Responsible Investment Policy Framework April 2016 CC&A/Corporate Citizenship
Contents 1. Introduction 3 1.1 Objectives 3 1.2 Mandate 3 1.3 Scope 3 1.4 Foundation 4 1.5 Structure 4 2. Responsible Investment: Vision, Approach & Key Principles 6 2.1 Vision 6 2.2 Approach 6 2.3 Key principles 6 3. Governance 9 3.1 Decision-making 9 3.2 Advising 9 4. Monitoring and reporting 10 Appendix 1: International standards and initiatives 11 Clarification note This Responsible Investment Policy Framework of NN Group N.V. ( NN Group ) was developed in 2014. Important legal information This document is for internal guidance purposes only and is not intended to be relied upon by any third party. The policy may be subject to change at any time. 2016 NN Group N.V.
1. Introduction As an international insurance company and asset manager, we are a significant investor in a large number of countries, industries and companies. We are committed to responsibly investing our own assets, as well as the assets committed to us by our clients. At NN Group, we want to be a good corporate citizen in the countries and communities in which we operate, and use our resources, expertise and reach to help society achieve long-term sustainable prosperity. Sustainability means creating long-term value while balancing the interests of all stakeholders. We enable people and businesses to make informed financial decisions with inclusive and accessible products and services. We integrate environmental, social, and governance ( ESG ) criteria into our business. Furthermore, we remain a good employer, as well as contribute to our local communities. To underline our ambition, NN Group or its respective entities endorsed various international standards and initiatives, such as the Principles for Sustainable Insurance (PSI), Principles for Responsible Investment (PRI) and Global Compact, all of which are supported by the United Nations. 1.1 Objectives The objective of this NN Group Responsible Investment Policy Framework (hereafter: Policy Framework) is to set out NN Group s vision, approach and key principles on RI, which it defines as the systematic integration of relevant ESG factors into its investment decision-making and active ownership practices. The ownership practices include, amongst others, the exercise of voting rights at shareholder meetings, as well as dialogue and engagement with investee companies. (Refer to section 2.2 for all four pillars of NN Group s RI approach). The key principles highlight the measures NN Group will take to effectively manage ESG risk and opportunities in the investment portfolios on a continual basis. They also promote consistency of RI-related practices and activities across the company. 1.2 Mandate The Management Board of NN Group has mandated that CC&A/Corporate Citizenship coordinates and maintains this policy, related minimum standards, guidelines, procedures and other related statements. 1.3 Scope This Policy Framework applies to all majority-owned NN Group businesses (or Business Units) and businesses under NN Group s management control. In cases where NN Group has an equity interest in life insurance, pension or asset management businesses, but it does not have management control, it will use its influence to apply the spirit of this policy. Furthermore, this Policy Framework applies to both NN Group s role as asset owner of Proprietary Assets and its role as asset manager for Client Assets, although the implementation of the Policy Framework could differ between these two roles. Proprietary Assets comprise those assets that belong to NN Group. Among Proprietary Assets are the assets held for the account of NN Group in the context of insurance obligations and own capital of NN Group. Client Assets are the assets that are managed by NN Investment Partners on behalf of third-party clients, including mutual funds. For the purpose of this Policy Framework, assets held for unit-linked products, as well as for separated account investment contracts, are also defined as Client Assets. NN Group as asset owner This Policy Framework applies to all Proprietary Assets of NN Group. NN Group, via the Investment Office and its Business Units, decides upon the allocation of all its assets to different asset classes. Management of the assets is in accordance with the outcome of the allocation procedure either outsourced to our in-house asset management company, NN Investment Partners, or to other internal or external asset managers or directly performed by the Investment Office. The key principles mentioned in this Policy Framework will be implemented via the RI Guidelines Proprietary Assets (refer to section 1.5 for the policy structure). NN Group as asset manager NN Group s asset managers will implement this Policy Framework in relation to the Proprietary Assets that they are mandated to manage. With regard to the Client Assets, NN Group will apply those elements of the Policy Framework that are consistent with the fiduciary responsibility and the mandate provided by its customers. The key principles mentioned in this Policy Framework will be implemented via the RI policies of the individual asset management unit(s). 3
