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Triodos Investment Management B.V.

PRI reporting framework 2018

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You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes

Implementation processes

LEI 01. Percentage of each incorporation strategy

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate (1) which ESG incorporation strategy and/or combination of strategies you apply to your actively managed listed equities and (2) the breakdown of your actively managed listed equities by strategy or combination of strategies (+/- 5%)

ESG incorporation strategy (select all that apply)

Percentage of active listed equity to which the strategy is applied (+/- 5%)
100 %
Total actively managed listed equities 200%

01.2. Describe your organisation’s approach to incorporation and the reasons for choosing the particular ESG incorporation strategy/strategies.

We aim to only invest in companies that contribute to a sustainable society or clearly lead the sustainability agenda in a particular industry. Furthermore, we will not invest in companies that are associated with unsustainable services, products or business processes. This is guaranteed by our rigorous selection process.

The thematic approach is based on the Triodos Bank mission to improve the quality of life. Products and services that contribute to a clean planet, healthy people and climate protection are captured in our themes.

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.

Main changes are:

  • positive selection instead of best-in-class
  • increase of the number of investment themes from four to seven;
  • integrated, in-house company analysis;
  • intensification of engagement;
  • in-house asset management.

01.3. If assets are managed using a combination of ESG incorporation strategies, briefly describe how these combinations are used. [Optional]

Triodos Investment Management applies a three step process for the ESG screening:

Step 1: Sustainable activities. We've identified certain types of products and services that contribute to the health and wellbeing of people and planet. A company that derives over 50% of its revenues from such sustainable activities qualifies for investment by one of our SRI funds, provided they also pass step 3.

Step 2: Best-in-class. A company that does not derive over 50% of its revenues from sustainable activities (step 1) can still qualify for investment if its all-round sustainability performance puts it among the best in its industry. Triodos Research assesses this using over 70 generic and sector-specific indicators, relating to environmental, social and governance issues. A company whose score puts it in the top 50% within its industry qualifies for investment, provided it also passes step 3.

Step 3: Minimum standards. Our minimum standards are the bottom line: they ensure that we do not fund a company that is engaged in activities that are harmful to individuals, society or the environment. A company that qualifies through steps 1 or 2 must also meet these standards before we'll consider investing in it.


LEI 02. Type of ESG information used in investment decision

02.1. Indicate what ESG information you use in your ESG incorporation strategies and who provides this information.

Type of ESG information

Indicate who provides this information  

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

02.2. Provide a brief description of the ESG information used, highlighting any different sources of information across your ESG incorporation strategies.

Basic sustainability data of companies are purchased from ESG data provider Sustainalytics. Triodos Investment Management applies its own weight matrix to these raw data. The ratings thus derived are used for the best-in-class screening. Furthermore, the data from Sustainalytics are used as a starting point to identify companies with sustainable products and services and to screen companies against the Triodos minimum standards. Triodos Investment Management maintains its own set of investment criteria and is responsible for developing the minimum standards for Triodos Bank as a whole.

In-house sustainability research is provided by Triodos Research. The maintenance of the minimum standards and their application in the research process is also conducted by Triodos Research, which uses multiple sources, including regular contact with leading international experts that represent various interests and stakeholder groups. This contributes to a broader perspective on what are often very complex issues.

02.3. Indicate if you incentivise brokers to provide ESG research.

02.5. Additional information.[Optional]


LEI 03. Information from engagement and/or voting used in investment decision-making

03.1. Indicate if your organisation has a process through which information derived from ESG engagement and/or (proxy) voting activities is made available for use in investment decision-making.

03.2. Additional information. [Optional]

Quarterly meetings take place between Triodos and Delta Lloyd Asset Management. At these meetings Delta Lloyd Asset Management is informed about engagement efforts that are considered relevant for the investment decision process. Moreover, Delta Lloyd Asset Management has access to the research results and underlying details including engagement efforts.

All proxy voting activities are published on the website including our proxy voting guidelines. This information is also available for Delta Lloyd Asset Management. During the process of voting pro-active input is sought from Delta Lloyd Asset Management to discuss ballots for which we need (financial) input from Delta Lloyd. Triodos initiates this contact in case it is considered relevant.

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 LEI 01.2.


(A) Implementation: Screening

LEI 04. Types of screening applied

04.1. Indicate and describe the type of screening you apply to your internally managed active listed equities.

Type of screening

Screened by

Description

Our minimum standards ensure that unsustainable products, like weapons and nuclear power, and unsustainable production processes, such as the violation of human rights and environmental damage, are excluded from our sustainable investment universe. But they also include preset requirements for policies and programmes that show the company is aware of the sustainability risks of its industry and that it takes action to mitigate these risks.

 

Screened by

Description

We search for companies that contribute to clean planet, healthy people and climate protection by means of their products and activities, and the sectors they operate in. For the best-in-class screening we look at over 70 indicators which cover environmental, social and corporate governance issues.

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 LEI 01.2.

Screened by

          CITES, WHO Code on Marketing of Breastmilk Subsitutes, Roundtable on Sustainable Palm oil, Roundtable for Responsible Soy, FSC, MSC Kimberley Process a.o.
        

Description

The principles listed above help us to identify if companies meet our minimum standards. But being a signatory to these principles and conventions is not always considered enough. Our requirements often go beyond the demands of these principles and conventions. We think that it is important that companies develop their own policies (in which they may refer to the principles and conventions listed) and that they explain how these policies are implemented in the organisation by means of programmes. In addition, we expect a company to report on targets and performance so we can identify if it has successfully incorporated its policies.

