European SRI Transparency Code Version 3:0

Transcription

1 European SRI Transparency Code Version 3:0 The European SRI Transparency Code (the Code) focuses on SRI funds distributed publicly in Europe and has been designed to cover a range of assets classes, such as equity and fixed income. All information pertaining to the European SRI Transparency Code can be found at the following website: The Code comes with a Guidance Manual for fund managers on how to best use and respond to the Transparency Code. The present version of the Code has been approved by the Board of Eurosif on October 3, TWO KEY MOTIVATIONS UNDERPIN THIS CODE 1. The opportunity for retail SRI funds to clarify their SRI approach to investors and other stakeholders in an easily accessible and comparable format. 2. Proactively strengthen a self-regulation that contributes to the development and promotion of SRI funds by setting up a common framework for transparency best practices. GUIDING PRINCIPLE Signatories to the Code should be open, honest and disclose accurate, adequate and timely information to enable stakeholders, in particular consumers, to understand the ESG 1 policies and practices of the fund. COMMITMENTS FROM SIGNATORIES The order and exact wording of the questions shall be respected; Responses should be informative and clear, and the resources and methodologies deployed should be described with as much detail and precision as possible; Funds should report data in the currency that they use for other reporting purposes; Reasons preventing the fund from providing all or part of the information to a given question should be clearly stated and, in such a case, signatories should state when they will be able to answer the question; Responses shall be updated at least on an annual basis and should have a precise publication date; Responses to the Code should be easily accessible on the fund s and/or fund manager s website. In any case, signatories should make it clear where to find the information required by the Code; Signatories are solely responsible for the answers to the questions, and should state this in their response. 1 ESG stands for Environmental, Social and Governance. 1

2 To clarify these commitments, signatories should include at the beginning of the response document the following two statements: Statement of Commitment Sustainable and Responsible Investing is an essential part of the strategic positioning and behaviour of RobecoSAM AG. We have been involved in SRI since 1995 and welcome the European SRI Transparency Code. This is our eight statement of commitment and it covers the period to 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 RobecoSAM AG 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. RobecoSAM meets the full recommendations of the European SRI Transparency Code. August 2017 CODE CATEGORIES Section 1 Basic Details The Fund Management Company 1a Provide the name of the fund management company managing the fund(s) to which this code apply. Provide general information about The Fund Management Company managing the fund(s) to which this code applies (e.g. name, address, website ). RobecoSAM AG (formerly SAM Sustainable Asset Management AG) Josefstrasse 218, CH-8005 Zürich Web: Johannes Weisser Client Portfolio Manager RobecoSAM johannes.weisser@robecosam.com Tel: Web: 2

3 1b Describe the general approach of the fund management company with regards to how it takes environmental, social and governance (ESG) criteria into consideration. Is the fund management company approach towards ESG criteria aligned or inspired by its corporate social responsibility approach? Yes/No. If yes, insert a link to the company s CSR policy. If not, explain why not. Founded in 1995, RobecoSAM is an investment specialist focused exclusively on Sustainability Investing. Our mission is to drive sustainability thinking. We use financial markets as the most powerful transmission mechanism to promote sustainable business practices. With our exclusive focus on Sustainability Investing, we provide a unique and broad range of sustainability solutions for investors and corporates. We are convinced that companies with sustainable business practices are more successful. Our vision is to set the standard in Sustainability Investing. As a thought leader, we contribute to this continuous development through our Sustainability Foresight. As a reflection of its own commitment to advancing sustainable investment practices, RobecoSAM is a signatory of the PRI and, UN Global Compact, a member of Eurosif, Swiss Sustainable Finance (SSF), Carbon Disclosure Project (CDP), the Portfolio Decarbonization Coalition (PDC), the GIIN, the FNG as well as the Sustainability Accounting Standards Board (SASB) and partner of the Swiss Climate Foundation. Please find below for an overview of RobecoSAM s corporate responsibility achievements, cooperation s and international affiliations: 2001: RobecoSAM becomes the first company in Switzerland to receive the Carbon Neutral(r) status in 2001, and is awarded the CarbonNeutral(r) status each year since. 2002: RobecoSAM partners with the Association for Sustainable & Responsible Investment in Asia (ASrIA) 2004: RobecoSAM a signatory to the transparency guidelines for sustainable retail funds issued by the European Social Investment Forum (Eurosif) 2007: RobecoSAM becomes a signatory of the Principles for Responsible Investments (PRI). In July 2017, RobecoSAM was again awarded an A+ score in all assessed modules by the UN PRI for their overarching approach to Sustainability Investing. 2009: RobecoSAM becomes a member of the Investor Network for Climate Risk, the Ceres Coalition as well as the Global Impact Investing Network (GIIN). 2010: RobecoSAM signs and endorses the CEO Water Mandate, which is an initiative of the UN Global Compact. 2011: RobecoSAM becomes a partner of co2-monitor a tool which enables the users to discover their personal CO2 emissions and find out how to reduced it. 3