External asset managers NN Group expects external asset managers to implement the key principles in this Policy Framework in relation to the Proprietary Assets that they are mandated to manage. Asset classes NN Group intends to progressively implement this Policy Framework to every asset category in which it invests, whenever applicable. The timelines of implementation may differ per asset class and/or asset manager. 1.4 Foundation The foundation of this Policy Framework is NN Group s values: we care, we are clear, and we commit. Throughout NN Group, these values drive the behaviour that is needed to realise our purpose: to help people secure their financial futures. These values, which are published under the title NN Statement of Living our Values, are reviewed regularly to ensure their relevance in the course of time. They set a global standard for the conduct expected of every employee, provide a compass for decision-making and help safeguard our company s reputation. Amongst other things, the statement expresses that we: Respect human rights, advocate equal opportunities and encourage diversity of thinking Avoid or responsibly manage any negative impact our business activities may have on people or the environment, and seek positive change in society Comply with all applicable laws, regulations and internal policies and guidelines Only do business with responsible, reputable and lawful parties Do business with the future in mind: amongst others by valuing long-term objectives over short-term gains, carefully balancing the interests of our stakeholders, and championing initiatives that create better lives for generations to come The full text of the NN Statement of Living our Values is available to the public and can be accessed through the website at nn-group.com. This Policy Framework also reflects our commitment to various international and sector-specific standards and initiatives that NN Group or its respective entities have endorsed, like: United Nations Global Compact United Nations Environment Programme Finance Initiative (UNEP FI) Principles for Responsible Investment (PRI) Principles for Sustainable Insurance (PSI) More information on these standards and initiatives is included in Appendix 1. NN Group has chosen these standards and initiatives because they are relevant to our business and investments and supported by broad stakeholder groups worldwide. Other international practices are referenced where relevant. 1.5 Structure The following chart outlines the relationship of this policy with other policies. tṗolicy structure NN Statement of Living our Values NN Group RI Policy Framework (Umbrella and high level policy indicating the way NN is addressing and managing ESG in investments; Proprietary and Client Assets). Incl. Defence policy; Global Voting Policy NN Group RI Guidelines Proprietary Assets Policies internal asset managers e.g. RI policy, and Proxy Voting Policies of NN Investment Partners The NN Group RI Policy Framework ( Policy Framework ), built from the NN Statement of Living our Values, sets out NN Group s vision, approach and key principles on RI. The following policies are part of this Policy Framework: Global Voting Policy: this policy lays down the high-level principles that NN Group requires its asset managers to apply when voting proxies in all but exceptional circumstances. Defence Policy: this policy outlines the Group-wide investment restrictions on controversial weapons and arms trade. Specific guidelines for Proprietary Assets ( RI Guidelines Proprietary Assets ) that relate to NN Group s activities as an asset owner have been developed. These guidelines translate the principles set out in this Policy Framework into expectations around the integration of ESG aspects into investment practices and processes. They apply for all asset classes in which the Proprietary Assets are invested. These expectations will be included in the investment mandates to internal and external asset managers. NN Investment Partners and other internal asset managers will implement their RI activities for clients through their own policies. For example, NN Investment Partners has a Responsible Investment Policy and a Proxy Voting Policy, which are available to the public and can be accessed via the Responsible Investing section on www.nnip.com 4
2. Responsible Investment Vision, Approach & Key Principles 2.1 Vision NN Group is a long-term global institutional investor with a duty to act in the best interest of its policyholders, clients, shareholders and other stakeholders. To fulfil this duty, NN Group acknowledges the importance of structurally integrating ESG factors into its investment policies, processes and decision-making. It has the following vision: NN Group believes that ESG factors have the potential to influence the financial performance of individual companies, both in a positive and negative way. Topics like climate change, resource scarcity and demography will change industries and business models. As such, they are important intangible value drivers, and an important factor in identifying corporate and management quality. Companies that maintain high standards of corporate governance and corporate responsibility will tend to deliver long-term shareholder value over time. Consideration of ESG aspects in the investment process will therefore result in more informed investment decisions and better optimisation of the risk/return profile of investment portfolios. Beyond this economic rationale, NN Group believes that the consideration of ESG issues is also a matter of good corporate citizenship. It supports us in our responsibility as an insurer and long-term investor to build sustainable business success while addressing the expectations of stakeholders in a way that is sustainable for our business and for society. This means that not only the values and interests of our beneficiaries should be taken into account, but also those of the broader society. 