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ACTIAM

PRI reporting framework 2017

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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

In the Fundamental Investment Principles, ACTIAM states that, prior to exclusion, it will always seek a dialogue with an entity. ACTIAM regularly engages with companies - and other entities - on (potential) controversial issues. Three types of engagements are distinguished:

(1) Responsive engagement: Where ACTIAM responds to specific controversies or violations of ACTIAM's Fundamental Investment Principles.

(2) Proactive engagement: Where ACTIAM proactively starts engagements based on observed risks or topics that ACTIAM considers material.

(3) Collaborative engagement: Collaboration with other investors and organisations to cooperate in exerting influence, increase efficiency and p

The goal of engagements is to bring about behavioural change of the entity and can be conducted by ACTIAM individually (executed by ACTIAM's ESG team), or in collaboration with other investors.

01.5. Additional information [optional]

ACTIAM places high value on exerting influence through active ownership. The goal is to achieve behavioural change in the investee companies and/or governments. In addition, we believe risks are reduced if ESG issued are addressed and managed well, which positively influences investors' performance on the long term. ACTIAM prefers engagement over exclusion. In most cases, exclusion will not lead to behavioural change / change in the real world. Through engagement and voting, we can achieve such change.

As described under LEA 01.4, ACTIAM conducts engagements both in a proactive as well as in a responsive (reactive) manner. The engagements are carried out by ACTIAM's in-house ESG team, and since late 2016, we have also hired an external provider to increase our engagement base. When relevant and possible, we try to involve portfolio managers as well.

Our proactive engagements focus on our three key themes: climate, water and land. ACTIAM's objective is to contribute to the UN SDGs and to achieve a liveable world in the long term. We believe climate, water and land issues are key and material for our investments, as global population growth and greater prosperity are putting our planet under increasing pressure. The aim is to avoid risks to our investments while at the same time actively helping to build the future as we see it, that is, a world worth living in where people are able to meet their basic needs.


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

          To draw attention to systemic ESG risks such as climate change; to increase the ESG-score of the company; to fulfil client mandates.
        

Collaborative engagements

          To draw attention to systemic ESG risks such as climate change; to increase the ESG-score of the company; to fulfil client mandates.
        

Service provider engagements

          To draw attention to systemic ESG risks such as climate change; to increase the ESG-score of the company; to fulfil client mandates.
        

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.

other description

          Based on our focus themes climate, water and land; based on lack of transparency (e.g. carbon disclosure, CDP climate/water/forest disclosure)
        

03.3. Additional information. [Optional]

Internal staff engagements and lead collaborative engagements are equally important, however priority of these two are given over less substantial/more passive collaborative engagements.

Engagement in reaction to ESG impacts which have already taken place are responsive engagements. These are formally addressed through ACTIAM's Selection Committee, as they could lead to exclusion in case of unsuccessful engagement.

Proactive engagements relating to our focus themes climate, water and land are prioritised over other engagements. This can apply to both environmental as well as social issues within these focus themes. The focus themes were selected based on systemic risks for the planet and our portfolios. In determining the active ownership strategy for these focus themes, our exposures (holdings) were taken into account. When selecting target companies, geography/market are taken into account. Materiality of ESG factors (increasingly) plays a role not only in selecting engagement issues but also engagement objectives.


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]

ACTIAM formalised 5 milestones that an engaged entity can achieve:

0. Engagement not yet commenced.

1. First correspondence sent and acknowledgement of receipt given by entity.

2. Objectives of engagement discussed in more detail with the entity.

3. Entity responds with relevant information and / or commits to raising the issue internally.

4. Entity develops and publishes (externally or to ACTIAM) a credible strategy and / or formulates clear targets to address the issues.

5. Entity demonstrates that the strategy is being implemented and / or that the targets are achieved.

Progress of engagements is monitored according to this set of milestones and updated on a quarterly basis. This information is brought into the quarterly meeting of the ACTIAM Selection Committee and reported to clients as well as externally on ACTIAM's website (aggregated in case of the latter). If circumstances require so, objectives can be revised, however a company not willing to achieve the objectives is not a valid reason for revision. In such cases, in combination with the entity continuing to violate the Fundamental Investment Principles, ACTIAM can consider exclusion of the entity.


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

other description

          Engagement with leading companies in order to apply that knowledge to engagement with laggards.
        

05.3. Additional information [Optional]

Depending on the factors described in LEA 05.2, ACTIAM decides whether it will partake actively or passively. Active collaborative engagements can entail both a lead investor role or a supporting investor role with an active contribution, such as the drafting of documents, planning, organisational contributions, etc.

Please also see response under LEA 03.


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]

ACTIAM formalised 5 milestones that an engaged entity can achieve:

0. Engagement not yet commenced.

1. First correspondence sent and acknowledgement of receipt given by entity.

2. Objectives of engagement discussed in more detail with the entity.

3. Entity responds with relevant information and / or commits to raising the issue internally.

4. Entity develops and publishes (externally or to ACTIAM) a credible strategy and / or formulates clear targets to address the issues.