4 RobecoSAM becomes member of the Global Initiative for Sustainability Ratings (GISR), a public benefit organization aimed at making financial markets agents of, rather than impediments to, achieving the Sustainable Development Goals and broader global sustainability agenda 2013: RobecoSAM establishes a collaboration with (CDP): CDP is the provider of the only global environmental disclosure system and the producer of the annual Climate Disclosure and Climate Performance Leadership Indexes (CDLI & CPLI). In the annual RobecoSAM Corporate Sustainability Assessment, RobecoSAM now asks public companies the same climate change questions as those developed over the past decade by CDP. This collaboration improves the comparability of sustainability data in the global market. 2015: RobecoSAM became a signatory of the Portfolio Decarbonization Coalition (PDC), a multi-stakeholder initiative that will drive global greenhouse gas (GHG) emission reductions by mobilizing a critical mass of institutional investors committed to gradually decarbonizing their portfolios. RobecoSAM became a signatory of the Global Investor Statement on Climate Change RobecoSAM sponsors the "Sustainable Games: The Business Model Challenge. Initiated by Cornerstone Capital Group and supported by UN PRME and the Clinton Global Initiative, students across the globe are asked to present a business model of the future. This business model must be aligned with a more regenerative form of capitalism and therefore should address environmental, social and governance challenges and opportunities. RobecoSAM supports and collaborates with the Global Child Forum Starting in 2015, RobecoSAM and the Global Reporting Initiative (GRI) work together on research and methodology. GRI and RobecoSAM have collaborated on research pieces that identify and report on material issues in certain industries. RobecoSAM has, where appropriate, aligned definitions and indicators to those present in GRI s G4 framework and the new Standards. Finally, RobecoSAM and GRI collaborate to ensure that the reporting burden for companies can be reduced while aligning sustainability metrics to make them more consistent and relevant for the investment community. Publications include Defining Materiality: What Matters to Reporters and Investors and Defining What Matters: Do companies and investors agree on what is material?, they were published in 2015 respectively RobecoSAM is part of the Swiss team of UN EP Inquiry to develop the Proposals towards a Sustainable Financial System in Switzerland. In February 2016, the Federal Council established principles for a consistent Swiss policy in this area. These principles have also been integrated in the Federal Council's report on the strategic thrusts of the financial market policy of October Furthermore, the competent federal authorities were actively involved in the corresponding international bodies, e.g. the G20 Green Finance Study Group (GFSG). 4

5 RobecoSAM signs the PRI initiative Global Statement on Investor Obligations and Duties. A Call on international and supranational policymakers to clarify investors obligations and duties, in particular, in relation to the integration of ESG issues into investment practice. 2017: RobecoSAM becomes a supporter of the Task Force on Climate-Related Financial Disclosures. In signing this statement, RobecoSAM affirms its commitment to support the voluntary recommendations of the industry-led Financial Stability Board (FSB) Task Force on Climate-related Financial Disclosures (TCFD). These disclosures are an important step forward in enabling market forces to drive efficient allocation of capital and support a smooth transition to a low-carbon economy. Has the fund management company signed the Principles for Responsible Investment? If yes, please insert the link to the answer to the PRI questionnaire. If not, explain why not. RobecoSAM becomes a signatory of the Principles for Responsible Investments (PRI). In July 2017, RobecoSAM was again awarded an A+ score in all assessed modules by the UN PRI for their overarching approach to Sustainability Investing. RobecoSAM s responses to the last PRI Reporting and Assessment survey can be requested via com@robecosam.com Is the fund Manager a signatory or a member of other international and/or national initiatives supporting SRI practices? Please answer if you deem this information to be useful. Please refer to our response above on page 3, regarding RobecoSAM s membership of international initiatives supporting SRI practice. In addition, we are involved in a number of academic collaborations in which we share our sustainability data with partner universities, business schools and research institutions, such as Swiss Federal Institute of Technology (ETH), Erasmus University and WWF UK, and support them in conducting empirical research on the linkages between sustainability performance and financial performance. Finally, we participate in a number of industry forums (such as UNPRI, Ceres, and Forum Nachaltige Geldanlage (FNG)) and thought-leadership initiatives in which we seek to advance key sustainability topics such as water footprint and education. In 2004, RobecoSAM signed up to the transparency guidelines for sustainable retail funds issued by the European Social Investment Forum (Eurosif). Has the fund management company established an ESG engagement policy? If yes, describe the policy by outlining its objectives and its methodology and/or, if it is public, insert a link to the policy. If not, explain why not. RobecoSAM has two engagement approaches - through Robeco's Governance & Active Ownership (GAO) team (formerly part of RobecoSAM) as well as through its Corporate Sustainability Assessment (CSA). 5