2.2 Approach NN Group sets the structural integration of ESG factors in the investment process at the core of its RI approach - supported by the belief that it helps to make more informed decisions and optimise the risk/return profile of its investment portfolio. Furthermore, through active ownership practices, NN Group addresses ESG issues at stake and promotes positive changes in corporate behaviour. The ownership practices include, amongst others, the exercise of voting rights at shareholder meetings, as well as dialogue and engagement with investee companies. Although NN Group invests from a standpoint of inclusion rather than exclusion, there are circumstances that call for an exception. Investment restrictions can be used as an instrument of last resort, to set a minimum standard and/ or in recognition of law or international consensus. Last but not least, NN Group will evaluate and consider opportunities for allocating assets to investment strategies that address environmental and social challenges, whilst meeting specific investment criteria. Furthermore, through its offering of specialised SRI funds and tailor-made RI solutions, NN Investment Partners meets its customers increasing demand for products or services with higher environmental or social benefits. 2.3 Key principles NN Group uses seven principles to highlight the measures it will take to systematically integrate ESG into our investment decision-making and ownership practices, for the benefit of all stakeholders. 1) NN Group incorporates ESG factors into the investment analysis and decision-making processes NN believes that integrating ESG factors into the investment process enables it to take into account aspects that are often out-of-scope of traditional financial analysis, but can have a significant impact on long-term performance. This allows for identifying risks and/or opportunities from an ESG perspective in order to protect and enhance the risk-return profile of our investments. Furthermore, we recognise that the consideration of ESG aspects help to better align our business with the broader objectives and expectations of society. 2) NN Group makes active and considered use of its voting rights Investors have a role to play in the checks and balances of the companies in which they are invested. The exercise of the voting rights is one of the most effective instruments that investors can use to hold management accountable. NN Group uses voting rights attached to shares of companies in which it invests to promote the standards set out in this policy. It encourages companies to adhere to internationally accepted governance standards beyond complying with local legal requirements. These principles include 6
the OECD Principles of Corporate Governance and the International Corporate Governance Network (ICGN) Guidelines. NN Group publishes its voting behaviour on its website. This principle is implemented through the Global Voting Policy, which lays down the high-level principles of voting and applies to all asset managers within NN Group. The principles expressed in that policy are also the foundation for NN Investment Partners voting policies, which describe how it votes on standard resolutions at shareholder meetings. 3) NN Group initiates dialogue with companies to address ESG issues and encourage positive change NN Group is committed to using its influence to encourage companies in which it invests to adopt and comply with ESG practices deemed appropriate. NN Group uses internationally accepted standards of corporate behaviour as a reference, such as the aforementioned OECD and ICGN Guidelines (see principle 2). Another important international guideline on corporate behaviour is the United Nations Global Compact, a framework of standards for corporate practice on human rights, labour rights, the environment and the prevention of corruption. NN Group uses these principles as a starting point for dialogue and engagement with companies. Cooperation To emphasise its message, NN Group engages collaboratively with other institutional investors and/ or through initiatives such as the PRI. In this way, it can achieve maximum investor influence and sharing of resources and expertise when engaging with companies. 4) NN Group advocates policy and legislation that supports sustainability and shareholder rights NN Group also cooperates with other institutional investors in the engagement with policymakers. This engagement contributes to the development of sustainable government policies and a more sustainable global financial system. NN Group s business entity, NN Investment Partners, is a member of several corporate or multi-stakeholder initiatives and investor networks through which it regularly discusses sustainability and shareholder rights with legislators and regulatory bodies. These include the ICGN, Eumedion, the European Fund and Asset Management Association, the Dutch Fund and Asset Management Association, the PRI, and the IIRC Pilot Programme Investor Network. 