5. Entity demonstrates that the strategy is being implemented and / or that the targets are achieved.

Progress of engagements is monitored according to this set of milestones and updated on a quarterly basis. This information is brought into the quarterly meeting of the ACTIAM Selection Committee and reported to clients as well as externally on ACTIAM's website (aggregated in case of the latter). If circumstances require so, objectives can be revised, however a company not willing to achieve the objectives is not a valid reason for revision. In such cases, in combination with the entity continuing to violate the Fundamental Investment Principles, ACTIAM can consider exclusion of the entity.

We monitor the actions of all companies addressed by a collaborative engagement if we have an active role at the company's engagement. Normally, within a collaborative engagement, other companies are addressed as well, where we are a passive supporter. In case of passive collaborative engagement, we (collaboratively) set objectives for the company, and we do monitor the actions companies take, however not through the abovementioned milestone system, as we cannot allocate the changes to our own active participation.


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]

The role(s) we play in service provider engagements depend on our level of involvement. Some engagements are conducted completely by the service provider. In those cases, we discuss the rationale and objective of the engagement and assess whether that fits our policy and strategy. Frequency of monitoring and review depends on the type of engagement (more frequent and stringent in case of responsive engagements).

When we play an active role in engagements conducted by our service provider, all the above steps are executed.


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]

Please see answers under LEA 07.2


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]

Information about engagement progress (both qualitatively as well as milestone progress) is shared on a quarterly basis with the ACTIAM Selection Committee, comprising the CEO (in the role of Chair), CIO, Head of ESG Research and an external expert who is also a Professor of Ethics. Furthermore, there is an ongoing dialogue about engagements with the investment managers. In the case of positive selection engagements, dialogues with the companies are often conducted together with portfolio managers. Engagements can also be conducted together with external investment managers in case that is relevant, for example because of location or language matters.


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]

ACTIAM tracks the number of engagements on an ongoing basis and formally submits them on a quarterly basis to the ACTIAM Selection Committee. The number of engagements, as well as milestone progress, is also reported to clients as well as externally on our website. In 2016, ACTIAM built a new database to track the number and progress of engagements, allowing us to measure our impact and improve our engagement strategy.


Outputs and outcomes

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

11.1. Indicate the amount of your listed equities portfolio with which your organisation engaged during the reporting year.

Number of companies engaged

(avoid double counting, see explanatory notes)

Proportion (to the nearest 5%)
Specify the basis on which this percentage is calculated

Individual / Internal staff engagements

79 Number of companies engaged
30 Proportion (to the nearest 5%)

Specify the basis on which this percentage is calculated

Collaborative engagements

332
56 Proportion (to the nearest 5%)

Specify the basis on which this percentage is calculated

Service provider engagements

177
13 Proportion (to the nearest 5%)

Specify the basis on which this percentage is calculated

11.2. Indicate the proportion of engagements that involved multiple, substantive and detailed discussions or interactions with a company during the reporting year relating to ESG issue.

Type of engagement

% Comprehensive engagements

 

 

Individual / Internal staff engagements

 

 

Collaborative engagements

 

 

Service provider engagements

11.3. Indicate the percentage of your collaborative engagements for which you were a leading organisation during the reporting year.

Type of engagement

% Leading role

 

 

Collaborative engagements

11.4. Indicate the percentage of your service provider engagements that you were highly involved in during the reporting year.

Type of engagement

% High involvement

 

 

Service provider engagements

11.5. Additional information. [Optional]


LEA 12. Engagement methods

12.1. Indicate which of the following your engagement involved.

12.2. Additional information. [Optional]

An engagement is always commenced by a letter outlining the objectives of the engagement, followed by a request for a call with the relevant person or team. Engagements are conducted by the ESG team and always involve ESG research.

In 2016, ACTIAM visited operations of several palm oil companies in Indonesia and Malaysia.


LEA 13. Engagements on E, S and/or G issues

13.1. Indicate if your engagements in the reporting year covered E, S and/or G issues, providing an estimation of the breakdown.

Individual / Internal staff engagements

75 % Environmental only
0 % Social only
0 % Corporate Governance only
25 % Overlapping ESG issues
Total 100%

Collaborative engagements

46 % Environmental only
5 % Social only
0 % Corporate Governance only
49 % Overlapping ESG issues
Total 100%

Service provider engagements

7 % Environmental only
11 % Social only
22 % Corporate Governance only
60 % Overlapping ESG issues
Total 100%

13.2. Additional information. [optional]


LEA 14. Companies changing practices / behaviour following engagement

14.1. Indicate whether you track the number of cases during the reporting year where a company changed its practices, or made a formal commitment to do so, following your organisation’s and/or your service provider's engagement activities.

14.2. Indicate the number of companies that changed or committed to change in the reporting year following your organisation’s and/or your service provider's engagement activities.

Number of company changes or commitments to change

Individual / Internal staff engagements

2

Collaborative engagements

1

Service provider engagements

0

14.3. Additional information [Optional].


LEA 15. Examples of ESG engagements

15.1. Provide examples of the engagements that your organisation or your service provider carried out during the reporting year.

