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Pensionfund Metalektro (PME)

PRI reporting framework 2017

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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]

We have agreed a formal process with our fiduciary manager MN for selecting the companies to engage with.

1. Regional: Our engagement with Dutch companies is carried out in collaboration with Dutch peers (via institutional investor platform EUMEDION, MN is a lead investor with respect to three of the company engagement trajectories, and contributor (opt-in) to eight others. The main reason for engaging with this category is that PME is a Dutch pension fund. They expect PME to consider proximity as a factor in evaluating material ESG-risks as a matter of responsibility to the pension funds beneficiaries’ home market. Dutch companies’ corporate governance arrangements and general sustainable performance often get widely discussed in Dutch media and financial markets. Sometimes, they might even have a big impact on Dutch politics and regulation.

2. Downside risk: Engagement with significant holdings that possess a Global Compact violator status (or are on the watchlist) have a substantial weight in our portfolios and may be an imminent threat to the principles of long-term shareholder value creation. Companies that fail to respond to engagement or fail to show improvements may be nominated for divestment following a certain period of time.

3. Thematic: Engagement with significant holdings that present material ESG-risks within a few key sustainability themes as prioritized by PME allow MN to choose quality over quantity. We have defined focus areas in the Environmental, Social and Governance space. Those themes equally define our engagement efforts. By focusing our attention to a few limited sustainability themes the team’s experts have the opportunity to specialize. The key themes and engagement objectives identified by PME are the companies’ ability:

  • To fully participate in the low-carbon economy energy transition (E);
  • To protect the human and labour rights of workers in the global supply chain (S);
  • To reward company executives according to an adequate and balanced remuneration scheme in line with the interests of (minority) shareholders (G).

This focused approach allows our team to deepen our dialogues with target companies and create bigger impact in terms of changing company conduct. For a selection of companies in this category we work in collaboration with other institutional investors (for instance PRI engagement working groups).

4. Adhoc/incidents: All portfolio companies are monitored on a constant basis by our data service providers. Any changes in sustainability performance will affect ESG-scores and companies might be flagged up for engagement. These types of concerns are often also confirmed/supported by articles from media outlets and NGO reports. These kind of issus will require further internal analysis from the responsible investment team and analysts. In this matter evidence of effective remediation and better processes is key. Divestment might be considered if incidents continue to occur for a longer period of time.

 


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]

 

  1. As discussed above, engagement objectives for companies are set by either qualifying as a Dutch holding; holdings falling within the ESG-risk themes as prioritized by PME; or by presenting high material ESG-risks and/or are widely being recognized as Global Compact violators.
  2. Based on research and specialist input, for each of these companies company best practices are being identified. Based on the established best practice gaps it is possible to develop engagement trajectories tailored to the needs of each individual company, set goals and define specific engagement topics. At the start of an engagement trajectory a starting point is defined by setting the lowest relevant milestone and ambitions are defined by setting the to-be achieved milestones, formulating the necessary in-between SMART-goals and choosing the required timeline. Milestones are general and similar for all types and themes of company engagement as they solely discuss the level of integration and mitigation of a certain ESG-risk:

1) no awareness;

2) awareness;

3) policy;

4) programme, practice; and

5) completion.

The in-between SMART-goals define the steps required to move a company up from one milestones to another and are tailored to the specific risks and awareness trajectory of a company. When progress on engagement is slow it can be decided to start working in collaboration with peers or other parties and intensify the engagement frequency. 

3. To stay up-to-date with changes in company conduct and practices, we monitor all company publications, receive third-party research from multiple providers, and actively engage with NGOs, academic and government representatives to receive sufficient variety in views.

