result in immediate exclusion. These activities include the manufacture of controversial weapons (such as nuclear weapons) and riverine tailings disposal. Sovereign bonds are excluded from investments if the issuing country does not comply with ACTIAM s Fundamental Investment Principles for sovereigns. Final decisions about our sustainability are made by the ACTIAM Selection Committee. The committee, which is chaired by ACTIAM s CEO, meets at least four times a year to assess whether the investment universe complies with the Fundamental Investment Principles and to decide whether specific entities are to be excluded from investment or included the investment universe. It also decides whether new or revised sustainability policy is to be approved.

7 Within this process, an external data provider is used to screen the investment universe. Hereafter, a quantitative opinion is given by the internal ESG team member based on consultation of other external sources, such as PRI and CDP, and internal consideration with subject matter experts. Furthermore, proxy voting and responsive engagement is done in partnership with GES What ESG criteria are taken into account by the fund(s)? When selecting entities to invest in, ACTIAM considers several environmental, social and governance (ESG) criteria. The first step in the selection process entails applying our Fundamental Investment Principles, which cover the following ESG issues and represent the parameters of our investments: human rights fundamental labour rights corruption the environment weapons client and product integrity animal welfare Our principles are based on international treaties, conventions and best practices. Because these international mechanisms are considered universal, we apply our principles uniformly across all investment regions. This means that investors can build a portfolio that pursues regional diversification, while at the same time applying a set of universal principles. Furthermore, the standards underlying our principles go beyond personal and cultural differences. Should a global consensus evolve, relevant amendments to our principles will be considered. Compliance with our principles will be assessed based on two main criteria: All Entities 1. Repeated or systematic involvement in activities covered by our principles, as well as failure to sufficiently remedy such involvement. Companies Only 2. Inadequate preparedness to prevent this involvement from occurring in the future. A company is considered to have taken insufficient measures to prevent ongoing or future involvement, when either of the following conditions is met: a) The company lacks coherent management systems, which include the following components: Management principles; An operational policy through which these principles are implemented; Adequate procedures to assess, mitigate and address risks; Systems for monitoring and tracking risks and risk management steps, as well as implementation of the operational policy; Sufficient training and education to help staff, subcontractors and suppliers in the adequate implementation and execution of the policies; Mechanisms to encourage frequent feedback to management; and Regular (public) reporting. b) The company demonstrates no credible implementation and/or enforcement of abovementioned management systems. As responsible investors, we will evaluate whether to exclude entities only once it becomes clear that we will not be able to persuade them to change their behaviour. Thus, prior to exclusion, we assess whether engagement may be a helpful tool in remedying any real or potential violation. Where engagement is neither an option nor successful, the ultimate consequence may be exclusion from our investment universe. As a result of the democratic process that guides government decisionmaking, the potential for investors to influence sovereigns through engagement is very limited. Thus, clear violations of our principles in these cases may lead to exclusion. When we decide to exclude an entity and investments have already been made, these assets will be sold at short notice. This may also apply to entities that are not directly involved in violations of the Fundamental Investment