See also: https://www.triodos-im.com/binaries/content/assets/tim/sri-theme-documents/minimum-standards.pdf

04.2. Describe how the screening criteria are established, how often the criteria are reviewed and how you notify clients and/or beneficiaries when changes are made.

The minimum standards are dynamic, evolving over time with our deepening understanding of sustainability, and reflect the latest developments in society. In practice, this means that we are continually tightening them, to ensure that we only invest in companies that are really setting the pace within their industry.

Changes to the minimum standards are established based on a long process of research and interviews with experts and companies. After a careful process of development, the proposed changes are put forward to the Investment Committee of the Triodos Sustainable Investment Funds for approval. This Committee is chaired by the Managing Director of Triodos Investment Management. If changes are required to the minimum standard document or other documentation that is published on the Triodos website, approval is sought also from the Executive Board of Triodos Bank. Changes in the minimum standards are published on the website and in the (semi-) annual report of the funds.

Changes to our approach as of April 2018 (LEI 01.2) will not affect the application of our minimum standards.


LEI 05. Processes to ensure screening is based on robust analysis

05.1. Indicate which processes your organisation uses to ensure screening is based on robust analysis.

          ESG research includes a four eyes principle and a consistency check on the application of our minimum standards.
        

05.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your ESG screening strategy.

05.3. Indicate how frequently third party ESG ratings are updated for screening purposes.

05.4. Indicate how frequently you review internal research that builds your ESG screens.

05.5. Additional information. [Optional]

All companies in our investment universe are subject to comprehensive ESG research, which is repeated every three years. Each company assessement is checked based on a four eyes principle. The primary research is conducted by the analyst in charge of the study and each study result is peer reviewed by another analyst. Moreover, all studies are then checked by a senior staff member for consistency in the application of minimum standards between studies. In case we are unable to identify if a company meets our sustainability criteria or when there are concerns about the performance of  a company, contact is sought with the company for additional information. We inform companies about our research findings to allow them to respond as detailed as possible. All companies that are contacted during research and all companies that are selected for sustainable investment by Triodos are informed in detail about the findings and conclusions of our research.

On a quarterly basis changes to the Triodos Sustainable Investment Universe are put forward to the Investment Committee for approval. This committee is chaired by the Managing Director of Triodos Investment Management.

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 LEI 01.2.


LEI 06. Processes to ensure fund criteria are not breached

06.1. Indicate which processes your organisation uses to ensure fund criteria are not breached

06.2. If breaches of fund screening criteria are identified - describe the process followed to correct those breaches.

Sustainability alerts on companies selected for investment are systematically checked by Triodos Research to ensure that all companies in the Triodos Sustainable Investment Universe continue to meet our sustainability criteria. If a company is in breach of one of our investment criteria, this can lead to immediate exclusion. Delta Lloyd Asset Management is informed of this breach and the new status of the company. If the company is in the portfolio of one of the funds, Delta Lloyd Asset Management has six months time to sell our position in this company. In practice Delta Lloyd Asset Management immediately sells any stake in the company.

In August 2014, SICAV I started using an automated IT system from RBC Investor Services Bank SA (custodian and fund administrator) to ensure that no investments are made outside the Triodos Sustainable Investment Universe.

On top, every month we receive the portfolios of all funds managed by Delta Lloyd Asset Management. Triodos then checks if all companies in the portfolios are selected for sustainable investment. If this is not the case Delta Lloyd Asset Management has to sell the share immediately. In 2017 no such incident took place.

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 LEI 01.2.

Our new IT system automatically checks whether the companies that are invested in are indeed part of the investment universe. If not, no investments can be made.

06.3. Additional information.[Optional]


(B) Implementation: Thematic

LEI 07. Types of sustainability thematic funds/mandates

07.1. Indicate the type of sustainability thematic funds or mandates your organisation manages.

07.2. Describe your organisation’s processes relating to sustainability themed funds. [Optional]

A company that derives over 50% of its revenues from sustainable activities qualifies for investment by one of the Triodos SRI funds. Companies can also be selected for their leading role in corporate social responsibility within their industry. These are the Corporate Social Responsibility (CSR) Pioneers. The sustainable activities that we identified are grouped in the following themes:

Clean planet. We favour companies that contribute to a clean planet and the development of solutions for environmental pollution. This is an urgent issue because our natural environment is under increasing pressure. Examples of products and services that fall within the scope of this theme are environmental technology aimed at preventing and cleaning up pollution, equipment to monitor energy and water consumption, bicycles and public transport.

Climate protection. Climate change poses a serious threat to the long-term health of the environment and the world’s population. It requires global action by governments, companies and citizens. We encourage companies to contribute to combating climate change. Companies in this theme are active in the production of renewable energy from the sun, wind, waves and geothermal energy. In addition, we include companies that develop new ways to storing energy and enhancing energy efficiency.

Healthy people. We prefer companies that contribute to a healthy lifestyle for everyone. Companies that fall within this theme offer solutions for health care issues, such as medical technology, drugs for treating serious diseases in developing countries, clean drinking water and innovative health care, medicines based on natural ingredients and organic food products.

CSR Pioneers. A company that qualifies as a CSR Pioneer is considered a real sector leader in terms of corporate social responsibility. A CSR Pioneer demonstrates leadership in its products or production process, showing its industry the path of transition to a sustainable society.

In addition to the above, in specific situations or as part of new developments, other sustainable activities may also be considered, for example new products or services that have particular importance from an environmental and/or social perspective.

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 LEI 01.2.


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