6 GAO Engagement Robeco's Governance & Active Ownership team provides engagement and voting services for Robeco and RobecoSAM's funds and for our institutional investor clients. The team is comprised of seasoned professionals who have been encouraging companies in our investment portfolios to implement good corporate governance and responsible policies since In 2016, we engaged with 188 companies on 210 engagement cases. For full details on the 2016 engagement season can be found at: For further details, please refer to the Robeco Engagement Policy hyperlink: CSA Engagement The CSA serves as a direct corporate engagement platform with over 900 of the world's largest corporations. Each year, RobecoSAM invites over 3,900 companies to participate in the CSA. In 2017, 942 companies completed the online questionnaire, covering a wide range of Economic, Environmental and Social topics. All participating companies are provided a Company Benchmarking Scorecard, that highlights their absolute performance as well as their relative performance to their peers. In 2016, we entered into a structured dialogue with more than 250 companies interested in improving their performance and provide them with a more in depth benchmarking report that outlines sustainability best practice approaches and provides more granularity on their relative strengths and weaknesses. More information on RobecoSAM's Corporate Sustainability Assessment can be found here: Has the fund management company established a voting policy? If yes, describe the policy by outlining its objectives and its methodology and/or, if it is public, insert a link to the policy. If not, explain why not. Voting Rights Robeco's Governance & Active Ownership team provides engagement and voting services for Robeco and RobecoSAM's funds and for our institutional investor clients. Robeco s voting policy is principle-based as it relies on the internationally accepted set of principles of the International Corporate Governance Network (ICGN). This means that instead of following formula-based instructions to votes, careful analysis of proposals is carried out in order to take into consideration local regulations, corporate-governance codes of conduct, and common practice in different markets and sectors. The policy is reviewed every year to assess whether it is up to date with best 6

7 practice. Based on this assessment it is decided whether significant changes should be made to the policy. The most recent significant changes made to Robeco s voting policy took place in 2014 following the revision of the ICGN Global Governance Principles. Robeco s voting policy is implemented through the custom voting policy that we have developed with our proxy voting service provider Glass Lewis. Every year we carry out a review and due diligence meet with our Proxy Voting Advisor and provider of the electronic voting platform to evaluate the voting process and the voting results. This evaluation is based on technical and infrastructure aspects of the voting process as well as on the content of the research and advisory services provided by them. We evaluate, for example, what the reasons are for distinctions between the vote recommendations of Glass Lewis and our final vote decisions. This way we try to identify the systematic aspects of Glass Lewis s approach which are not in line with our Proxy voting policy. Furthermore, we aim for improvements in the cooperation with Glass Lewis which should lead to ongoing improvement of quality standards in the voting process. Transparency is a key element of RobecoSAM s corporate governance policy. We present our voting decisions shortly after the annual general meeting took place. Highlights of the 2017 voting season can be found at: Describe how the fund management company or the group contributes to the promotion and the development of SRI. Promoting Sustainability Investing RobecoSAM also hosts the annual RobecoSAM Forum, bringing together institutional investors, asset managers and company stakeholders with the goal of analysing key sustainability trends shaping industries and financial markets. By connecting key decision-makers across the financial industry, the RobecoSAM Forum serves as a platform for establishing a global community of thought leaders and practitioners of sustainability investing. In addition, RobecoSAM is actively involved with over 10 other sustainability institutions and organizations.these institutional include the following:, Global Real Estate Sustainability Benchmark (GRESB), CDP, International Corporate Governance Network (ICGN), Investor Network on Climate Risk (INCR)/CERES, United Nations Environment Programme Financ Initiative (UNEP FI), United Nations Global Compact (UNGC), United Nations Principles for Responsible Investment, Global Reporting Initiative, ASRIA, International Integrated Reporting Committee (IIRC), and Sustainability Accounting Board Standards (SASB). In our view, the first step to being a responsible and active owner is to send companies a strong signal that we, as investors, are interested in how they manage sustainability issues. Our questionnaire used for the RobecoSAM Corporate Sustainability Assessment acts as a tool to encourage improved disclosure on key sustainability issues of interest to long-term investors and 7