8 Principles, but where aggregate findings of their behaviour or activities raise serious ethical questions. Regarding specific or highly complex issues relating to the Fundamental Investment Principles, ACTIAM writes position papers that help further detail and consistently implement the Fundamental Investment Principles. In such processes, ACTIAM consults external experts and exchanges knowledge with peers to better grasp the often complex perspectives on an issue What principles and criteria linked to climate change are taken into account in the fund(s)? Within our Fundamental Investment Principles, we have a paragraph on The Environment. We do not wish to be involved in activities that cause serious environmental damage through pollution, biodiversity loss, or the depletion of natural resources. We seek guidance from the following instruments of international environmental norms and best practices, as well as environmental laws and regulations, when determining whether a company is in violation with our principles. Rio Declaration on Environment and Development, 1992 The Earth Charter, 2000 Principle 7 of the UN Global Compact IFC Performance Standards on Social & Environmental Responsibility The Paris Agreement under the UNFCCC, 2015 Companies unwilling to phase out the most carbon-intensive assets, products or processes could be in violation of our principles. Criteria to determine whether companies are in violation of our principles, as well as distinct best practice guidelines, are further specified in ACTIAM s position papers. For instance, ACTIAM does not invest in companies that have over 15% of their total revenue resulting from thermal coal. Furthermore, our guidelines prohibit us from investing in companies involved in particularly harmful activities including mountaintop removal mining, riverine tailings disposal, illegal logging, and extraction activities in protected areas. Such areas include those covered by the International Union for the Conservation of Nature (IUCN) Protected Areas Categories I through IV, the 1972 UNESCO World Heritage Convention, and the 1971 Ramsar Convention on Wetlands. Furthermore, we believe that the energy transition is not a choice but a necessity. Various benefits can be achieved by supporting the emergence of renewable energy sources (including secondgeneration biofuels, solar energy and wind energy) and energy conservation. Not only does this benefit people and the environment, but it is also good for trade and industry. New technologies create opportunities for the business community. In view of global developments and challenges, a transitional phase in which fossil fuels, nuclear energy and renewable energy sources coexist is inevitable. However, this phase should be kept as short as possible to ensure that we scale back our dependence on fossil fuels and nuclear energy as fast as we can. The choices facing all stakeholders are tremendously important. Moreover, it is necessary to act quickly in order to ensure that fossil fuels and nuclear energy are dealt with responsibly and to manage the risks. One of the ways in which ACTIAM is putting its views on energy transition into practice is through active ownership. The aim is to bring about behavioural change. We therefore have set up an Energy Transition Policy with criteria to Support innovation and transition through positive selection and green bonds; Encourage behavioural change through active ownership; Exclude companies from its portfolios if, despite active ownership, they continue taking irresponsible risks with the generation of nuclear energy or the extraction and combustion of fossil fuels or make an insufficient contribution to the energy transition. Active ownership Instruments ACTIAM can use to further reduce the carbon footprint of its investments are voting at general meetings, filing or supporting shareholder resolutions and ESG integration, where sustainability indicators are included in the financial analysis. This policy document will also consider ACTIAM s strategy in relation to oil and gas companies, mining companies and utility companies with operations in: Arctic oil

9 Nuclear energy Tar sands Shale gas and/or shale oil Coal 3.5. What is the ESG analysis and evaluation methodology of the fund manager/fund management company (how is the investment universe built, what rating scale is used etc.)? ACTIAM s ESG Research team investigates whether investment objects comply with the Fundamental Investment Principles (FIP). To this end, ESG analysts carry out extensive analyses in all domains. Detailed criteria have been formulated per domain, based on the requirements of the customer. The focus of attention in the investigation is determined on the basis of the core subjects of the sector. They are the themes that, from an ESG perspective, cause most controversies in the same way that best practices of progressive companies stand out. Together with a tailor made analysis done based on MSCI-data on the compliance of the investment universe with our FIP, the ESG analysts base their findings on information from various prominent research bureaux (such as Vigeo and Bloomberg), non-governmental organisations, academic institutions, sustainability initiatives and various media sources. The focus of ESG research is not on data mining and aggregation, but on interpretation of the information based on the criteria and the investment vision of the customer. For quality assurance and validation, whenever possible, at least two sources are used and compared. Next, the analysts test their findings across various customers and products in order to ensure coherence of decisions and to increase the sagacity of the analyses. Also, there is an internal review procedure where the research of each ESG analyst is evaluated by his or her assigned sector backup from the team. After that, key documents are scrutinised by the senior ESG analyst responsible for the product or customer in question. Next, company profiles, including the advice to exclude or include, are composed by the ESG team and presented to the ACTIAM Selection Committee. The Selection Committee of ACTIAM decides upon the eligibility of investments, based on the advice of the ESG research department. Its role, composition, responsibilities and procedure are laid down in the Statute of the ACTIAM Selection Committee. This decision and policy making body consists of five members: the CEO, performing the role of chairman, the CIO, the head of Fund Management, the head of the ESG research department and an external professor of Ethics. The ACTIAM Selection Committee is supported by a Secretary. The ACTIAM Selection Committee can decide to include a company, institute or country, to exclude it or to start a constructive dialogue with it. In the event of serious and systematic violations of the Fundamental Investment Principles, the committee excludes controversial assets from the investment portfolio. In the event of doubtful ESG policy and performance, the ESG Research team decides to hold a constructive dialogue with the concerned party. Generally, such a process will take one to three years. Subject to a successful conclusion of the constructive dialogue, these entities are included in the investment universe of ACTIAM. At every meeting (at least once every quarter), the ACTIAM Selection Committee is informed about the progress of the constructive dialogues. As active and responsible investors, it is our strong preference to engage companies on the topics described in the previous questions rather than exclude. Thus, prior to exclusion, we assess whether a responsive engagement may be a helpful tool in remedying any real or potential violation. Where responsive engagement is either not an option or not successful, the ultimate consequence is exclusion from our investment universe. Where investments have already been made, these assets will be sold at short notice. This may also apply to entities that are not directly involved in violations of the FIP, but where aggregate findings of their behaviour or activities raise serious ethics questions. Besides responsive engagement, ACTIAM also conducts proactive engagement. With the latter there is no acute violation of the FIP, as is the case with responsive engagement. Yet, the company is a laggard on sector specific ESG criteria, with a potential risk of violation of the FIP in the future. Through this engagement effort, ACTIAM strives to improve the average ESG performance of a sector as a whole and to prevent possible future controversies from happening. With this form of engagement we

