Brochure. Socially Responsible Investing and Corporate Governance

Transcription

1 Brochure Socially Responsible Investing and Corporate Governance

2 Socially Responsible Investing and Corporate Governance In this brochure we explain the influence that socially responsible investing (SRI) and governance have on the way in which Stichting Pensioenfonds SABIC (SPF) invests its pension money. Socially responsible investments are investments motivated by socio-ethical and environmental considerations, while governance stands for the principles of responsible corporate management and the procedures we like to see in companies in which SPF invests. Recognizing its social responsibility, SPF has developed a policy for socially responsible investing, the basic premise being that such investments should yield the returns needed to pay out the pensions, now and in the future. According to the pension fund, SRI investments can yield the same returns as conventional investments. The UN Global Compact comprises ten principles, derived from the following international treaties and declarations: The Universal Declaration of Human Rights. The International Labor Organization s Declaration of Fundamental Principles and Rights at Work. The Rio Declaration on Environment and Development. The United Nations Convention Against Corruption. SPF s SRI policy is based on three pillars: 1. Exclusion 2. Target investments 3. Transparency 1. Exclusion SPF has decided not to invest in certain companies or countries because they engage in activities that the United Nations (UN), the European Union (EU) or the Dutch government considers unacceptable. In its Global Compact the UN explains what activities are considered unacceptable. The ten principles of the UN Compact are: Human Rights Principle 1: Principle 2: Businesses should support and respect the protection of internationally proclaimed human rights; and make sure that they are not complicit in human rights abuses. Brochure SRI and Corporate Governance, version

3 Labor Principle 3: Principle 4: Principle 5: Principle 6: Environment Principle 7: Principle 8: Principle 9: Anti-Corruption Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; the elimination of all forms of forced and compulsory labor; the effective abolition of child labor; and the elimination of discrimination in respect of employment and occupation. Businesses should support a precautionary approach to environmental challenges; undertake initiatives to promote greater environmental responsibility; and encourage the development and diffusion of environmentally friendly technologies. Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery. Besides companies that do not comply with the Global Compact principles, SPF also excludes companies that produce controversial weapons or are major suppliers to such producers. Controversial weapons are: Landmines Biological weapons Chemical weapons Depleted uranium ammunition Nuclear arms White phosphorus ammunition Government bonds issued by countries that are the subject of UN and/or EU sanctions are also excluded from investments by SPF. Such sanctions are imposed mainly because of human rights and arms issues. Investment research firm Sustainalytics helps SPF (and other investors) find out which companies and countries should be excluded from investments because they do not uphold the ten principles of the UN Global Impact. 2. Target investments Target investments are investments in companies that are committed to sustainable development and that are active in fields like alternative energy, microfinancing and social projects. A condition to be met by such target investments is that they should not result in deterioration of SPF s returns and risk profile. Microfinancing implies that money is lent out to poor people in poor countries who normally do not qualify for loans from, for instance, banks because they do not meet certain requirements, such as having equity capital. A small loan (microcredit) enables them to start their own company and build a better existence. Alternative energy, such as wind, solar and bioenergy, can in principle be used indefinitely without having a negative impact on the living environment of today s and tomorrow s generations. SPF s target investments, which currently make up about 1% of its total investments, are investments in: Actiam Institutional Microfinance Fund I This fund provides microfinancing to small entrepreneurs in developing countries. Its money is not lent directly to individuals but goes to local microfinance institutions (MFIs) in Latin America, South East Asia, Eastern Europe and Africa. These MFIs in turn lend money, often between US$100 and 1500, to entrepreneurs for a period of 6 to 12 months. Brochure SRI and Corporate Governance, version

