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APG Asset Management

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]

URL

Attach document


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

APG engages to assure that its portfolio companies effectively implement an appropriate long-term corporate strategy and deliver returns to their shareholders, while respecting their other stakeholders. APG expects its portfolio companies to demonstrate responsible business practices and policies.. Therefore, APG enters into dialogue with companies in order to enhance and preserve the value of our investments, and to improve sustainability and corporate governance performance. In meetings with companies we make our expectations on sustainability and shareholder rights clear. To emphasize our message we often cooperate with other investors in this area. Our approach to engagement includes:

1. Intensive engagement with companies that are potentially in violation of the UN Global Compact with clear objectives, based on structured processes and monitored by our Responsible Investment Committee;

2.. Engagement based on priority themes that we define at the beginning of the year (e.g. climate change, labour relations, remuneration, board composition);

3. (Joint) engagement by GRIG and/ or portfolio managers on ESG issues that contribute to ESG integration;

4. Ad-hoc engagement based on issues that arise throughout the year;

5. Strategy related engagement contributing to better risk/return profiles; and

6. Engagement with external managers who manage long term portfolios on our behalf.

01.5. Additional information [optional]


LEA 02. Reasoning for interaction on ESG issues (Not Completed)


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]

Given the size of APG's equity portfolio universe, we need to consider optimal use of engagement resources, balancing the prospect of achieving successful engagement results from an investment (value creation) and RI policy perspective with other considerations such as market impact and clients' wishes. This requires us to be selective.

The nature of the concern and the gravity of the particular issue:

  • High priority concerns include: violations of the UN Global Compact principles labour standards controversies, environmental harm, board and committee independence, audit concerns, remuneration concerns.
  • Isolated incidents versus repeated patterns: A once-off incident (for example an oil spill or labour unrest) does not necessarily require engagement. We examine the way management responds to such incidents, and the effectiveness of management systems and other fundamental considerations such as the corporate culture surrounding safety.

Investment impact:

  • Business impact - the likelihood the ESG issue identified may or could materialize into a significant business detriment;
  • Investment relevance - likelihood the ESG issue could impact the share price in the short, medium or long term;
  • Portfolio relevance - a combination of our stake and the company's value in our portfolio;
  • The degree of leverage we believe we have (outlook for success);
    • size of our stake (% of equity);
    • relationship with the company;
    • track record with the company;
    • wider investor interest in the topic.

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]

We have a database that has been in place since 2009 in which we track our engagement with companies as well as other relevant information. We also screen portfolios with respect to the UN Global Compact.

For each engagement we document the company's name, the engagement issues, our objectives, and whether they have been met or if progress has been made. We also document the engagement intensity-level, whether we are working collaboratively with other investors, the steps taken in terms of dialogues, meetings and written exchanges, and the steps to be taken in future. The internal database has been a very successful engagement monitoring tool that is used on a daily basis. The database is also accessible to and widely used by portfolio managers.

Engagements with companies on the basis of UN Global Compact violations require sign-off from the board-level Responsible Investment Committee. Progress of these engagement trajectories is evaluated regularly by this committee.


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 assessment of whether or not to start or join a collaborative engagement is mostly defined on the basis of:

  • whether there are like-minded investors with whom we can collaborate,
  • whether the engagement is in line with our priorities,
  • whether the engagement targets form part of our portfolios, and
  • whether we perceive a group engagement to be the most effective approach in a given situation.

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]

We have a database that has been in place since 2009 in which we track our engagement with companies as well as other relevant information. We also screen portfolios with respect to the UN Global Compact.

For each engagement we document the company's name, the engagement issues, our objectives, and whether they have been met or if progress has been made. We also document the engagement intensity-level, whether we are working collaboratively with other investors, the steps taken in terms of dialogues, meetings and written exchanges, and the steps to be taken in future. We monitor progress against engagement objectives. The internal database has been a very successful engagement monitoring tool that is used on a daily basis. The database is also accessible to and widely used by portfolio managers.