10 focus our efforts at the natural resources sectors as we believe that these have the most impact on society as a whole How often is the ESG evaluation of the issuers reviewed? How are any controversies managed? The investment universe and the current holdings are evaluated on a regular basis, and at least every quarter of the year. The screening process is conducted and when controversies are found, via the screening or via other internal or external sources such as newspapers or ESG platforms, the case will be examined. Based on internal and external information, an advice is given by the ESG team to the Selection Committee to engaged or excluded the issuer from the investment universe. When engagement is chosen, collaboration is first sought. We join forces with other organisations and investors so that we can have a greater impact as believe that we can increase the pressure on the company by teaming up with other shareholders. In case the controversies is very severe and structural and there is failure to sufficiently remedy, we will exclude the issuer from our universe for future sales and will terminate our current holdings. The ESG process and the FIP is updated when necessary. For example, early 2018, the Fundamental Investment Principles have been revised and an additional principle on Animal Welfare is added. There is no set timeframe for updating the Principles or the ESG methodology. The last 3 years we have had a partnership with data-provider MSCI and GES, which are continuously improving and evolving into a better methodology.

11 4. Investment process 4.1 How are the results of the ESG research integrated into portfolio construction? The ACTIAM Selection Committee holds a meeting at least every quarter, prior to which the complete universe is screened for compliance with our Fundamental Investment Principles (FIP). The ESG Research team will either engage companies that do not comply with our FIP, or advise to exclude these companies. The ACTIAM Selection Committee will decide to go along or against this advice. After the ACTIAM Selection Committee has decided to exclude a company, portfolio management has maximum 32 working days to sell all the stocks. 4.2 How are criteria specific to climate change integrated into portfolio construction? Yes, see answer How are the issuers that are present in the portfolio, but not subject to ESG analysis evaluated (not including mutual funds)? No, there are no issuers present in the portfolio which are not subject to ESG analysis Has the ESG evaluation or investment process changed in the last 12 months? No, the ESG evaluation nor the investment process has been changed in the last 12 months. The Fundamental Investment Principles itself has been extended by the chapter on Animal Welfare. Furthermore, several policy documents supporting the investment process have been updated over the year Is a part of the fund(s) invested in entities pursuing strong social goals/social enterprises? No, there is no part of the fund invested in entities pursuing strong social goals or enterprises Does (do) the fund(s) engage in securities lending activities? No, the fund is not engaged in securities lending activities. 4.7 Does (do) the fund(s) use derivative instruments? If so, please describe (i) their nature; (ii) their objectives; (iii) the potential limits in terms of exposure; (iv) if appropriate, their impact on the SRI nature of the fund(s). No, there are no derivative instruments used in the fund Does (do) the fund(s) invest in mutual funds? If so, how do you ensure compatibility between the policy for selecting mutual funds and the SRI policy of the fund(s)? How many funds can be held? There are only direct lines and companies.