8 offers companies a blueprint of industry best practices. Moreover, the Dow Jones Sustainability Indices (DJSI), which is based on the results of RobecoSAM s annual assessment, offers investors an indirect engagement platform to have a collective impact on companies through all our licensees. One of the merits of indirect engagement is that it expands the scope of our efforts. In the first phase of our Corporate Sustainability Assessment process, our invitations to the RobecoSAM assessment reach companies every year. Over 900 companies participate actively in the assessment. Subsequently, we enter into structured one-on-one dialogues with over 200 companies that have demonstrated an interest in improving their sustainability performance. Discussions with management are based on a company-specific benchmarking report that compares the company s performance with industry best practices on 120+ criteria. Finally, we engage with companies on an ad hoc basis if they appear to have been involved in controversial business activities or in breach of international norms and standards. Through RobecoSAM's Corporate Sustainability Assessment, companies are challenged on leading and under-reported sustainability topics - driving increased public disclosure over time and greater transparency for investors and other stakeholders. The RobecoSAM Corporate Sustainability Assessment process can therefore be seen as a combination of indirect engagement at the systemic level and direct engagement activities through active dialogues with companies which aim to improve specific aspects of corporate behaviour. RobecoSAM publishes the percentile rankings of all companies assessed down to the criterion level on the Bloomberg Professional platform. This information is available at no additional to cost to anyone with access to Bloomberg Professional and is intended to provide the broader investment community with RobecoSAM's research. 1c Describe/List your SRI products and the specific resources allocated to your SRI activities. Briefly describe the SRI fund range (number, assets under management, strategies,...) Describe/Detail the resources allocated by the fund management company (organization, ESG research internal/external, dedicated portfolio management team, ) and indicate where this information is available. Sustainability Solutions The firm s offering comprises asset management and indexes. Its asset management capabilities include a broad range of regional and global equity, impact investing, and theme-based strategies in the areas of Water, Smart Energy, Smart Materials, Healthy Living and Agribusiness. In addition, it offers large institutional investors customized investment solutions and mandates that incorporate sustainability criteria, including optimized, active and unconstrained strategies. Every strategy is managed by a dedicated lead portfolio manager who has full decision making responsibility. Portfolio managers directly report to the Head of Investment Management, who is a member of RobecoSAM's Executive Committee. Fund name Inception date Strategy AuM (EUR million) as of June 2017 Core Equity Funds RobecoSAM Sustainable Global Equity Fund RobecoSAM Sustainable European Equities Fund

9 RobecoSAM Global Small Cap Equities Fund RobecoSAM Gender Equality Impact Equities RobecoSAM Global Child Impact Equities Fund Theme-based Equity Funds RobecoSAM Sustainable Water Fund RobecoSAM Smart Energy Fund RobecoSAM Smart Materials Fund RobecoSAM Sustainable Healthy Living Fund RobecoSAM Sustainable Agribusiness Equities Fund In partnership with S&P Dow Jones Indices, RobecoSAM has developed and licenses the globally recognized Dow Jones Sustainability Indices (DJSI), launched in September of The DJSI family has since grown to include global, European, Eurozone, North American, US, Asia-Pacific Emerging Markets benchmarks and a Diversified index family. Sustainability Research RobecoSAM s Sustainability research is generated internally, and is based on RobecoSAM s annual Corporate Sustainability Assessment and the annual reports published by the companies covered by RobecoSAM s Research. Over the last 18 years, RobecoSAM has identified and developed an extensive set of economic, environmental, and social assessment criteria in order to measure a company s sustainability performance. These criteria are built into the questionnaire, which quantifies the sustainability performance of a company by assigning a corporate sustainability score based on predefined weights for each of the criteria. The data we collect is stored in RobecoSAM s proprietary Sustainability Information Management System (SIMS), where it is converted into investment relevant insights. Information used as inputs for the RobecoSAM Corporate Sustainability Assessment includes, among others, environmental, social and economic (raw) data provided by the companies, supporting documentation such as internal corporate strategies and policies, position papers, publicly available sustainability, environmental, or occupational health and safety reports. Fund holdings are published in RobecoSAM s annual and semi-annual reports. These can be downloaded at: Funds RobecoSAM Publications regarding the product capabilities such as prospectus, factsheets and fund brochures can be found under: 1d Describe the content, frequency and resources allocated/used by the fund management company to inform investors about the ESG criteria taken into account. The RobecoSAM Yearbook can be found in digital form and in form to download under: The Sustainability Yearbook RobecoSAM RobecoSAM studies and white papers, Foresight, Insight and Flash can be found under: Sustainability insights RobecoSAM 9

