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AP1

PRI reporting framework 2017

You are in Direct - Listed Equity Active Ownership » Engagement

Engagement

Overview

LEA 01. Description of approach to engagement

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate whether your organisation has a formal engagement policy.

01.2. Indicate what your engagement policy covers:

01.3. Attach or provide a URL to your engagement policy. [Optional]

01.4. Provide a brief overview of your organization’s approach to engagement

Active ownership

The Fund's ownership approach is founded on the conviction that engagement and setting of requirements can make a difference. Första AP-fonden's actions in ESG issues are governed by the ownership policy that is adopted by the Board and defines the Fund's views on key aspects of corporate governance, such as executive compensation, board composition, capital and ownership structures and the opportunities to exercise voting rights.

Thanks to its size and level of commitment, Första AP-fonden has a relatively large influence on the Swedish holdings. The Fund works actively to influence the structure and evaluation of compensation systems and to increase the level of diversity on company boards. This influence takes place through dialogue with the company boards, participation in nominating committees and voting at general shareholder meetings.

In foreign companies, the top priorities are compensatory issues and that the managing director/CEO and board chairman are not the same person. To exert an influence, the Fund votes at general meetings and contacts the companies to explain its views.

01.5. Additional information [optional]

Environmental and social responsibility

In matters related to social and environmental responsibility, the Fund's principles for engagement, action and demands for change are based on the same set of values applied by Swedish Government, in which the central aspects are democracy, the equal value of all people, the freedom and dignity of individuals and sustainable development.

The companies in which the Fund has holdings are expected to give consideration to the environmental impact of their operations. This means being aware and taking relevant measures to reduce the direct and indirect environmental impact of their operations over the entire product life cycle.

The companies should also respect human rights and the International Labour Organization's core conventions. This means among other things that the Fund does not accept discriminatory practices or treatment, forced labour, child labour or restriction of freedom of association. The Fund also expects the companies to ensure safe working condition in both their own production units and those of the company's subcontractors.

Based on these expectations, the Fund conducts discussions with a number of companies, both Swedish and foreign. In environmental and social issues related to foreign companies, Första AP-fonden cooperates with the Second, Third and Fourth AP funds through the Ethical Council.


LEA 02. Reasoning for interaction on ESG issues

02.1. Indicate the method of engagement, giving reasons for the interaction.

Type of engagement

Reason for interaction

Individual/Internal staff engagements

Collaborative engagements

Service provider engagements

02.2. Additional information. [Optional]


Process

Process for engagements run internally

LEA 03. Process for identifying and prioritising engagement activities

New selection options have been added to this indicator. Please review your prefilled responses carefully.

03.1. Indicate whether your organisation has a formal process for identifying and prioritising engagement activities carried out by internal staff.

03.2. Describe the criteria used to identify and prioritise engagement activities carried out by internal staff.

03.3. Additional information. [Optional]

As large shareholder in Swedish companies, focus for engagement done by internal staff is on these companies primarily. With approx 25 Swedish companies in the Swedish equity portfolio we attend all AGM. We have one to one meetings arranged by us with the chairman or meetings arranged by the companies themselves with a group of investors  on regular basis. Corporate governance issues are always high on the agenda and, when appropriate, any ESG issue of concern to us. Íssues are identified through a systematic monitoring of external sources, ratings etc.

We also use a theme based approach whereby we identify a specific issue of concern to us, then doing a thorough analysis of how well different companies are at addressing the issue. Based on that analysis, we identify laggards and engage with them to promote change in the area of interest.

For proxy voting outside Sweden, we vote on almost all companies in our developed market portfolio (approx 300 companies in the US, Japan, Australia, Canada,  France, Germany, Ireland, Italy, Japan, Jersey, Netherlands, Spain, Switzerland, United Kingdom and United States.)

For approximately 50 companies a letter is sent describing the rational for voting against the proposal by management. When we select the companies that we send letters to, we prioritize two issues, remuneration and split CEO/Chair.

A large porpotion of AP1´s engagment activites are done under the Ethical Council umbrella, where AP1 is a founding member. How engagements are identified and prioritised is to be found on www.ethicalcouncil.com and in the annual report of the Ethical Council.


