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Triodos Investment Management B.V.

PRI reporting framework 2018

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Outputs and outcomes

FI 18. Financial/ESG performance

18.1. Indicate whether your organisation measures how your incorporation of ESG analysis in fixed income has affected investment outcomes and/or ESG performance.

Select all that apply
SSA
Corporate (financial)
Corporate (non-financial)
We measure whether incorporating ESG impacts funds' reputation
We measure whether incorporating ESG impacts financial returns
We measure whether incorporating ESG impacts risk
We measure whether incorporating ESG impacts funds' ESG performance
None of the above

18.2. Describe how your organisation measures how your incorporation of ESG analysis in fixed income has affected investment outcomes and/or ESG performance. [OPTIONAL]

Reputation: Our investment process and criteria ensure that we invest only in outperformers on sustainability and that we have no involvement in unsustainable activities. We continuously monitor our reputation with clients and distributors of our funds.

Return: Delta Lloyd Asset Management is limited to investing in companies that are selected for sustainable investment by Triodos. Despite these limitations, Triodos is convinced that companies that outperform on ESG will (in the long run) also outperform financially. The investment return of the funds are benchmarked against widely accepted general indices.

Risk: Due to the limitations of the investment universe and the concentrated investment portfolios, the volatility of the funds is relatively high. However, research has shown that the incorporation of ESG criteria has had a positive impact on the risk profile of the funds.

ESG performance: Based on our strict selection criteria, most companies fail to meet our investment standards. By maintaining our investment standards, we continue to select companies that clearly outperform on ESG and this outperformance is also visible in the investment portfolios. The investment portfolios are exclusively made up of companies that are selected for sustainable investment by Triodos.

18.3. Additional information.[OPTIONAL]

The financial performance against the benchmark in general shows a performance above the benchmark.

As of 31 December 2017, in the Triodos Sustainable Mixed fund, the average scores (0 - 100%) of bond holdings of companies compared with the benchmark counted 10.5 percentage points more on E, 6.7 percentage points on S and 6.6 percentage points on G indicators, while for the Triodos Sustainable Bond fund the average scores of non-souvereign bonds counted 10.6 percentage points  more on E, 7.1 percentage points  on S and 6.5 percentage points  on G indicators.

Information provided refers to 2017. Please note that, as of April 2018, Triodos Investment Management will bring the asset management of its SRI funds in-house. As of that month, a team of investment analysts will integrate the ESG and the financial performance in their analysis of companies, resulting in the definition of the investment universe. Related organisational changes are being implemented and expected to be fully in place by the end of 2018. See FI 01.3.


FI 19. Examples - ESG incorporation or engagement

19.1. Provide examples of how your incorporation of ESG analysis and/or your engagement of issuers has affected your fixed income investment outcomes during the reporting year.

ESG issue and explanation

Remuneration: Triodos Research excludes companies that are involved in remuneration controversies that publicly raise significant ethical/moral concerns and are in clear violation of local or international standards of best practice, while failing to take credible measures. In 2017, a new step was added to the assessment process. A set of four indicators was defined that express a company's performance and policies regarding (CEO) remuneration. These include the ratio between CEO remuneration and average employee remuneration, as well as the existence of a clawback provision. A factor in which the size of the company is reflected is used to determine controversial remuneration.

Impact on investment decision or performance

The decision has not affected our investment universe yet, as the new approach will not be applied in retrospective but at the next full assessment of companies involved.

The new remuneration approach is applicable to all companies, both financial and non-financial.

ESG issue and explanation

Italy was added to the list of approved countries of the investment universe for Triodos Sustainable Funds. Although Italy did not ratify the Stockholm Convention on the ban of Persistent Organic Pollutants (POP’s), EU-membership enforces legal binding to follow this convention. Therefore, autonomous ratification by Italy is not considered compulsory anymore.     

Impact on investment decision or performance

Asset managers are allowed to invest in bonds of Italy.

ESG issue and explanation

Cotton: this one of the world's most important natural fibres and renewable natural resources. However, cotton farming has serious environmental and social impacts. The number of initiatives to grow and use more sustainable cotton is increasing and a significant amount of more sustainable cotton has become available. As a result, in 2017 a requirement was introduced for companies whose products contain cotton, to have a policy or target for the use of sustainable cotton.

Impact on investment decision or performance

The decision has not affected our investment universe yet, as the new requirement will not be applied in retrospective buat at the next full assessment of companies involved.

ESG issue and explanation

Starting in November 2016, we started engaging with ING Group about its involvement in the Dakota Pipeline project. Engagement intensified in March 2017, when - due to our concerns - the company was put under review. When the company announced the sales of its loan to the project, the review status was turned back to selected for investment.

Impact on investment decision or performance

During the under review period, the fund managers are advised not to increase their holdings in the company. After the termination of the under review status, ING Group remained in the investment universe.

ESG issue and explanation

We gave feedback to EIB on the way they reported about their impact bonds, which was appreciated by the company and hopefully will be integrated in their report.

Impact on investment decision or performance

EIB remains in the investment universe, while the information about impact bonds for investors may improve.

19.2. Additional information.


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