If you select any 'Other' option(s), specify
During the year 2018 AP3 only carried out one new external manager selection and appointment processes. A few were terminated as we moved management inhouse.
For all external managers there is reporting requirements and if possible, relevant and meaningful indication (assessment) of impact.
Describe how the ESG information reviewed and discussed affects the selection decision making process.[OPTIONAL]
Sustainability is an integral part of the DD process for all external managers in all asset classes. The ambition is to get as good insight and understanding as possible about the managers view and actions on sustainability issues/ risks and opportunities. The exposure and importance of different sustainability related questions vary among managers and it is important to focus on the ones that are material. The outcome from the DD is part of the final selection and appointment decison making process. The selection and appointment processes develop over time and the requirements with regard to ESG are increasing.
Sustainability issues are addressed in the Manager selection and appointment processes, in the agreements signed (IMAs and Side Lettters), in the monitoring and reporting required from the managers.
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
· Responsibility within the organisation for sustainability?
· Company engagement and dialogue.
· If the manager is a signatory of UNPRI and/or other initiatives/codes etc.
· Implementation of UNPRI six principles.
Sustainability reporting is included in the Reporting requirements in the IMA/Side letter. For segregated accounts the possibility to exclude stocks is added. AP3 use customized index benchmark.
AP3 also have meetings with the external managers to discuss different issues e.g governace and climate change.
AP3 vote all stocks itself so it is important that managers can verify that they don´t use the AP3 voting rights. Also in the meetings with the managers sustainability is included in the agenda for discussion and understanding of how the manager address the isssue and how teh area is developing over time.
For Private Equity the process is similar, and developping as an increasing number of GPs include sustaniability in their strategies and management.
Property, in the directly owned real estate companies AP3 is represented on the Board and sustainability issues addressed in teh Board meetings, decided and followed up. We can also have meetings with the property companies and the staff responsible for sustainability to discuss, learn and understand how the company manage 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. All property companies and real estate funds report or are encouraged to report to GRESB.