Our responsible investment approach seeks to provide an investable universe composed of companies that stand out due to their commitment to mitigate ESG issues and act in a socially responsible manner.
The incorporation of a socially responsible investment approach into Santander Empleados Pensiones pension fund is done with the aim of obtaining a global vision of enterprises’ behavior via an analysis of their social responsibility. Furthermore, this investment approach leads to a promotion of sustainable capital markets and a reduction of systemic risks within our portfolio. Our investment approach is based on UN PRI’s responsible investment guidelines, seeking an alignment of our investment strategy with international SRI frameworks.
The investment policy for Santander Empleados Pensiones is approved by the Control Commission, the governance organ of the pension fund. It is characterized with a flexible and dynamic structure, as this will allow the policy to reflect the evolution of corporate social responsibility over time. Currently, the policy covers the main ESG issues that are present in the 5 impact areas aforementioned in different manners through our exclusion and value criteria.
- Exclusion Criteria
Participation in the following activities will lead to a direct exclusion of a company from our investable universe.
- Inappropriate use of nuclear energy
- Toxic waste-related activities
- Environmental Pollution
- Huma Rights:
- Child Labour
- Universal Decalration of Human Rights breaches
- Other Ethical Concerns:
- Child Pornography
- Manufacturing or sale of a finished product/strategic parts of cluster ammunition, anti-personnel landmines or nuclear weapons
- Irresponsible advertisement of alcohol, tobacco, pornography or gambling related products
2. Value Criteria:
Within this field we aim to assess different procedures and initiatives of companies related to their environmental impact. Our investment policy looks at environmental policies, management and other systems that an enterprise might have to mitigate their impact on the environment, concentrating on the implementation and evolution of these. Moreover, it also takes into account the adherence to international environmental treaties (such as the Kyoto Protocol). Our investment policy also takes into account emissions control, adding value to those companies that make efforts on reducing their GHG emissions or have systems in place to avoid these. In addition, those that promote and operate on renewable energy sources are considered as more valuable under our policy. Ultimately, those companies that follow a sustainable approach to timber-related practices are rewarded. Firms that underperform in these areas or avoid their environmental responsibilities will be penalized and are therefore seen as less valuable under our analysis.
We believe that corporate governance reflects executives’ commitment to the firm’s social responsibilities. When upper-management is directly involved with the ethical functioning and behaviour of the enterprise, this will be transferred across all levels of the company. Under these ideas, we analyze a company’s corporate governance looking at several factors which we believe are key in this area. Its executive board’s membership and activities are assessed to ensure an appropriate and representative composition of the board and alignment with their responsibilities. Furthermore, firms must have a clear and transparent policy to deal with bribery and corruption and concise code of ethics that is applied and reaches all employees. Executives’ commitment to their CSR commitments are assessed via their relationship with the firm’s stakeholders. The success of gender equality policies and practices and the higher percentage of women in upper management is rewarded in our investment policy.
Any firm that considers itself as socially responsible must present and apply clear policies in relation to human and labor rights. In order to assess a firm’s performance in this area, our investment policy looks at the existence and quality of human rights policies in an enterprise and the way in which this is implemented in all of its business activities, including its supply chain. Furthermore, compliance with the ILO’s International Labor Standards is analyzed in order to ensure that those companies that are underperforming in this area are penalized. Much like human rights policies, we believe that these standards must be maintained across all levels of a company’s supply chain in order to consider them socially responsible in this regard. Some other specific ESG issues are also analyzed in this area, such as: child or forced labor, discrimination in the workplace or freedom of association and the workers’ right to unionize.
We firmly believe that a good relationship between a firm and its stakeholders leads to tangible and intangible benefits for the company, therefore adding value to it. As a result, in regards to the establishment and maintenance of a good relationship with its stakeholders, we assess firms on their policies of stakeholder management and communication. These must have the objective of benefitting all parties involved in any discussion or dispute. Furthermore, we look for initiatives that promote: equal opportunities, health and safety at the workplace, employee training or job creation and security. The existence of these demonstrates a firm’s intent to better the position of its stakeholders, which we deem as a valuable approach to social responsibility. Thus, resulting in a greater value for the firm overall.
Other Ethical Concerns:
In this case, we look at firms’ activities to assess the negative impact that these might have on society or the environment. We perceive the relationship with these sort of activities as detrimental for a company and therefore its value. In this regard, we penalize companies for their involvement in:
- Animal testing (with the exception of medicine)
- Genetic engineering
- Production or sale of military products or armament
- Intensive farming