12 5. ESG controls 5.1 What internal and/or external control mechanisms are in place to ensure compliance of the portfolio with the ESG rules on managing the fund(s) as defined in section 4? After a decision has been made by the ACTIAM Selection Committee, portfolio management has a maximum of 32 (work) days to liquidate all positions in the new excluded entities. Next to that there is a check in the first week of every quarter to cross reference the funds current positions to their exclusion list.

13 6. Impact measures and ESG reporting 6.1 How is the ESG quality of the fund(s) assessed? (Final) decisions regarding ESG policies and procedures are made by the ACTIAM Selection Committee. This committee, chaired by the CEO, tests and challenges at least four times a year the ESG quality of the funds managed by ACTIAM. New ESG policies are discussed and approved and the status of excluded companies and sectors is challenged. Furthermore, status of responsive engagements and other ESG initiatives is regularly questioned and discussed What ESG indicators are used by the fund(s)? Indicators used are the UNGC, thresholds for companies active in coal mining, tobacco, pornography, gambling. Furthermore, we have indicators for our focus themes; water, carbon and land What communication resources are used to provide investors with information about the SRI management of the fund(s)? ACTIAM provides the clients with quarterly ESG reports (in Dutch), which are also published on the website: Additionally, ACTIAM updates clients about engagement activities on a quarterly basis and provides any additional information on an ad hoc basis. ACTIAM publishes all relevant information about the funds on its website, and also discloses the voting performance, see: Does the fund management company publish the results of its voting and engagement policies? Yes, the voting policy of ACTIAM can be found at The engagement policy and process can be found at The current engaged companies are listed es.pdf Results on voting and engagements can be found in several communication documents, such as and in the yearly reports of the funds. ACTIAM is intensifying engagement activities step by step. The most basic form of engagement is proxy voting at shareholder meetings of all companies in ACTIAM s or its clients' portfolios; this occurs in accordance with the ACTIAM Fundamental Investment Principles (FIP) and ACTIAM s voting policy. ACTIAM aims to gradually extend engagement with companies in our voting universe beyond proxy voting to involve extensive and profound dialogue, individually or in cooperation with other institutional investors. As of 2011, ACTIAM defines three categories of engagement: responsive engagement, proactive engagement and collaborative engagement. Each of these is intended to facilitate constructive dialogue with companies to promote ACTIAM s FIP. The first type of engagement is called responsive engagement. The ACTIAM Selection Committee decides to start this type of constructive dialogue with a company when the findings of the ACTIAM ESG Research department uncover doubtful ESG policies and performance in such a way that there is a possible violation of one or more Fundamental Investment Principles. The effectiveness of this dialogue is determined by assessing the readiness of companies to answer ACTIAM s questions, to cooperate in the process of the engagement, to be transparent, to address the matters of care, and ultimately to demonstrate improvement in their ESG policies and performance in order to assure compliance with the FIP. At every quarterly meeting the ACTIAM Selection Committee is informed about the progress of the responsive engagement process. When the company does not succeed in taking away ACTIAM s doubts concerning compliance with the FIP, e.g. when the dialogue does not lead to improvement in terms of ESG policies and