10 The RobecoSAM Newsletter is on a subscription basis: Newsletter RobecoSAM The Corporate Sustainability Assessment (CSA) Resource Center, containing information about the CSA Methodology, can be found here: RobecoSAM CSA Resource Center The SRI Fund(s) 1e Provide the name of the fund(s) to which this Code applies and its (their) main characteristics Describe the main characteristics of the fund(s): geographical focus, asset class, SRI strategy used (use the classification provided by Eurosif/EFAMA). As mentioned above, RobecoSAM exclusively focuses on sustainability investing. Therefore, all RobecoSAM strategies are managed according to the RobecoSAM sustainability principles. The RobecoSAM strategies are long-only equity products. Core strategies (regional): The core strategies invest in companies in the MSCI World, MSCI World Small Cap, and the MSCI Europe that have received a sustainability score (based on the RobecoSAM Sustainability Assessment), plus listed companies outside the respective index that are covered by RobecoSAM's sustainability theme strategies: RobecoSAM Sustainable Global Equities (LU ) RobecoSAM Sustainable European Equities (LU ) RobecoSAM Global Small Cap Equities (LU ) RobecoSAM Global Gender Equality Impact Equities Fund (LU ) RobecoSAM Global Child Impact Equities Fund (LU ) Theme strategies: Long-term sustainability related trends such as demographic change, resource scarcity, pollution, and climate change shape the competitive landscape in which companies operate. RobecoSAM's theme-based strategies invest in listed companies worldwide that anticipate and respond to challenges in the areas of Water, Smart Energy, Smart Materials, Healthy Living and Agribusiness: RobecoSAM Sustainable Water Fund (LU ) RobecoSAM Smart Energy Fund (LU ) RobecoSAM Smart Materials Fund (LU ) RobecoSAM Sustainable Healthy Living Fund (LU ) RobecoSAM Sustainable Agribusiness Equities Fund (LU ) 10

11 1f What is (are) this (these) fund(s) trying to achieve through taking into account ESG criteria? For instance, financing a specific sector, reducing risks, support better CSR practices, develop new value creation opportunities, other objectives. Creating shareholder value through sustainability investing RobecoSAM s overall corporate philosophy, product strategy and focus are based on its aim to provide a compelling range of sustainability products to its clients. By leveraging the comprehensive data collected by the RobecoSAM Corporate Sustainability Assessment, we are ideally positioned to identify companies leading their peers in terms of sustainability and, thus, shareholder value creation. RobecoSAM s fundamental investment philosophy is based on the premise that overarching sustainability megatrends such as demographic change, resource scarcity, pollution, and climate change shape the competitive landscape in which companies operate and that the financial markets are the most powerful transmission mechanism to promote sustainable business practices. We believe that material, non-financial information fully integrated with traditional financial data gives investors an information edge. We believe that sustainability is all about a company s capacity to prosper by anticipating and managing current and future economic, environmental and social opportunities and risks by focusing on quality, innovation and productivity to create a competitive advantage and most importantly, long-term stakeholder value. We believe that these objectives focus companies on activities that positively affect their free cash flow, return on invested capital and weighted average cost of capital. RobecoSAM s in-house empirical analysis demonstrates that sustainability investing delivers alpha to investors. Please consider our white paper "Alpha from Sustainability": Section 2. Approach to ESG Evaluation of Companies 2a What fundamental principles underlie the ESG research methodology? Describe the principles, standards or norms on which the ESG analysis is based for each of the environmental, social/societal and governance dimensions. Include brief comments about how stakeholders are consulted, as appropriate. Economic, Environmental and Social Criteria Sustainability is the guiding principle of development that meet the needs of the present without compromising the ability of future generations to meet their own needs. 2 Its central element is a future-oriented perspective that incorporates economic, environmental, and social considerations into business decisions. Factors such as good corporate governance practices, ethical behaviour, 2 Brundtland Commission, Our Common Future,

12 human capital management, environmental policies, and risk and crisis management are crucial contributors to the long-term success of a company. Similarly, Sustainability Investing is a long-term investment approach that integrates economic, environmental, and social criteria into the selection and retention of investments. Our conviction is that sustainability trends such as climate change, resource efficiency, or demographics have an impact on the environment in which companies compete, and their response to such challenges determines their ability to create shareholder value. The impact of these sustainability factors and trends on companies long-term business and financial performance is under-estimated and under-researched by investors, resulting in market inefficiencies, which RobecoSAM is well positioned to exploit. At the corporate level, sustainability is a future-oriented approach in which companies incorporate economic, environmental, and social considerations into their business decisions. Based on the global trend analysis, research identifies factors such as corporate governance practices, human capital management, environmental policies, and risk and crisis management that have a material impact on the long-term success of a company. Companies that are better at managing corporate sustainability risks than their peers are well-positioned to profit in the long run. By analysing the sustainability profile of companies and integrating it into traditional financial analysis, RobecoSAM gains additional insights that facilitate the selection of stocks offering the potential for attractive long-term returns, while investing in responsible companies. Media & Stakeholder Analysis As part of its annual Corporate Sustainability Assessment, RobecoSAM conducts an ongoing monitoring of companies that have been selected as members of the eligible investment universe for its funds, or as components of the Dow Jones Sustainability Indices. This monitoring process consists of a Media & Stakeholder Analysis, which is based on screening provided by RepRisk, a leading ESG research and business intelligence provider, and frequent interactions with key stakeholders such as NGOs and consumer organizations. Companies are monitored on an ongoing basis to verify their involvement in, and the management of critical environmental, economic and social crisis situations that can have a damaging effect on their reputation and core business. In addition, the consistency and quality of a company s behaviour, response, and management of such situations is reviewed in line with its stated principles and policies. The Media & Stakeholder Analysis can lead to the downgrading of a company s sustainability score, which may affect its overall fair valuation score. Examples of critical issues identified and reviewed through the monitoring process include: Commercial practices; e.g. tax fraud, money laundering, antitrust, balance sheet fraud, and corruption cases. Human rights abuses; e.g. cases involving discrimination, forced resettlements, child labour and discrimination of indigenous people. Layoffs or workforce conflicts; e.g. extensive layoffs and strikes. Catastrophic events or accidents: e.g., fatalities, workplace safety issues, technical failures, ecological disasters and product recalls. 12

