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AP3

PRI reporting framework 2019

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Asset class implementation gateway indicators

OO 10. Active ownership practices for listed assets

10.1. Select the active ownership activities your organisation implemented in the reporting year.

Listed equity – engagement

Listed equity – voting

Fixed income SSA – engagement

Fixed income Corporate (financial) – engagement

Fixed income Corporate (non-financial) – engagement


OO 11. ESG incorporation practices for all assets

11.1. Select the internally managed asset classes in which you addressed ESG incorporation into your investment decisions and/or your active ownership practices (during the reporting year).

Listed equity

Fixed income - SSA

Fixed income - corporate (financial)

Fixed income - corporate (non-financial)

Property

Select the externally managed assets classes in which you and/or your investment consultants address ESG incorporation in your external manager selection, appointment and/or monitoring processes.
Asset class
ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes
Listed equity

Listed equity - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Private equity

Private equity - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Property

Property - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Infrastructure

Infrastructure - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Forestry

Forestry - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

11.4. Provide a brief description of how your organisation includes responsible investment considerations in your investment manager selection, appointment and monitoring processes.

Sustainability is an integral part of AP3’s mission to create long-term value and the fund works actively to address sustainability issues and opportunities across its entire portfolio. It is important that managers selected are aligned with AP3 in their views on ESG/Sustainability and that there is a mutual understanding of what is expected and what to expect. As the work regarding ESG is an ongoing process it is also important to see what could and should be done over time.

Selection /Appointment/Monitoring

ESG and potential ESG issues are on the list of questions to be discussed and answered when selecting and appointing managers, Are there potential risks, (how are they handled, before and now), Trackrecord. Are there policies in place and more important are they followed.  How are they monitored?

The manager's view on relevant  and material environmental, social and goverance issues. Resources and responsibility in the organisation. Is there a dedicated team, what is the general knowledge and handling of ESG in the organinsation.

ESG/sustainability is a given part of the DD process, where we want to get as good insight and understanding as possible about the manager's views and actions on sustainability issues. The outcome from the DD is then part of the selection/appointment and monitoring is done via reporting and follow ups in different ways eg. meetings and conference calls.

A section on sustainability is included in RFIs, RFPs and in the Due Diligence process. The questions is about for example:

· Investment policy that includes sustainability issues. ESG policy, ESG and investment beliefs?

· RI policy and content?

· The management of sustainability risks and opportunities, factors/KPIs?

· The integration of sustainability in investment processes and decisions,knowledge and experience?

· Resposibility within the organisation for sustainability?

· Company engagement and dialogue?

· If the manager is a signatory of UNPRI and/or other initiatives/codes etc.?

· Implemenation of UNPRI six principles?

Sustainability issues are thus addressed in the Manager selection and appointment processes, in the agreements signed (IMAs and Side Letters), in the monitoring and reporting required from the managers.

Sustainability reporting is included in the Reporting requirements in the IMA/Side letter. For segregated accounts there are questions about the possibility to exclude stocks added. AP3 use customized index benchmark that are reviewed 4 times a year. Before each review the conventional index for the mandate  are screeend and decisons taken about what companies to have exposure to / not to have exposure to.

In late 2017 a survey was sent out to all external equity managers with questions on their work with ESG (policies, team, time etc), if they are signatories of PRI and /or other organisations, if they support the París Agreement, if they measure the CO2 footprint, how they work with the UN SDGs, which ones are most relevant/material, and how /if they measure impact. The major part of the managers took the suvery.The results have been discussed during the year with all our external managers. Those discussions have also led to futher sustainability related discussions and learning regarding eg corporate governace and climate change implications. How these issued can be approached and integrated in the asset management.

As mentioned, AP3 have recurring meetings/conference calls with our external managers to discuss different ESG  issues, and how the are handled. These meeetings have a dual function, they are part of the monitoring/follow up but they also function as a means to exchange and share knowledge and experience from the development.

 AP3 vote all stocks itself so it is important that managers can verify that they don´t use the AP3 voting rights.

For Private Equity, the process is similar and developing as there is a potential to develop/elaborate the processes here from DD to reporting  (increased in line with the DD) and monitoring as an increasing number of GPs are including sustainability in their strategies and management. During the year the emphasis on ESG in PE has increased.

Property, in the directly owned real estate companies AP3 is represented on the Board and sustainability issues should be addressed, decided and followed up. We also have meetings with the property companies and the staff responsible for sustainability to discuss, learn and understand how the company handles sustainability issues, such as energy efficiency, building materials, suppliers, maintenance etc.. The information is used to spread best practise to the other real estate companies AP3 is invested in. GRESB reporting is encouraged and asked for.

Infrastructure,  investment in Infrastructure follow the same processes as the above. Infrastructure itself may be part of the an ESG issue or of the solution thus the selection/appointment/monitoring processes are very important. 

Forestry, investment in Timberand follow the same processes as the above. AP3 timberland holdings are certified by the Forest Stewardship Council (FSC).

 


OO 12. Modules and sections required to complete

12.1. Below are all applicable modules or sections you may report on. Those which are mandatory to report (asset classes representing 10% or more of your AUM) are already ticked and read-only. Those which are voluntary to report on can be opted into by ticking the box.

Core modules

RI implementation directly or via service providers

Direct - Listed Equity incorporation

Direct - Listed Equity active ownership

Direct - Fixed Income

Direct - Other asset classes with dedicated modules

RI implementation via external managers

Indirect - Selection, Appointment and Monitoring of External Managers

Closing module

12.2. Additional information. [Optional]

Sustainability is an integral part of AP3 asset management, across assets. The basic principles are the same but there is an ongoing development process and the level of advancement depends on many different factors e.g. availability of reliable data and other information, the strategies and mandates, knowledge and insight etc.


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