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APG Asset Management

PRI reporting framework 2020

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You are in Direct - Fixed Income » ESG incorporation in actively managed fixed income » (A) Implementation: Screening

(A) Implementation: Screening

FI 04. Types of screening applied

04.1. Indicate the type of screening you conduct.

Select all that apply
SSA
Corporate (financial)
Corporate (non-financial)
Securitised
Negative/exclusionary screening
Positive/best-in-class screening
Norms-based screening

04.2. Describe your approach to screening for internally managed active fixed income

We are convinced that investors make better investment decisions if they look structurally at sustainability factors and responsible business practices as this gives them a more comprehensive picture of investment risks and opportunities.

The RI policy requires that our investment teams actively consider relevant environmental, social and governance factors alongside considerations of return, risk and cost in a portfolio context, leading to informed and well-considered investment decisions for every industry and company we are invested in.

04.3. Additional information. [Optional]

Based on our belief, APG, together with our clients, has developed an industry-leading inclusion policy whereby the investment universe for capital market investments is assessed based on a proprietary methodology and categorized into leaders and laggards. Investments in laggards require engagement in order to improve their sustainability performance. Engagement is therefore one of the cornerstones of the inclusion policy. We aim to invest only in companies that either perform adequately on our chosen sustainability indicators or those that we expect can make progress in these areas.

In addition to a strong focus on integration, APG has minimum standards and an exclusion policy built into its investment processes.

We expect companies to act in line with the principles of the UN Global Compact. On a regular basis we screen our equity and bond portfolio and engage with companies we think are in breach of these. Where engagement does not lead to the desired change we can decide to divest. This is a last resort and the result of an intensive process that can take several years and involves clear requirements and deadlines. In line with our clients policies, APG does not invest in companies involved in the following:

− Controversial weapons: This means we do not invest in companies that are involved in the production, sale or distribution of cluster munitions, anti-personnel mines, chemical or biological weapons. We define involvement as production, sale and/or distribution of the core weapon system, or components/services of the core weapon system that are considered tailor made (or dedicated) for the weapon or weapons system and essential (key) for the lethal use of the weapons. Regarding nuclear weapons, we exclude companies involved in the production, development, sale and/or distribution of the core weapon system. We also consider companies involved in the production, development, sale and/or distribution of the company is deriving revenues of components or services that are considered tailor-made (or dedicated) for the weapon or weapon system and components or services that are considered essential (key) for the lethal use of the weapon or weapon system.

− Tobacco production: we define involvement as companies that derive revenues (i.e. > 0% revenue) from the production of tobacco products. This relates to companies engaged in manufacturing and producing tobacco products such as cigars, cigarettes, e-cigarettes, beedi, kretek, smokeless tobacco, reconstituted tobacco leaf, snuff, snus, and chewing tobacco. It also includes companies that grow or process raw tobacco leaves

In addition to the exclusion policy on corporates, we exclude sovereign bonds issued by countries that are subject to an arms embargo by the UN Security Council.

The exclusion policy has been changed over 2018, whereby as of January 2019 companies involved in tobacco production, and companies involved in nuclear weapons inside the Non-Proliferation Treaty are excluded from investment. The exclusion list is determined on a semi-annual basis. Per December 2019 we exclude 156 public and 119 private companies that are directly, or through ownership, involved in production of anti-personnel landmines, cluster munitions, nuclear weapons or tobacco production. We exclude 3 companies that we consider to be in violation of the UN Global Compact principles. 10 countries currently feature on the exclusion list for sovereign bonds. We apply the exclusion policy for listed and non-listed issuers, the list of private issuers is internally available and shared with our external managers.  


FI 05. Examples of ESG factors in screening process

05.1. Provide examples of how ESG factors are included in your screening criteria.

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

Under our exclusion policy we have added several new companies and countries, some of these additions have led to selling positions. Examples of ESG factors used are involvement in manufacturing of cluster munitions or involvement in production of tobacco. In addition to the exclusion policy on corporates, we exclude sovereign bonds issued by countries that are subject to an arms embargo by the UN Security Council.

05.2. Additional information.


FI 06. Screening - ensuring criteria are met

06.1. Indicate which systems your organisation has to ensure that fund screening criteria are not breached in fixed income investments.

Type of screening
Checks
Negative/exclusionary screening
Norms-based screening

06.2. Additional information. [Optional]


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