European SRI Transparency Code

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1 European SRI Transparency Code ING Duurzaam Aandelen Fonds ING (L) Invest Sustainable Equity Fund ING (L) Renta Fund Euro Credit Sustainable Statement of Commitment Sustainable and Responsible Investing is an essential part of the strategic positioning and behaviour of ING Investment Management. We have been involved in SRI since 2000 and welcome the European SRI Transparency Code. This is our fifth statement of commitment and covers the period January 2011 December 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 web site Compliance with the Transparency Code ING Investment Management 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. ING Investment Management meets the full recommendations of the European SRI Transparency Code for its ING Duurzaam Aandelen Fonds, its ING (L) Invest Sustainable Equity Fund and its ING (L) Renta Fund Euro Credit Sustainable. June 2012 investment management

2 European SRI Transparency Code June 2012 Section 1. Basic Details 1 Signatories should be clear about who they are and provide precise background information on the fund management company and the fund(s) The fund management company 1a 1b Provide the name of the fund management company managing the fund(s) to which this code apply. ING Investment Management Schenkkade AS, The Hague The Netherlands Describe, in a general way, the SRI philosophy of the fund management company and the way it is implemented concretely. As of 1 September 2008, ING Investment Management has become a signatory to the United Nations Principles for Responsible Investment (UN PRI). The UN PRI are designed to help investors consider the environmental, social and governance (ESG) issues in investment decision making and ownership practices. For ING, being a responsible company is not only complimentary to our long-term business objectives, it also helps to define our strategy and identify the way we do business. Today, a responsible financial institution has to make decisions while taking into account both financial and non-financial (ESG) risks. After all, that is part of our fiduciary duty. Signing up to the Principles shows our increased awareness of ESG issues and helps us meet our client objectives. ING Investment Management s investment principles take our obligations under the UN PRI into account. This is reflected in the first sentence of our investment principles: We are committed to investing responsibly and delivering client-oriented investment solutions. A global ING Investment Management Committee (ING IM UNPRI Committee), which includes members from Europe, US, Asia, and Australia, has been set up to monitor and align regional UNPRI initiatives, encourage best practice sharing and support consistent internal and external communication regarding UNPRI initiatives. Each year, this committee participates in the UNPRI Reporting and Assessment survey, which helps evaluate our progress. ING IM UNPRI Committee has set various ambitions. One of them is to provide training to mainstream ING IM teams on ESG (environmental, social and governance) criteria. This ESG information is shared globally as part of the mainstream investment analysis and decision making process. The SRI fund(s) 1c Provide the name of the fund(s) to which this code apply, and its (their) main characteristics. ING Duurzaam Aandelen Fonds EUR 66 mln AUM as of 31 December 2011 Benchmark: MSCI World DM Index Inception date: 31 May 2000 ING (L) Invest Sustainable Equity EUR 80 mln AUM as of 31 December 2011 Benchmark: MSCI World DM Index Inception date: 31 July 2000 ING (L) Renta Fund Euro Credit Sustainable EUR 209 mln AUM as of 31 December 2011 Benchmark: Barclays Capital Euro Aggregate Corporate ex Financials Inception date: 15 December d 1e Provide details on how to find further information regarding the funds. Please contact the local ING branch/website for further information. Provide details of the content, frequency and means of communicating information to investors. The investors are informed on a monthly, quarterly, semi-annual and annual basis. This is in form of reports. Next to this, there are frequent client visits (institutional clients) and conference calls, depending on clients needs. Short seminars are being organized for retail clients. 2

3 June 2012 European SRI Transparency Code Section 2. ESG Investment Criteria in SRI fund 2 Signatories should be clear about the fund(s) purpose and its (their) ESG investment criteria. 2a 2b How does the fund define SRI? The strategy combines risks and opportunities linked to ESG factors with a strong financial performance of a company. In this way we take into account factors which are often out of scope of traditional financial analysis, but can have a significant impact on long-term performance. What are the ESG investment criteria of the fund? For ING Duurzaam Aandelen Fonds and ING (L) Invest Sustainable Equity the following holds: Companies are first subjected to a relative screening, i.e. application of best-in-class (BiC) criteria to global sectors in the universe under coverage. This is followed by the application of absolute (exclusionary) criteria. We determine the relative position of companies in their sectors by using Sustainalytics scores on ESG criteria. These ESG scores are based on both opportunities and risks that a certain company faces. ESG criteria comprise around 150 factors in total, partly depending on the sector. For each sector (GICS 2 level) only the best 50% is directly eligible for the sustainable investment universe (the 50% with