LEA 04. Objectives for engagement activities

New selection options have been added to this indicator. Please review your prefilled responses carefully.

04.1. Indicate if you define specific objectives for your engagement activities.

04.2. Indicate if you monitor the actions that companies take following your engagements.

04.3. Indicate whether your organisation defines milestones and goals for engagement activities carried out by internal staff.

04.4. Indicate if you do any of the following to monitor and evaluate the progress of your engagement activities carried out by internal staff.

04.5. Additional information. [Optional]

Analysis of Swedish companies and meetings are done on regular basis, not only when specific incidents have happened but to have an ongoing dialogue with the company, thus formal goals or objectives are not necessarely set prior to the discussions. Follow-up of previous discussions are standard item on the agenda. For non-Swedish holdings, engagement on G is mostly focused on explaining the reason behind our voting decisions. Monitoring of progress is done at least annually, when voting the following year. 


Process for engagements conducted via collaborations

LEA 05. Process for identifying and prioritising collaborative engagement

New selection options have been added to this indicator. Please review your prefilled responses carefully.

05.1. Indicate whether your organisation has a formal process for identifying and prioritising collaborative engagements

05.2. Describe the criteria used to identify and prioritise collaborative engagements

05.3. Additional information [Optional]

The vast majority of AP1´s collaborative engagements are done under the umbrella of the Ethical Council, where AP1 is one of the founding members. For a description of the process of identifying and prioritising the collaborative engagements see www.ethicalcouncil.com and the annual report of the Ethical Council.


LEA 06. Objectives for engagement activities

New selection options have been added to this indicator. Please review your prefilled responses carefully.

06.1. Indicate if you define specific objectives for your engagement activities carried out collaboratively.

06.2. Indicate if you monitor the actions companies take following your collaborative engagements.

06.3. Indicate whether your organisation defines milestones and goals related to engagement activities carried out via collaborations.

06.4. Indicate if you do any of the following to monitor and evaluate the progress of your collaborative engagement activities.

06.5. Additional information. [Optional]

In some proactive within the Ethical Council a gap-analysis has been done prior to engagement (as part of the first analysis). A few years after a new gap analysis will be performed. More information about the Ethical Council is available at www.ethicalcouncil.com . For most severe breaches of conventions, a 4-year limit exists. For more information about the process see http://etikradet.se/etikradets-arbete/en-systematisk-process/?lang=en


Process for engagements conducted with/on your behalf by service providers

LEA 07. Role in engagement process

New selection options have been added to this indicator. Please review your prefilled responses carefully.

07.1. Indicate if you play a role in the engagement process that your service provider conducts on your behalf.

07.2. Indicate the role(s) you play in engagements that your service provider conducts on your behalf.

07.3. Additional information. [Optional]


LEA 08. Monitor / discuss service provider information

08.1. Indicate whether you monitor and/or discuss the following information provided to you by your service provider

Please select all that apply

08.2. Additional information. [Optional]


General processes for all three groups of engagers

LEA 09. Share insights from engagements with internal/external managers

09.1. Indicate if insights gained from your engagements are shared with your internal or external investment managers.

Type of engagement

Insights shared

Individual/Internal staff engagements

Collaborative engagements

Service provider engagements

09.2. Additional information. [Optional]


LEA 10. Tracking number of engagements

10.1. Indicate if you track the number of engagements your organisation participates in.

Type of engagement
Tracking engagements

Individual / Internal staff engagements

Collaborative engagements

Service provider engagements

10.2. Additional information. [OPTIONAL]

We do track engagements - but we make no difference between our own collaborative engagements through the Ethical Council and our service providers engagement as we are much involved in it. Statistics provided as collaborative (not done by service providers) thus is an estimate.


Outputs and outcomes

LEA 11. Number of companies engaged with, intensity of engagement and effort (Private)


LEA 12. Engagement methods

12.1. Indicate which of the following your engagement involved.

12.2. Additional information. [Optional]


LEA 13. Engagements on E, S and/or G issues (Not Applicable)


LEA 14. Companies changing practices / behaviour following engagement (Private)


LEA 15. Examples of ESG engagements (Not Completed)


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