ACTIAM holds responsible investment in high regard. This also applies to external manager selection, appointment and monitoring. In general, we strive to get a thorough understanding of an external manager's responsible investment policy at the earliest stage in a search for an external manager.
When we seek to appoint an external manager to invest, it is a prerequisite that the manager is a PRI signatory. The rankings within the PRI reports are a further differentiator. ACTIAM created a questionnaire for external managers to measure the application of ESG criteria in the investment process. This questionnaire covers the availability and quality of ESG policies, the incorporation of ESG data in the investment decision making process, the application of exclusionary criteria and the amount of overlap with the ACTIAM exclusion list (in case of pooled funds), the execution of active ownership by the manager, and finally the level of transparency and reporting.
In the rare case where we decide against selecting a PRI signatory, our governance structure requires us to formally get clearance by going through the investment thesis thoroughly and convincing our client that other investment considerations outweigh the lack of PRI membership in this case, and that there is no alternative PRI signatory manager who we judge to be at least equally qualified.
Should we, for other reasons related to our fiduciary duties, be forced to opt for a manager with a less laudable RI profile, we choose to engage with that party. We will enter into a dialogue aimed at understanding the manager's motivations to not have high RI ambitions, and we will render our views and expectations clear, indicating what changes we would expect. In 2014 we engaged with one of the world's largest asset managers in this way, in close cooperation with one fellow asset manager out of our informal ESG network. Following our pressure, the asset manager decided to become a PRI signatory.
ACTIAM has a company-wide exclusion list. All internal investment teams will strictly refrain from investing in names on this list. We enforce or encourage external managers to adhere to this exclusion list as well. If the external investment is structured as a segregated mandate, we enforce adherence to our exclusion list. If the investment vehicle is a mutual fund, we are bound by the broader investment guidelines set for the fund. We will still point out the importance of avoiding investment in the names on our exclusion list, but enforcement in this case is legally impossible. It is however one of the data points in the questionnaire for external managers.
We feel active ownership is an integral part of being a responsible investment manager. Hence, we require external managers to vote proxies and to engage on our behalf. For segregated accounts, we vote the stocks in managers' portfolios ourselves (supported by a service provider) directly, according to our in-house ESG voting policy. On a regular basis, we evaluate the outcome of the voting process and the current strategy and results of engagement activities.
Responsible investing is fully integrated in our monitoring process. Our policy is to have a minimum of four contact moments every year with every external manager in our portfolio, preferably at least two of which are face-to-face meetings. In practice, the frequency of interaction is typically exceeding the minimum requirement. ESG / responsible investing is a topic at every monitoring meeting.
We have chosen to restrict investment in commodities due to responsible investment considerations. Rising prices of basic commodities can have serious consequences for poor people depending on these commodities. As research cannot fully take away doubts about investors' alleged contributions to such price rises, ACTIAM chooses to abstain from derivatives exposure to commodities.
For further detail on our external manager responsible investing policy please check our website: http://www.actiam.nl/en/sustainability/position-papers.