Engagements with companies on the basis of UN Global Compact violations require sign-off from the board-level Responsible Investment Committee. Progress of these engagement trajectories is evaluated regularly by this committee.


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

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

10.2. Additional information. [OPTIONAL]

We have a database that has been in place since 2009 in which we track our engagement with companies as well as other relevant information. We also screen portfolios with respect to the UN Global Compact.

For each engagement we document the company's name, the engagement issues, our objectives, and whether they have been met or if progress has been made. We also document the engagement intensity-level, whether we are working collaboratively with other investors, the steps taken in terms of dialogues, meetings and written exchanges, and the steps to be taken in future. We monitor progress against engagement objectives. The internal database has been a very successful engagement monitoring tool that is used on a daily basis. The database is also accessible to and widely used by portfolio managers.

Engagements with companies on the basis of UN Global Compact violations require sign-off from the board-level Responsible Investment Committee. Progress of these engagement trajectories is evaluated regularly by this committee.


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

300 Number of companies engaged
8 Proportion (to the nearest 5%)

Specify the basis on which this percentage is calculated

Collaborative engagements

80
1 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

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

11.5. Additional information. [Optional]


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

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

109

Collaborative engagements

45

14.3. Additional information [Optional].

The number of companies listed above include those companies where we have either seen positive progress in an open engagement, or where an engagement has been closed effectively.


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
          Corporate Governance/ Shareholder rights
        
Conducted by
Objectives

Get the company to abolish a policy which prevented a shareholder (group) to control 20% or more of the company’s total voting rights (‘poison pill’).

Scope and Process

In a meeting with the company we requested the Board of Directors to abolish the anti-takeover measure and thereby improve shareholder rights at the company.

Outcomes

The company published a statement that it decided not to continue its poison pill and to abolish it at the end of fiscal 2017 based on the opinion of its shareholders and changes in the local corporate governance landscape.

Topic or ESG issue
          Corporate Governance/ Anti-bribery and corruption
        
Conducted by
Objectives

Get the company to introduce the following measures to enhance transparency in financial donations and to improve its governance:

  • Internal/ external audit on bribes
  • Identify the non-business related spending/investment that can be used as bribe
  • Re-establish a culture of integrity within the entire company
  • Set up measures to strengthen the oversight function by the Board of Directors on the matter and the control over such non-business related spending
  • Cut certain political connections on the Board
  • Enhance Board diversity on expertise and quality
  • Upgrade the Code of Conduct and publicly disclose more of its existing policies
  • Work with investors on the above measures and report on any progress.
Scope and Process

We sent a letter to the CEO/ Chair of the company addressing our concerns about the bribery/ corruption that took place at the company and suggested the above measures to enhance transparency in financial donations and to improve its governance. Shortly after we sent the letter we received a response from the company’s CEO/ Chair that our suggestions would be looked into.

Outcomes

A bit over two months after we sent our letter the company announced a series of measures to bring greater transparency and accountability in managing financial donations and monetary support for corporate social responsibility (CSR)-related activities and funds. Additionally, the company established a special Council to review these projects/ measures.

Topic or ESG issue
          Human Rights
        
Conducted by
Objectives

Publication and implementation of a Human Rights and Labour Rights policy by the company.

Scope and Process

In a number of meetings with an engineering, design and consulting company we requested it to implement and publish a Human Rights and Labour Rights Policy and emphasized the importance the importance for the company to have and implement such a policy given its activities in large infrastructure projects globally which could have a significant impact on local communities.

Outcomes

In December 2016, the company issued its first Human Rights and Labour Rights Policy.

Topic or ESG issue
          Corporate Governance/ Shareholder Rights
        
Conducted by
Objectives

Get Swedish companies to propose the members of the board of directors at the annual general meeting for individual (re-)election instead of all in one bundled proposal.

Scope and Process

About 40 Swedish companies received a letter from about 12 institutional investors requesting the Board to proposed their candidates for individual (re-)election at the annual general meeting.

Outcomes

Out of the 40 companies, 17 proposed their members of the Board of Directors individually at their 2016 annual shareholder meeting.

15.2. Additional information. [Optional]


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