5) NN Group may use investment restrictions as a last resort NN Group aims to include, not exclude, entities for investment consideration. Nevertheless, it may use restrictions as an instrument to set a minimum standard, in recognition of law and/or international consensus. Defence restrictions NN Group takes position against controversial weapons trade, such as making arms available to UN, EU or US weapon-embargoed countries. Furthermore, NN Group considers cluster munitions, anti-personnel landmines, depleted uranium ammunition, biological and chemical weapons, or nuclear weapons to be controversial. NN Group therefore restricts investments in companies that relate to the manufacture, development, trading and maintenance of such weapons. This principle is implemented through the Defence policy, including a restricted list, which includes detailed criteria as well as the precise application of the investment restrictions to Proprietary Assets and Client Assets. Sanctions compliance and Ultra High Risk Countries NN Group entities must fully comply with all applicable sanction laws and regulations. The applicable sanction laws and regulations include those of the Netherlands, the United Nations, the European Union, and the United States, as well as those of the other individual countries in which NN Group entities are located. This principle is implemented through the Ultra High Risk Country Policy ( UHRC Policy ), which is a reflection of NN Group s business decision to not facilitate business with certain named countries for business and/or regulatory reasons. This policy is not only applicable to NN Group s Proprietary Assets and Client Assets, but also to all business engagements involving Ultra High Risk Countries by all Business Units of NN Group. Other restrictions NN Group may apply additional investment restrictions for Proprietary Assets. These could include additional countries (government bonds) where fundamental human rights are systematically breached, and/or companies that seriously and structurally breach global standards of good corporate behaviour, such as the ones listed in the United Nations Global Compact. 7
6) NN Group identifies and considers sustainable investment opportunities NN Group wants to play a role in addressing global sustainability challenges, such as climate change, resource scarcity and demographic change. It will therefore consider investment opportunities that offer solutions to these challenges whilst meeting our investment criteria. Furthermore, through its offering of specialised SRI funds and tailor-made Responsible Investment solutions, NN Investment Partners meets its customers increasing demand for products or services with higher environmental or social benefits. Current examples include the actively managed SRI strategies within the asset classes of Equities and Fixed Income, as well as tailor-made Responsible Investment solutions to clients, based on their preferences and ESG policies. 7) NN Group is transparent on its RI activities and aims to be accountable to its stakeholders on the progress it is making in this area Public disclosure of progress is important to the credibility of an organisation. It enables the stakeholders of a company to better understand how it is managing relevant ESG and sustainability issues in its business. Transparency is also an important driver for continuous improvement. NN Group therefore commits to regularly communicating its RI approach and activities to relevant stakeholders. This includes publication through updates in its Annual and Sustainability Report, and making information, such as its RI policies, and proxy voting behaviour, available on the website. Furthermore, it regularly participates in relevant (inter)national sustainability ratings and RI benchmarks. 8
3. Governance 3.1 Decision-making Decision-making on RI-related topics is integrated in the existing governance and committee structure of NN Group. The following bodies, each including executive management representation, play a role: Management Board of NN Group N.V. The Management Board of NN Group N.V. ( MB NN Group ) is responsible for the adoption of this Policy Framework. The MB NN Group discusses the progress on NN Group RI policies and activities twice a year. In the context of this Policy Framework, the MB NN Group decides on: Adjustments to this Policy Framework Investment proposals with high reputational risk involved or high sustainable investment profile, submitted by the Group Investment Committee (only if required by escalation procedure) Risk and Finance Committee The Risk and Finance Committee ( RFC ) is the operating committee delegated by the Executive Board of NN Group N.V. with the responsibility to steer NN Group in matters of risk management and finance matters, including sustainability. The RFC is also a decision-making body for: Approval and/or adjustments to NN Group RI policies and minimum standards related to this Policy Framework Approval and/or adjustments to the restricted list(s) 3.2 Advising CC&A/Corporate Citizenship As owner of this Policy Framework, CC&A/Corporate Citizenship advises the MB NN Group on adjustments to this Policy Framework in consultation with relevant stakeholders, including the ESG Committee of NN Investment Partners. ESG Committee of NN Investment Partners NN Investment Partners has an ESG Committee in place, which provides advice to its own management board, about NN Investment Partners positioning and future initiatives in the RI area. In the context of this Policy Framework, the ESG Committee has a mandatory advice role on NN Group policy proposals and restricted list(s), thereby providing NN Investment Partners perspective on impact and implementation. Furthermore, this body is responsible for steering the implementation of the overall Policy Framework and related policies in the investment processes within NN Investment Partners. The ESG Committee is chaired by the Chief Investment Officer and comprised of managers from NN Investment Partners diverse business segments and managers from NN Group. CC&A/Corporate Citizenship is also a member of the ESG Committee. The ESG Committee meets on a quarterly basis. Group Investment Committee The main scope of the Group Investment Committee ( GIC ), a sub-committee of the RFC, is optimising the investment performance, the investment strategy and new investment ideas for all the Proprietary Assets of NN Group. In the context of this Policy Framework, the GIC decides on: Investment proposals with high reputational risk involved or high sustainable investment profile (that do not fit existing mandates), submitted via the Investment Office of NN Group 3 An ad-hoc procedure will be followed for policies or restricted list(s) that need immediate advice from the ESG Committee. Depending on the matter, the members of the ESG Committee (or a sub-group thereof) will be consulted via email. If required, a formal meeting will be set up. 9