4. Progress on company engagement is being reviewed on a quarterly basis. Every quarter is also is decided whether new companies with a sudden increase in material ESG-risks and/or Global Compact violator status should be added to the engagement list. Overall, on an ongoing basis it is decided which companies should be added or delisted from the engagement list:

  • Added to the engagement list: companies that according to our engagement selection rules qualify within the MN engagement scope.
  • Prolonged on the engagement list: companies that show sufficient commitment, are still within the set timeline, and are clearly in the middle of processes implementing change.
  • Delisted from the engagement list: companies that have shown sufficient progress in conduct and have achieved desired milestone(s) within the set timeline.
  • Delisted from the engagement list: after a minimum period of two years, companies that according to our engagement selection rules do not longer present material ESG-risks.
  • Escalation – divestment nomination: after a minimum period of two years, companies that fail to show any willingness to engage, that fail to produce any improvements in conduct may be nominated to be delisted. The final decision is made by the management team of MN asset management (comprising the MN CEO and CIO).

5. MN registers all engagement activities in an internal database (CRM) that allows to log all points of contact and tracks company engagement progress overtime. This database caters for organising company engagement logs by ESG-themes, milestones, smart-goals, date, etc and for filing all evidence on company engagement (including emails, meeting notes, company communication, notes, research, progress analysis, yearly summaries etc). Insights on companies from the database are often shared with investment teams on request. In addition, there exist various ways of cooperation with the investments teams. Either for reasons of knowledge sharing on material ESG-risk topics retrieved from engagement (such as energy transition, freedom of association, annual bonus) or in preparation of voting and AGMs.

6. The engagement coordinator is responsible for the complete engagement value-chain, from design of policies to final output. Think quality of work, actual progress on company improvements realized and the availability of high quality information management support systems. Other responsibilities regard developing policies in coordination between MN and PME expectations, control of full execution of policies and quality of company contact, managing the team of engagement specialists, prioritization of engagement companies, quality of contact with companies and PME progress reports. MN’s overall engagement policy is being reviewed on a two-yearly basis which allows for improvement of processes, updates on standards and benchmarks and integration of lesson learned.


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]

MN only takes part in collaborative engagement opportunities if companies and/or E,S,G themes were first prioritized according to the rules of our MN engagement policies. We work with others not only to conduct company engagement, but also to speak to industry organisations, (bilateral) government organisations and NGOs. If there is no match with the companies and/or themes on our MN engagement list, automatically there is no reason for us to participate.

When there is a match, collaborative engagement offers several efficiency benefits: sharing of workload and knowledge development. An important requirement to collaborative engagement is that we need to be convinced that the engagement can have substantial impact. More assets under management often means more impact. A  group of investors supporting the same standard/benchmarks more easily convinces parties of the urgency to implement change.

We take part in a considerable number of collaborative engagement working groups but the level of involvement can be different for each working group. For some groups we are in the lead for a few companies and contribute to the work of others on other companies. For other workers groups we are part of developing a new E,S,G, framework to evaluate complete industries. For some theme’s the collaborative engagement is formalized under the umbrella of the PRI and IIGCC, for other work streams it is just an informal group of investors regularly working together on the same themes.

See examples of collaborative initiatives that we participate in see the answers to question SG: 09.1


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]

As mentioned in LEA 05.3, we only participate in collaborative engagement projects if the companies and themes were already prioritized by our MN engagement policies. As such there is no difference between evaluating the insights gained from individual and/or collaborative engagement trajectories. MN sets for all engagement activities specific milestones and goals, and tracks its progress continuously.

For instance in the case of collaborative work with the PRI working groups, we see similarities in the way the working group is evaluating companies and the way we would assess the company according to MN policies. In there is an established match, it makes sense for us to join the PRI working group and also adopt the existing PRI scorecard as the basis of setting milestones and goals. As such, collaborative engagements are registered and tracked in the same database as individual engagements. However, if there exists a difference in opinion, our individual assessments will always prevail any collaborative assessments.  The way we work on collaborative engagement projects is that we agree on assessment methodology, we conduct meetings together, but eventually all parties involved are always entitled to their own opinions and (final) evaluations.


General processes for all three groups of engagers

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


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]

Tracking progress of engagements is logged in the same database as where we log milestones and goals for engagement. As discussed before, we track all company related activities and evaluations in this database. A summary of these transcripts is provided from our fiduciary manager MN to PME on a quarterly basis. The information in the system is subjected to internal control processes and audits and is a source of evidence for the external audits on public reporting by PWC.


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