the highest ESG scores). Companies that clearly score below the sector average are excluded from the sustainable investment portfolios. Selection of companies that are close to sector average depends on sector and regional risk characteristics of the overall portfolio. After the BiC approach, the strategy excludes a limited number of activities: firearms & military contracting, nuclear energy, tobacco, gambling, pornography and fur. The strategy also excludes companies fundamentally engaged in businesses that contravene generally accepted values and standards: violation of the Universal Declaration of Human Rights, violation of the core ILO conventions, violation of OECD guidelines for Multinational Enterprises and involvement in dictatorial regimes. For ING (L) Renta Fund Euro Credit Sustainable the following holds: The strategy excludes companies fundamentally engaged in businesses that contravene generally accepted values and standards: violation of the Universal Declaration of Human Rights, violation of the core ILO conventions, violation of OECD guidelines for Multinational Enterprises and involvement in dictatorial regimes. 2c 2d How are the ESG criteria defined? The ESG criteria have been defined by the fund manager and an independent advisory board at the start of the strategy. The criteria are reviewed on an annual basis, though BiC and exclusionary criteria have never been adjusted since inception of the strategy. How are criteria changes communicated to investors? There have not been any criteria changes in the past. In case of any plans for criteria changes in the future the investors will be informed in advance. Section 3. ESG Research Process 3 Signatories should provide clear information on the ESG research process of their investments. 3a 3b 3c Describe your ESG research methodology and process. In the first step of the investment process the fund manager of the SRI strategy applies criteria to the mainstream investment universe to create a sustainable universe. For this part of the process the portfolio manager primarily uses external research sources. Sustainalytics ( supplies the research and data based on a tailor-made service contract - that serve as input for the sustainability screening along ING IM s sustainability criteria. Screening is performed by the SRI Portfolio Manager via an automated internet-based tool. As ING has worked with Sustainalytics (former SiRi / Dutch Sustainability Research) since inception of its SRI strategy there is intense and high quality cooperation. Apart from the direct unprocessed data input from Sustainalytics, direct company contacts on sustainability issues, ESG broker reports, and meetings with NGO s (non-governmental organizations) also serve as an important source of ESG research. Next to this, the team cooperates closely with the SRI analysts and Corporate Responsibility specialists within ING Group. Does the fund manager use an in-house ESG research team and/or does he delegate this research to one or several external specialised providers? The fund manager is using an external independent worldwide sustainable research provider (Sustainalytics), which provides information on ESG performance of companies. This research input is available via an on-line web-tool accessible through client specific login and password. Data and research are continuously updated by all analysts. The on-line tool provides 100% flexibility to clients screening methodology and preferences, i.e. criteria and their weighting scheme are fully determined by its customers. As mentioned under 3a, the team has direct company contacts on sustainability issues and makes use of ESG broker reports. Meetings with NGO s also serve as an important source of ESG research. Next to this, the team cooperates closely with the SRI analysts and Corporate Responsibility specialists within ING Group. Is there an external control or external verification process in place for the ESG research process? Sustainalytics external verification process takes place through clients and company feedback. Sustainalytics has in the past participated in discussions that lead to the development of an independent quality standard for research organisations via the Association for Independent Corporate Sustainability and Responsibility research (AI-CSRR). Furthermore, during the first five years of existence of the strategy, an independent Advisory Board has also helped in further deepening and extending knowledge on ESG topics and criteria. 3

4 European SRI Transparency Code June d 3e 3f 3g Does the ESG research process include stakeholder consultation? All company research from Sustainalytics is provided to companies for feedback at least once a year. Further contacts are established with companies on a case-by-case basis on important issues as needed. Information from other stakeholders (unions, NGOs, governments) is gathered via media and news searches. Several NGO and government websites are systematically and on a regular basis reviewed in detail. Sustainalytics has additional contacts with NGOs, experts and government officials on a case-by-case basis. Specific contacts are established typically in the context of important controversies (mining activities in developing countries, weapon exports to Myanmar, activities related to anti-personnel mines and cluster munitions). Do companies/issuers have the opportunity to see their profile or analysis? All company research is provided to companies for feedback at least once a year. How frequently is the ESG research process reviewed? All companies are fully updated once a year. There is in addition an ongoing review of media and news sources that result in monthly updates of all companies when relevant and are subsequently distributed via an alert service. What research findings are disclosed to the public? There is no systematic disclosure of ESG information to the public. Sustainalytics publishes occasional reports that make use of ESG data (e.g. AEX report, Banks & climate change, etc), but the corporate data they collect is as such not made publicly available. Section 4. Evaluation and Implementation 4 Signatories should provide information on how the ESG research is used to build and maintain their portfolio. 