4. Monitoring and reporting Monitoring and reporting on the progress of this Policy Framework may differ per pillar of our approach and/or per related policy, minimum standard, or guideline. In the context of this Policy Framework, the key roles and responsibilities are: CC&A/Corporate Citizenship, as owner of this Policy Framework, is responsible for the development and maintenance of this Policy Framework. It supports the business in its application of the principles and ensures alignment between the RI-related policies of NN Group and its asset managers. In this role, the Corporate Citizenship team actively liaises with the other departments within the company (e.g. Investment Office, Risk Management, Legal & Compliance). Furthermore, it is the primary point of contact for, and interacts with, external stakeholders, like sustainability rating agencies (in relation to the rating of NN Group) and civil society organisations. Risk Management, in consultation with CC&A/ Corporate Citizenship, is responsible for tracking and monitoring activities to ensure full and adequate implementation of the restricted list(s). The Investment Office responsible for including RI expectations and objectives in the investment mandates and evaluation of the asset managers that manage NN Group s Proprietary Assets. CC&A/Corporate Citizenship reports twice a year on the progress of NN Group RI policies and activities to the MB NN Group. It also reports on its sustainability progress to external stakeholders through NN Group s Annual and Sustainability Reports. 10
Appendix 1: International standards and initiatives United Nations Global Compact NN Group has been a participant in the Global Compact initiative since December 2006. The United Nations Global Compact asks companies to embrace, support and enact, within their sphere of influence, a set of core values in the areas of human rights, labour standards, the environment and anti-corruption. These values are formulated in 10 principles, which are each based on concepts established in international treaties: the Universal Declaration of Human Rights the International Labour Organisation s (ILO) Declaration of Fundamental Principles and Rights at Work the Rio Declaration on Environment and Development The United Nations Convention against Corruption The 10 principles are: Human Rights Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and Principle 2: make sure that they are not complicit in human rights abuses. Labour Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; Principle 4: the elimination of all forms of forced and compulsory labour; Principle 5: the effective abolition of child labour; and Principle 6: the elimination of discrimination in respect of employment and occupation. Environment Principle 7: Businesses should support a precautionary approach to environmental challenges; Principle 8: undertake initiatives to promote greater environmental responsibility; and Principle 9: encourage the development and diffusion of environmentally friendly technologies. Anti-Corruption Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery. More information on the United Nations Global Compact can be found at unglobalcompact.org. United Nations Environment Programme Finance Initiative (UNEP FI) NN Group has been a member of UNEP FI since October 2007. UNEP FI is a global partnership between the United Nations Environment Programme (UNEP) and the financial sector. Over 200 institutions, including banks, insurers and fund managers, work with UNEP to understand the impact of environmental and social considerations on financial performance. More information can be found at www.unepfi.org. Principles for Responsible Investment (PRI) NN Investment Partners has been a signatory to the United Nations-supported PRI since September 2008. The PRI is a set of global best practices that provide asset managers with possible actions for incorporating ESG issues into investment decision-making and ownership practices. Its goal is to contribute to the development of a more sustainable global financial system. More information can be found at www.unpri.org. Principles for Sustainable Insurance (PSI) NN Group has been a signatory of the Principles for Sustainable Insurance (PSI) since June 2012. The PSI, an initiative of the UNEP FI, is a sustainability framework for the global insurance industry. Its goal is to encourage greater integration of ESG issues into insurance. Signatories commit to embedding ESG issues, to managing risk and developing solutions with their clients, to working together with industry stakeholders, and to publicly disclosing their ESG progress. More information can be found at www.unepfi.org. 11
Contact information + 31 (0)88 663 54 55 nathalie.van.toren@nn-group.com babs.dijkshoorn@nn-group.com www.nn-group.com