14 performance, it will be excluded from the investment universe by the ACTIAM Selection Committee. A second type of engagement is called proactive engagement. In contrast to responsive engagement candidates and companies excluded by ACTIAM, our thematic engaged companies are not in clear and immediate violation with the FIP. Some may even outperform their sector peers in terms of ESG policies and (risk) management. However, all of these companies have at least one critical weakness in their ESG policies, practices or disclosure. As with responsive engagement, proactive engagement is based on research conducted by the ACTIAM ESG Research department. Thematic engagement is a more proactive form of engagement that is intended to have a positive impact on and encourage sectoral ESG standard development. In this type of engagement, ACTIAM focuses on the natural resources sectors (energy, utilities, food & beverages, paper & forest, and extractives). In those sectors, ACTIAM observes an ever increasing conflict over scarce resources as well as a strong incoherence between companies ESG policies and performance. Problems in those sectors affect us all, whether we are rich or poor, from an industrial or emerging economy. This creates the need for cooperation between corporations, governments and civil society. Promising facts are that companies are increasingly willing to talk to investors, which offers realistic openings; there are large differences between sector laggards and leaders in terms of ESG policies and performance, offering room for 'best practice'; and public bodies are increasingly critical, which indicates political and societal support. The objective of proactive engagements is to stimulate companies, sectors and industries to improve the ESG policies, practices and disclosure standards in the natural resources sectors. Here, ACTIAM wishes to be a 'critical friend', aiming to approach companies from a basis of mutual cooperation, jointly working towards the achievement of a common goal of ESG performance improvement in the natural resources sectors. Proactive engagement often takes the form of direct company engagements, but can also include supporting resolutions and statements, participating in voluntary initiatives, industry organizations or steering committees, publicizing thematic research and collaborating with other parties. Finally, a third type of engagement is called collaborative engagement. With collaborative engagement the main focus is on issues in the natural resources sectors. However, some exceptions may be made in case of eminent initiatives in other sectors addressing relevant issues in terms of the FIP. ACTIAM is a signatory/member of, among others, the United Nations backed Principles for Responsible Investment Initiative (PRI), the Carbon Disclosure Project (CDP), and the Extractive Industry Transparency Initiative (EITI). For more memberships, please see question 1b. Each of these initiatives represents the combined assets of a large number of institutional investors. By participating in such leading and broad based ESG engagement efforts, ACTIAM is able to exert greater influence on companies to improve company ESG behaviour, policies, and management structures. Our individual company engagement is linked to our ESG research and selection process. The ESG research team of ACTIAM investigates whether investment objects comply with ACTIAM s Fundamental Investment Principles. Based on this research, if a company breaches our FIP, the ESG Research team decides to engage a company or to advise for exclusion. In general, engagement is preferred over exclusion, as this provides an opportunity to talk to the company and stimulate better ESG policies and practices. After the ESG Research team has decided to engage a company in a constructive dialogue, a procedure will be started for establishing contact with the concerned company. The ESG analysts then draw up the most suitable dialogue programme for each concerned company. When the expectations of the constructive dialogue with a company are very promising, a discussion of strategic issues at CEO/Chairman level may be the preferred way to advance the engagement. The availability of this option obviously depends on the availability and willingness of the management of the concerned company to participate actively in the constructive dialogue. With regard to communication, ACTIAM prefers corresponding via s and/or letters, complemented by telephone conferences. Visits to companies will only be made in case of very promising preparations, given some readiness on the part of the company for change. For each company it is determined whether an individual dialogue is likely to be most effective or whether a common dialogue with likeminded parties is preferred (for example, through the UN PRI, the International Corporate Governance Network (ICGN), Eumedion). ACTIAM prefers existing forms of

15 cooperation as long as their focus does not violate the Fundamental Investment Principles and/or the objectives of the dialogues of ACTIAM. The effectiveness of the constructive dialogue is determined by measuring the readiness of companies to answer ACTIAM s questions, to cooperate in the process of the constructive dialogue, to be transparent, to address matters of care and finally to show improvement in their policy and performance in order to comply with the Fundamental Investment Principles. At every meeting (at least once a quarter) the ACTIAM Selection Committee is informed about the progress of the constructive dialogues. If the constructive dialogue does not lead to improvement, or if the company does not succeed in removing the doubts concerning the Fundamental Investment Principles, the ACTIAM Selection Committee can decide to exclude the company from investment, based on advise of the ESG Research team.