4a 4b 4c 4d How are the results of ESG research integrated into the investment process, including selection and approval of companies/ issuers for investment? After applying our Best-in-Class and Exclusionary criteria (as explained under 2b) the investment universe is subjected to our financial criteria (using our proprietary ranking tool). This tool is used to prioritize bottom-up research, including 3 main screens Valuation, Quality and Momentum. For ING (L) Renta Fund Euro Credit Sustainable we screen on the Exclusionary criteria, but don t perform a Best-in-Class screen to preserve a broad enough credit investment universe for good diversification. Bonds in our portfolio that are not eligible anymore according to one of the filters in our exclusionary screening will be sold within 3 months. What internal and/or external measures are in place to ensure portfolio holdings comply (or not comply) with ESG investment criteria? Every month the holdings in the portfolio are subjected to a check (do all holdings still comply with the criteria?) and do the potential holdings (new investment opportunities) comply with the same criteria as well? What is the policy and procedure for divestments on ESG grounds? If a company does not comply any more with one or more of our criteria. This could for example happen if a company extends its activities by acquiring another company active in an area, which is excluded from our universe, e.g. nuclear energy (applicable to our SRI equity funds). Another reason would be if a company suddenly becomes active in a sensitive country (e.g. Myanmar), or gets seriously involved in controversies that relate to e.g. Human Rights. What divestments occurred in the past year related to the SRI fund criteria? For ING Duurzaam Aandelen Fonds and ING (L) Invest Sustainable Equity the following holds: We sold our position in international mining company Rio Tinto because of ESG controversies related to environmental and social incidents. For ING (L) Renta Fund Euro Credit Sustainable no divestments occurred since the launch at 15 December e 4f 4g Are investors informed about divestments on ESG grounds? Changes in the portfolio are communicated to investors on a monthly basis. Does the fund manager inform companies/issuers of portfolio movements due to non-compliance with its ESG policy and criteria? Not in all cases directly, though we take the opportunity as soon as we meet company management. To what extent do any results of engagement activities feed into companies/issuers selection? During a company meeting a company could explain that it is planning to reach certain ESG targets more quickly than expected and that it is making good efforts to improve its corporate governance. In this case the company s ESG score could improve significantly, which would mean that this company could suddenly become eligible for our universe (according to best-in-class criteria). In practice, this would mean that we would closely watch this company, communicate on the topic with Sustainalytics and ultimately determine if and when we could include it in our eligible investment universe. 4

5 June 2012 European SRI Transparency Code Section 5. Engagement Approach 5 Signatories should explain their approach to engagement if the fund has such a policy. 5a 5b 5c 5d 5e 5f 5g 5h What are the aims of the engagement policy? We do not have a formal direct engagement policy, focused on ESG factors only. Though we do frequently meet company management and discuss strategy, financial and ESG issues, which is an important step in our investment research process. Furthermore, we perform indirect engagement via our voting efforts at annual shareholder meetings of companies. How does the fund prioritise which companies/issuers it will engage with? The first priority is to talk to companies which are holdings in the portfolio and need some improvement in certain ESG areas. The second priority is to talk to companies which are laggards in the industry in terms of ESG criteria (and therefore not holdings in the portfolio). We motivate these companies to improve their efforts in the ESG area by providing constructive feedback. Who undertakes engagement on behalf of the fund? Only the team members of the Sustainable strategy (including the fund manager and the ESG specialist) and SRI analysts from ING Bank used to undertake engagement in the past. However, since ING Investment Management has signed up to the United Nations Principles for Responsible Investment, our sector specialist (mainstream fund managers) are also frequently in dialogue with companies (not only discussing subjects from financial, but also from ESG perspective). What methods of engagement are employed? Dialogue with the companies. How is the effectiveness of engagement activity monitored/addressed? We do not measure the effectiveness, though we do monitor companies attitudes and behaviour both directly via our company contacts as well as indirectly via the research efforts of