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ACTIAM

PRI reporting framework 2020

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Outputs and outcomes

FI 17. Financial/ESG performance

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

Select all that apply
SSA
Corporate (financial)
Corporate (non-financial)
Securitised
We measure whether incorporating ESG impacts portfolio risk.
We measure whether incorporating ESG impacts portfolio returns.
We measure the ESG performance/profile of portfolios (relative to the benchmark).
None of the above

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

Fixed Income investments aim for a high(er) ESG Score (in relation to the benchmark). In this process, we measure and report on the ESG scores of our investments. Since we have targets on the relative and absolute ESG scores of most of the portfolios, there is a measurable impact (as % of the BM that is not investable). Additionally, we approach carbon and water footprints of our investments from a risk perspective, incorporating these on the ESG Score. As issuers' ESG Scores, are related to our portfolio targets, these influence the design of portfolios. Finally, water and carbon footprint are measured (versus the footprints of the benchmarks), reported and also related to overall targets.

17.3. Additional information.[OPTIONAL]


FI 18. Examples - ESG incorporation or engagement

18.1. 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

ACTIAM's Fundamental Investment Principles prevents us from investing in activities that cause serious environmental damage and/or harmful to human life, among others. In 2019, the regular screening has shown that a company that was under Responsive Engagement for past controversies in both topics was responsible again for severe damages to the environment, as well as the death of several people. Despite the company's responsiveness to engagement until then, the company reincurred in severe violations. ACTIAM considered this an evidence of irrecuperable failure by the company, deciding then to exclude it from its investable universe.

Impact on investment decision or performance

Given the severe violation, despite engagement, the company was excluded from the investable universe, resulting in divestment.

ESG issue and explanation

Several ESG topics are incorporated into the ESG Score of the investees. For Corporate (financials), product safety is among the various material topics. During 2019, the ESG Score of a company was downgraded following an update that has shown very low performance and significant controversies related to financial product safety by the company.

Impact on investment decision or performance

The significant downgrade of the company's ESG Score has led FI portfolio managers less interested in the issuer, selling some of the assets held in the active portfolios and substituting for names of higher ESG Score.

ESG issue and explanation

During a regular screening, and according to the 2019 update of ACTIAM's Sustainable Policy, a company was found to be non-adaptive due to their Fossil Fuel use (high share of coal-fired power generation, as well as plans for new coal-fired power plants). In-house assessment has shown no potential for responsive engagement. The company was thus excluded from the investable universe.

Impact on investment decision or performance

By excluding the company, no investments can be done by the portfolio managers, dimishing the investment universe.

ESG issue and explanation

Our Fundamental Investment Principles prevent ACTIAM from investing in companies involved in severe damage to the environment. Activities such as mountain top removal and riverine tailings disposal are considered extremely harmful and lead to exclusion. Every year, all companies excluded from ACTIAM's investable universe to date are reviewed through a screening. The 2019 review has shown that one of the excluded companies no longer applied such activities. A fundamental analysis of the company's current practices confirmed such information. The ESG Committee has therefore decided for inclusion of the company in the investment universe.

Impact on investment decision or performance

The re-inclusion of the company enables investment again, expanding the investable universe for FI portfolio managers.

ESG issue and explanation

In the end of 2018, a renewable energy company announced an asset swap, leading to reduction of their renewable power generation assets. The company had previously launched a Green Bond, in which ACTIAM participated, with a use of proceeds for renewable energy generation projects. The asset swap meant a change on use of proceeds by the company, now allocated to grid projects.

Impact on investment decision or performance

ACTIAM analysed the reallocation of use of proceeds by the company. We concluded that the reallocation of assets did not show strong ambitions. The reallocation from solely renewable energy to connecting renewables and smart meters, coupled with the already large amount going to grid investments related to the wind energy made the level of ambition of that framework doubtful. There were no strong plans for making the grid “greener”. Additionally, following the swap, it was not clear how the pool of green assets and projects would grow over time. ACTIAM has concluded the ESG Score of the bond should be downgraded due to the diminishing of ambition. The ESG Score was adjusted from 85 to 75, the minimum ESG Score for Green Bonds.

18.2. Additional information.


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