Topic or ESG issue
          CDP water engagement
        
Conducted by
Objectives

Goal is at least 50 % increase in the coverage of CDP water risk data for companies in the MSCI ACWI in the focus sectors Utilities, mining and energy between CDP 2015 report and 2018 report.

Scope and Process

Together with PGGM we engaged 37 companies in the mining and energy sector to improve reporting trough CDP trough letters, ftf meetings and calls. We also spoke with IPIECA, the sector representative of the Oil & Gas sector.

Outcomes
  • Utilities: response rate 2015 report= 28%, response rate 2016 report = 39%
  • Energy response rate 2015 report= 22%, response rate 2016 report = 29%
  • Mining response rate 2015 report= 43%, response rate 2016 report = 54%

We selected the most persistent non-responders for our engagement. Thus far, one one the engaged companies has responded.

Topic or ESG issue
          Diversifying protein supply chains
        
Conducted by
Objectives
  • Plans to promote alternative sources of protein through product placement, appealing packaging, improved labelling or other ‘choice architecture’ techniques.
  • Plans to ensure sustainably sourced and alternative protein products are affordably priced to be competitive with intensively-reared livestock products.
  • Investment in product reformulation to explore opportunities to reduce animal-based ingredients in favor of more sustainable sources of protein.
  • Investment in consumer education to raise awareness of the environmental and health benefits of diets based less on animal sources and more on plant proteins.
Scope and Process

More than forty institutions with collectively more than $1.25 trillion AUM have joined this initiative. 16 companies have been targeted.

Outcomes

Mixed responses.Unilever has shown good progression on this topic. Others are acknowledging the importance but very much in first stages.

Topic or ESG issue
          Antibiotics engagement
        
Conducted by
Objectives

Phase out the routine, preventive use of antibiotics in their supply chain.

Scope and Process

Companies that are the focus of the investor engagement on antibiotics: Brinker International,  Domino’s Pizza Group, McDonald’s Corporation, Mitchells and Butlers, Restaurant Brands International, The Restaurant Group, Wendy’s, JD Wetherspoon, Yum! Brands., 61 investors with over US$1.3 trillion of assets under management. FAIRR is in the lead with the company engagements

Outcomes
  • The Restaurant Group (including brands such as Frankie & Benny’s and Garfunkel’s)has committed to take steps to phase out the routine, preventative use of antibiotics in their supply chain and to refine its use of antibiotics classed as ‘critically important’ by the World Health Organization.
  • More than half of the companies approached by the investor group report that their usage of antibiotics is under review or they are considering changes. All companies approached by the investors responded.
Topic or ESG issue
          Energy transition
        
Conducted by
Objectives

We started responsive engagement with 18 companies in 2016, based on their exposure to coal mining, coal power generation, shale gas/oil, oil sands and/or nuclear energy.

Scope and Process

We started with the first group of companies in 2016 (more in scope). The goal is to confirm our information and get understanding from the company of how they want to contribute to the energy transition and how they plan to make the company resilient for a max. 2 degree scenario. 

Outcomes

8 companies responded promptly: Alliant Energy Corporation, American Electric Power Co., Canadian Natural Resources Limited, Chugoku Electric Power Co., CLP Holdings, Imperial Oil, WEC Energy Group, Glencore, Marathon oil. We managed to organise a call with Suncor and Pioneer at a later stage. 4 companies were hard to get a hold of but we are hopeful to plan a meeting: Continental Resources, FirstEnergy Corp, Hopewell Holdings, PPL Corporation. Depending on the responsiveness, strategy and developments we will keep engaging the companies or advise exclusion.

Topic or ESG issue
          Carbon emissions
        
Conducted by
Objectives

Managing carbon emissions and disclosure (through CDP)

Scope and Process

We initiated engagement and 3 other investors joined us. We addressed 17 companies.

Outcomes

Engagement started in 2015, soon after the emissions fraude was made public, which shifted focus. However, a succes was that one of the auto companies made its response to CDP public, where it was previously private.

Topic or ESG issue
          Palm oil
        
Conducted by
Objectives

Implementation of no deforestation, no peat, no exploitation policy

Scope and Process

Collaborative engagement, we were lead on 2 companies (Wilmar and Golden Agri Resources).

Outcomes

Companies published GPS coordinates of plantations and of their suppliers.

15.2. Additional information. [Optional]


Communication

LEA 16. Disclosure of approach to ESG engagements

16.1. Indicate whether your organisation proactively discloses information on its engagements.

16.2. Indicate if the information disclosed to the public is the same as that disclosed to clients/beneficiaries.

16.3. Indicate what engagement information your organisation proactively discloses to the public.

          Select engagement cases/themes reported quarterly
        

16.4. Indicate how frequently you typically report engagements information to the public.

16.5. Indicate what engagement information your organisation proactively discloses to clients/beneficiaries.

          Select engagement cases/themes reported quarterly
        

16.6. Indicate how frequently you typically report engagements information to clients/beneficiaries.

16.7. Describe any other differences in the information being disclosed. [Optional]

As we are not allowed to disclose PRI engagement details to the public, these are not disclosed externally but are disclosed to our clients.

16.8. Additional information. [Optional]


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