Sustainalytics. What further steps, if any, are taken if engagement is considered unsuccessful? The last resort would be divestment. However, it should be mentioned that due to the very nature of our strategy, the companies we invest in have already been subjected to strict criteria (exclusions and best-in-class in case of equity and exclusions in case of corporate bonds). Divestment takes place mostly due to our financial criteria. How, and how frequently, are engagement activities communicated to investors and other stakeholders? These are communicated on a quarterly basis through our quarterly report. What engagement activity has been carried out on behalf of the fund during the past year? Dialogue with a.o. the following companies: Credit Agricole, Akzo Nobel, Shell, Kingfisher, Goldman Sachs, EDP and KPN. Section 6. Voting Policy 6 Signatories should make clear their policies on voting. 6a 6b 6c 6d Does the fund have a voting policy? The voting policy applicable for the SRI equity funds is largely based on the ING IM Europe s Voting Policy. This policy can be found on the following webpage: In addition to this, the fund puts additional efforts in research and recommendations for all sorts of environmental and social resolutions at the annual agendas of companies. Specifically for the ING Duurzaam Aandelen Fonds, the fund manager determines the ultimate votes for all agendas and companies and is allowed to deviate from the policy/recommendation of his mainstream investment colleagues, based on his specific set of criteria for ESG issues. Does the fund disclose its voting practices and reasoning for decisions? The fund discloses its voting practices on the following webpage: A summary of the voting behaviour and reasoning for decisions is made available on a quarterly basis via the quarterly reports. Does the fund sponsor/co-sponsor shareholder resolutions? No. What voting actions occurred that were related to the SRI fund ESG criteria? For the specific ballots we refer to the website. ING as a sustainable organisation For more information regarding ING and its corporate responsibility strategy, please take a look at the following web page: 5

6 European SRI Transparency Code June 2012 Definitions of key terms used in the Code Term Divestments ESG Engagement Exclusion Fund manager Fund(s) Fund Purpose Holdings Portfolio Signatories SRI Voting Policy Definition Companies that are sold from the fund portfolio. Environment, Social and Governance A long-term process of dialogue with companies by investors which seeks to positively influence company behaviour in relation to their social, ethical, governance and environmental practices. This includes vote at AGM, filing or co-filing shareholder proposals, asking questions at AGM, collaborative engagement initiatives, individual company contact and dialogue with policy makers and industry organisations. The exclusion of sectors or companies from a fund if involved in certain activities based on specific ESG criteria. The entity responsible for overall management of the fund. A legal entity, the purpose of which is solely the acquisition of portfolio investments. This also includes compartments and sub-funds. The spirit and overall focus of the fund, but not the investment criteria employed. Equities and/or bonds of companies that collectively comprise the fund portfolio. A collection of investments managed by the fund manager. Fund(s) and/or fund manager that commits to disclose SRI information in line with the Code. SRI, a generic term covering sustainable, responsible, ethical, environmental, social investments and any other investment process that integrates financial analysis with the influence of environmental, social and governance (ESG) issues. It includes an explicit written policy to make use of ESG criteria. Policy of a fund to exercise its voting rights as investors to influence company behaviour. About Eurosif EUROSIF, the European Sustainable Investment Forum, is the pan-european network whose mission is to address sustainability through the financial markets. Eurosif works as a partnership of the national Sustainable Investment Forums (SIFs) within the EU and with the support and involvement of Member Affiliates. Recognised as the premier European forum for sustainable investment, Eurosif s Member Affiliates are drawn from leading pension funds, asset managers, NGO s, trade unions, academic institutes and research providers, together representing assets totalling over 1 trillion. Eurosif s work includes a focus across asset classes - equity and fixed income markets, microfinance, renewable energy, property, private equity and hedge funds - all centred around the industry trends and future legislation affecting this space. The key benefits that Eurosif affiliate members receive include EU interfacing, SRI information and European wide initiatives that integrate Environmental, Social and Governance (ESG) issues into the financial services sector. For the full list of Eurosif Member Affiliates, please see National social/sustainable investment forum to date include: Belsif, Belgium Dansif, Denmark FNG The German, Austrian and Swiss Sustainable Investment Forum Forum per la Finanza Sostenible, Italy Forum pour l Investissement Responsable, France Norsif, Norway Spainsif, Spain Swesif, Sweden UKSIF, UK VBDO (Vereniging van Beleggers voor Duurzame Ontwikkeling), The Netherlands For further information contact Eurosif at or by at contact@eurosif.org. Additionally, feel free to see the most updated information on the Transparency Code at Eurosif La Ruche 84 quai de Jemmapes, Paris, France Tel: