The starting point of investing at ACTIAM is ethical and written down in our Fundamental Investment Principles (FIP). We do not want to invest - from an ethical perspective - in companies that violate our FIP. The principles are based on international treaties and best practices and cover the following subjects: Human rights, Labour rights, Corruption and fraud, Environment, Weapons, Customer and Product integrity, and Animal welfare.
In addition, ACTIAM’s investment policy stimulates companies to operate within the ‘planet’s safe and just operating space for humanity’, which means operating within the planetary boundaries and respectful of the social foundations. As our Fundamental Material Drivers policy describes in-depth, ACTIAM assesses to what extent companies have the capacity to prepare for the ongoing transitions in society and how a lack of adaptive capacity creates risks for our portfolio. We analyze if and how companies follow the necessary, ‘science-based’ pathways to move towards the ‘safe and just operating space’.
ACTIAM assesses companies through the lens of seven material business drivers: fossil fuel use, water use, land use, chemicals use, social capital management, human capital management and organisational behaviour. Based on this assessment, companies are categorised according to their capacity for behaviour change, indicating they are deemed non-adaptive, at-risk or moving towards sustainable behaviour. Their categorisation determines in which types of funds companies fit.
In addition, for climate, water and land, long-term and 'science-based' targets have been formulated. These are: 1. Climate: 30% less CO2 emissions in 2030 (compared to 2010), in line with the climate agreement of Paris; 2. Water: water-neutral investment portfolios in 2030 3. Land: no deforestation and no loss of biodiversity in 2030. With these objectives, ACTIAM aims to ultimately invest within the planetary boundaries and in line with the Sustainable Developments Goals (SDGs).
To achieve these objectives, we use different instruments. The first is exclusion from our investment universe. We are aware that excluding a company has no impact on the real world and the real economy. Investing only in the companies that do good ultimately does not lead to a sustainable society, and as described in our vision: a transition is needed. The majority of companies will also have to be encouraged to change their behaviour towards the best practices. We do this via engagements, entering into a dialogue with companies and aiming for concrete objectives that entail a change in behaviour. We make a distinction between responsive and proactive engagement. The first aims to respond to (potential) controversies or violations of our Fundamental Investment Principles. When responsive engagements are not successful within a reasonable timeframe, the next step is to exclude the company. For some of our strategies, responsively engaged companies are not investable.
The third option is to vote at shareholders' meetings. In addition to casting our vote, we also actively file for items on the agenda. The fourth option is to invest extra in companies that operate sustainably or in companies with a positive impact. For example, ACTIAM has a range of sustainable products including only the companies that already operate sustainably and are preparing, for example, for the low-carbon transition. ACTIAM also has a global equity impact fund that only invests in companies that demonstrably contribute to the SDGs. Additionally, in our Credits fund (corporate bonds), we strive to invest as much as possible in Green Bonds.
Finally, we look at financially material sustainability issues per company and per sector. Here, we look at ethical components, top-down policy based on climate, water and land and bottom up or company-specific relevant sustainability topics. This research is reflected in the ACTIAM ESG score. This score looks at the company specifically, the climate, water and land focus themes and the positive contribution to the SDGs. On the basis of these three steps, a score is given per company between 0 and 100. The higher the score, the more sustainable (also from a financially-material perspective) the company. For some of our strategies, we have a minimum ESG score. For all investments, the average ESG score should be at least as high as the relevant benchmark.
The responsible investment policy is drafted by the in-house ESG team (9 FTE and 2 interns on average). All policies and exclusion decisions need to pass by the ACTIAM ESG Committee, which consists of the CEO (performing the role of Chair), CIO, Head of Fund Management and Head of ESG Research and an external expert who is also a Professor of Ethics. This committee meets at least once every quarter. The policies are reviewed and updated on a regular basis.
Several instruments used in our investment universe, such as Green Bonds and the ACTIAM ESG Score, are developed and applied in collaboration between Portfolio Management and the ESG team. Therefore, we meet on a regular basis and continuously discuss content and developments.