13 2b What internal and external resources are used to carry out this research? Describe the general information used to carry out the ESG research: internal analysis, ESG rating agencies, other external sources of information. Information Source RobecoSAM s Sustainability research is generated internally, and is based on RobecoSAM s annual Corporate Sustainability Assessment and the annual reports published by the companies covered by RobecoSAM Research. Over the last 18 years, RobecoSAM has identified and developed an extensive set of economic, environmental, and social assessment criteria in order to measure a company s sustainability performance. These criteria are built into the questionnaire, which quantifies the sustainability performance of a company by assigning a corporate sustainability score based on predefined weights for each of the criteria. The data we collect is stored in RobecoSAM s proprietary Sustainability Information Management System (SIMS), where it is converted into investment relevant insights. Information used as inputs for the RobecoSAM Corporate Sustainability Assessment includes, among others, environmental, social and economic (raw) data provided by the companies, supporting documentation such as internal corporate strategies and policies, position papers, publicly available sustainability, environmental, or occupational health and safety reports. Primary Research Each RobecoSAM analyst meets on average at least 50 companies per year. In addition to discussing financial performance issues, analysts also typically steer their conversations with company management towards long-term sustainability topics related to environmental and social issues in order to inform their view of a company s risk-return profile. Our strong focus on primary research with respect to under-researched topics related to environmental, social and financial considerations enables RobecoSAM research to maintain an information advantage over mainstream investors who do not consider these factors in their investment process. External Sources of Information RobecoSAM s Sustainability Application and Operations Team (SAOT) has subcontracted part of the sustainability assessments to Evalueserve in India. RobecoSAM has established a Service Level Agreement with Evaluserve, and the SAOT is responsible for the monitoring of the agreed service levels, and initiation of corrective actions by the service provider when relevant. Within Evalueserve, a limited pre-agreed team of analysts is working on the company assessments and DJSI information is treated confidential within the dedicated team. Further, the involved employees at Evalueserve are bound to confidentiality. For those companies that are not actively participating on the DJSI questionnaire, Evalueserve performs sustainability assessments by filling in the DJSI questionnaires based on publicly available information. In addition, RobecoSAM s has subcontracted, through a cooperation agreement, part of the Media & Stakeholder Analysis research to RepRisk. Throughout the year, RobecoSAM monitors news coverage of companies in the universe on a daily basis using media stories compiled and pre- 13

14 screened by RepRisk, a leading provider of media monitoring tools. News stories covered by the Media and Stakeholder Analysis (MSA) include a range of issues such as economic crime or corruption, fraud, illegal commercial practices, human rights issues, labor disputes, workplace safety, catastrophic accidents or environmental disasters. For actively managed strategies, RobecoSAM applies the following universe restrictions: weapons related military sales, firearms, controversial weapons and tobacco. For the screening of all investment universes and the application of additional respective filters, RobecoSAM works with the specialized research provider, Sustainalytics. 2c Which ESG analysis criteria are used? Indicate what the main criteria for each of the environmental, social/societal and governance dimensions are. Specify if these criteria differ according to sectors, the geographical zones, the type of company, If appropriate, provide an example. Sustainability Analysis Criteria Based on a global trend analysis, RobecoSAM has identified underlying economic, environmental and social megatrends such as aging infrastructure, access to capital, the scarcity of natural resources, and climate change, coupled with population growth, urbanization, and an aging population. Such trends represent opportunities and risks for companies to develop and market innovative products and services that address these long-term sustainability challenges. Those who can successfully anticipate to these trends are well-positioned to outperform in the long run. We use a best in class approach, as through our annual Corporate Sustainability Assessment we identify the most sustainable companies in each of the 60 industries. The sustainability scores, however, are integrated into the valuation model. Companies with a superior sustainability score will have a positive impact on their total valuation analysis, because we believe that more sustainable companies are better positioned to generate long term shareholder value. Sustainability laggards will have a negative impact on their overall valuation, as they are more likely to be underperformers in terms of their ability to maintain and grow earnings. Based on these trends, RobecoSAM has defined over 120 general and industry specific criteria, across 60 different industries, which form the basis of the annual RobecoSAM Corporate Sustainability Assessment. All criteria are based on widely accepted standards, best practices and audit procedures as well as extensive input from industry specialists and consultants. RobecoSAM s annual assessment is also used as the basis for the construction and annual review of the Dow Jones Sustainability Indices (DJSI). General criteria include standard management practices and performance measures applicable to all industries, such as corporate governance, environmental management and performance, human rights, supply chain management, risk and crisis management and labour practices. The industry specific criteria account for the majority of the assessment. Industry-specific criteria take into account the challenges and trends affecting specific industries. They reflect the economic, environmental and social forces driving the sustainability performance of a particular industry. 14

15 The assessment is divided into three distinct sections, covering the economic, environmental and social dimensions. A selection of criteria used in the Assessment is outlined below. RobecoSAM s Industry-based analysis Furthermore, our investment universe restricts firms with a significant exposure to damaging activities, such as the production of tobacco or firearms. Eligible universe Universe Restrictions 15

16 2d What is your ESG analysis and evaluation methodology (how the investment universe is built, rating system, )? Describe the ESG evaluation/rating system and how it is built by explaining how the various ESG criteria are articulated. If appropriate, provide an example. RobecoSAM Sustainability Score RobecoSAM s methodology is based on the application of economic, social and environmental criteria to assess the opportunities and risks deriving from these three dimensions. Over the last 18 years, RobecoSAM has identified an extensive set of criteria which are used to measure a company s sustainability performance. These criteria are built into an extensive industryspecific annual questionnaire, the RobecoSAM s Corporate Sustainability Assessment. It is used to obtain insights into each company s response to a broad range of general and industry specific sustainability challenges. The information provided by a specific company is quantified based on predefined weights for each of the criteria, and results in a Sustainability Score which is also used as a base for the construction of the Dow Jones Sustainability Indices. Additional sources of information used as an input for the sustainability assessment include supporting documentation such as sustainability reports, environmental reports, and health and safety measures provided by the companies, as well as personal contacts between the analysts and companies. In addition, analysts review media, press releases, articles, and stakeholder commentary written about a company over the past twelve months. This information is integrated into the sustainability analysis, and also serves as a basis for possible downgrading of a company s sustainability score. Information provided in the questionnaire is verified. Verification includes crosschecking answers with documentation provided by the company, verifying a company s track record and incidents and crisis management with media and stakeholder reports and, if necessary, direct interaction and clarification with the company. Industry-Specific Assessment RobecoSAM analyses the corporate sustainability information collected by focusing on the company s position within its industry and chosen markets, its degree of preparedness for the opportunities and challenges arising from global sustainability trends, and the degree to which its business practices align management interests with those of the shareholders. Companies that are better at seizing opportunities and managing risks than their industry peers are well-positioned to profit in the long run. Thus, those companies that embrace corporate sustainability as a key source of competitive advantage and implement sustainable practices to mitigate risks and seize opportunities are more likely to receive a higher sustainability score compared to their peers. The score is then incorporated into the RobecoSAM Valuation Model, because RobecoSAM believes that management decisions regarding sustainability factors pertaining to the environment, social considerations and corporate governance have an impact on value drivers such as a company s resource efficiency, workforce motivation, innovation potential, and reputation with stakeholders. The positive or negative impact of sustainable (or unsustainable) management decisions can then be measured in the company s financials such as revenues, costs or reinvestment rates. Companies with a high sustainability score will enjoy a higher return on invested capital and/or a lower cost of capital, thus receiving a higher RobecoSAM Fair Value score. 16

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18 2e How frequently is the ESG evaluation reviewed? Please briefly explain the methodology update process and who is involved. If appropriate, explain if the methodology has changed in the past 12 months and the nature of the key changes. RobecoSAM continuously makes enhancements to its research methodology in order to identify and interpret corporate sustainability information that has a material impact on long-term shareholder value creation. Such enhancements are aligned with our mission to leverage our understanding of sustainability issues in making better-informed investment decisions. Each SI research analyst is responsible for reviewing the sector-specific portion of the questionnaire for his or her area of coverage, and amending or including new questions for inclusion in the questionnaire, based on industry-specific sustainability trends, risks, and challenges affecting his or her specific research sector. We focus on ESG issues that are material to the companies' respective industries, long-term in nature, and that are under-researched in traditional financial analysis. As sustainability becomes more embedded in corporate practices, RobecoSAM regularly updates the questionnaire to capture new sustainability trends that are likely to have an impact on the companies' competitive landscape, and to continuously challenge companies to improve their policies and processes. The questionnaire for the annual RobecoSAM Corporate Sustainability Assessment is reviewed by RobecoSAM Research each year. Approximately 15-20% of the questions are yearly renewed and optimized. In the 2017 assessment, for instance, new questions on Policy Influence and Impact Measurement were introduced and increased focus was put on companies' assessment of risks in their supply chains. The section on Corporate Governance was extended to cover additional questions about board tenure and board industry experience. By doing so, we hope to raise awareness and eventually improve corporate performance in these areas. In addition to this, many other criteria were reviewed to ensure consistency, clarity and materiality of the questions asked. Other enhancements to our SI research process include a Materiality Analysis on the most relevant sustainability factors for the GICS industries that RobecoSAM analyses, and a new format for sharing companies Sustainability Profiles with other investment professional of the group. Because the Corporate Sustainability Assessment also forms the basis for the Dow Jones Sustainability Indices (DJSI), key criteria changes are published in the form of a Review Presentation, which can be downloaded. Annual Review DJSI RobecoSAM also presents and discusses major methodology through publications and webcasts. These can be found in the Corporate Sustainability Resource Center: CSA Resource Center Additionally, we publish an annual RobecoSAM Sustainability Yearbook, which includes some of the major changes to the RobecoSAM Corporate Sustainability Assessment. A copy of the yearbook can be found on our webpage: RobecoSAM Sustainability Yearbook 18

19 To ensure quality and objectivity of the RobecoSAM Corporate Sustainability Assessment, an annual external review by Deloitte is completed. The review monitors and maintains the accuracy of the assessment procedures and results. The Assurance Statement can be downloaded as a PDF file at: Deloitte Assurance Report Section 3. Fund Management Process 3a How do you take into account ESG criteria when defining the universe of eligible investments? If appropriate, describe the eligibility threshold and the resulting level of selectivity. Long-term Sustainability Drivers Based on its long-term experience and in-house sustainability expertise, RobecoSAM conducts a global trend analysis, which serves as the framework for defining sustainability drivers such as Demographics, Resource Scarcity, and Pollution. Investment Universe The investment universe for the RobecoSAM Core Strategies consists of all stocks in the MSCI World All Countries / MSCI World Small Cap / MSCI Europe that have received an above average sustainability score based on the RobecoSAM Corporate Sustainability Assessment, plus any companies with an exposure to one of the RobecoSAM Sustainability Themes: Water, Clean Energy, Materials, Healthy Living and Agribusiness. To demonstrate, we provide the selectivity criteria of the investment universe below for our Sustainable Global Equities strategy: The starting investment universe consists of approximately stocks: It encompasses companies of the MSCI World Index plus companies outside the index that are covered by the RobecoSAM sustainability theme strategies. By broadening the Global Equity investable universe to include these small and mid-cap companies whose business activities directly address long term sustainability megatrends such as demographic change, resource scarcity, pollution and climate change, we can capture additional alpha opportunities. The starting universe is then screened for stocks above USD 1 billion market cap, resulting in an investment universe of approximately companies. Universe Restrictions An increasing number of investors recognize the value that they can derive from integrating environmental, social and governance factors into their investment decisions. One of our strongestheld beliefs is that companies that are able to add value for society will deliver superior returns to their shareholders over the long term. The flip-side of this is that firms that are lagging behind in this regard are likely to face headwinds from increasing regulation, public scrutiny, and reduced demand from their customers over the long term. 19

20 Besides this systematic integration of ESG factors in our investment process, we believe that some products and business practices are detrimental to society in a way that makes them incompatible with a sustainable investment strategy. With this in mind, at RobecoSAM we exclude from our investment universe companies whose practices breach the principles of the United Nations Global Compact and turn out to be unwilling or incapable of changing these practices even after active engagement by our specialized team. In addition, our investment universe restricts firms with a significant exposure to damaging activities, such as the production of tobacco or firearms. Eligible universe Universe Restrictions For additional information on exclusion criteria thresholds, please refer to our above response in 2c. We believe that the resultant benefits to our clients are two-fold: it increases the likelihood of them achieving the investment returns that they need, and enables them to make a positive contribution to society through the deployment of their assets. Environmental impact The RobecoSAM Sustainable Global Equities strategy s investment team uses a proprietary tool, the Impact Optimizer, to maximize the reduction of the portfolio environmental footprint, while minimizing the number of companies excluded from the investable universe. The Impact Optimizer was developed, in order to apply the environmental impact data in an efficient way in the universe screen and portfolio construction. The analytical reporting tool helps monitor the impact of the portfolio on the following four quantitative environmental impact indicators: Greenhouse gas (GHG) emissions: measures direct GHG emissions generated by sources owned or con-trolled by the company (Scope 1 emissions) and indirect emissions associated with the generation of purchased electricity or heat (Scope 2 emissions). Energy consumption: measures total energy directly consumed by the company as well as indirect energy consumed outside the organization. Water use: measures company s total water withdrawal, excluding water discharged with an equivalent quality level than the water extracted. Waste generation: measures metric tons of dry waste generated by the company, consisting of by-products of the extraction or production process that can no longer be used for production or consumption and which the company intends to discard. 20