4 DIF Infrastructure II Fund and DIF Infrastructure III Fund These funds invest in European infrastructure projects, such as roads, schools and hospitals, and in alternative energy such as wind and solar energy. DIF Infrastructure II Fund invested among other things in the Harrow Schools project, which involved the setting up of a primary school and two schools for children with special needs. DIF further invested in the development of two hospitals specializing in cancer treatment and heart conditions. In the field of alternative energy DIF has investments in wind energy in Germany. DIF Renewable Energy Fund The DIF Renewable Energy Fund invests in alternative energy projects, the focus being on wind energy and solar energy, mainly in Europe. In SPF s view, companies that have an excessive environmental impact or that handle certain social factors (for instance employees and other stakeholders) in an unacceptable way do not represent good investments. SPF is of the opinion that such companies will lose their license to operate in the future, disqualifying them for investment. A certain ESG level is, therefore, necessary to guarantee a company s license to operate. Companies also create opportunities by taking the ESG factors seriously. Sustainable companies can improve their revenues by creating energy responsible or environmentally responsible products. This is a win/win situation, combining a lower environmental impact with good returns on investments for shareholders. Glenmont Clean Energy I and II These funds, too, invest mainly in European wind and solar energy projects, both in the prestart-up phase and the operational phase. Examples are the construction of wind farms in the UK and a solar energy project in Italy. 3. Transparency A third pillar of SPF s SRI policy is the fund s transparency about its investments. The SPF website lists all companies in which SPF has invested, in all investment categories. This includes investments made on behalf of SPF by external investors. Please click here for a list of SPF s investments. Sustainability Besides these three pillars, there is yet another factor that SPF takes into account in its SRI policy: sustainability. Sustainability is related to the aforementioned ESG factors (Environment, Social and Governance). Governance Good governance is about transparent and efficient monitoring of corporate management. This requires a balanced distribution of influence between managing board, supervisory board and general shareholder meeting. The starting point is that the managing and supervisory boards are accountable for corporate policy and the supervisory board s supervision of this policy, while shareholders must be able to influence this policy and its supervision. Brochure SRI and Corporate Governance, version

5 Voting policy By making its voice heard during shareholders meetings, SPF is able to influence the policy and the quality of the board of companies in which the fund takes an interest. Eventually this may impact the share value in a positive way and reduce investment risks. Every share in a company an investor holds, entitles the holder of a share to a right to vote during shareholder meetings of that company. Items open for voting are, amongst other things, the annual report, profit sharing, authority to buy or issue shares, the appointment of board members and commissioners and the company's remuneration policy. SPF invests its assets in many companies. It is not always possible to attend to all the shareholders meetings being held. As SPF insists on voting, the fund votes remotely (proxy voting). For the exercise of its voting rights, the fund makes use of the services rendered by Institutional Shareholders Services (ISS). ISS is a renowned institution in this specific field of work. On 1 January 2004 the Dutch Corporate Governance Code ( Code Tabaksblat ) became effective. The fund subscribes the Code Tabaksblat and actively applies this code by exercising its voting rights. The fund limits itself to exercising its voting rights to Dutch shares only. By focusing on Dutch shares, for which the scope of the voting policy is restricted to just a few companies, the votes can be assessed more thoroughly. Thus, a better view on risks and opportunities can be achieved. Moreover, a limited scope of the voting policy allows for a better and more timely recognition of the (durable and social) development and direction of a company, and - via the voting policy - permits for early calling to account of the company and for adjustments of the business policy where necessary. Additionally, the fund has solid roots in the Dutch society, which explains its close involvement with the development of the Dutch business community. Thus, the fund is also very familiar with the Dutch market it invests in and is well aware of the market's dynamics. All these aspects make for a more balanced implementation of active shareholding than in the event of a voting policy that is spread worldwide, where there is less feeling with market developments and local values. Besides, the fund's policy gives a better response to society's call for more own responsibility, defined at shareholders meetings on the basis of thorough knowledge of the voting policy. In 2017, SPF has had a vote in a total of 27 shareholders meetings. This figure includes both General and Extraordinary Shareholders Meetings. During these meetings, the fund voted on a total of 264 agenda items. On 5 agenda items the fund voted against the management's proposal. For more information on our voting policy, please click here ( Europe Summary Proxy Voting Guidelines ). To find out how SPF has voted, please click here. Brochure SRI and Corporate Governance, version

6 Contact If you have any questions about your pension visit the website: or contact our Pension Desk: tel or Disclaimer The information provided in this brochure by Stichting Pensioenfonds SABIC, based in Sittard (the pension fund) is general, purely indicative and subject to change. It is intended only to provide members with a general view. The information provided is assumed to be reliable, but is used entirely at the user s risk. Neither the administrator (DSM Pension Services B.V.), nor the pension fund accepts any liability for damage arising from errors or omissions in the information, or for damage arising in connection with the use of, reliance on, or distribution of the information. Rights can be derived only from the pension regulations applying to the member. Brochure SRI and Corporate Governance, version