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Profundo

Service Provider Reporting Framework 2017

You are in Strategy and Governance » Responsible investment policy

Responsible investment policy

SG 01. Responsible investment policy

01.1. Describe how your organisation’s philosophy incorporates environmental, social and governance factors, and the link to your business offerings.

          Profundo is a mission driven research and advisory firm: “With profound research and advice, Profundo aims to make a practical contribution to a sustainable world and social justice”. The irresponsible patterns in which the global community produces, processes and consumes natural resources, as well as distributes the wealth and wellbeing derived from these resources, are not just destroying biodiversity, the environment and the climate. They also destabilize societies, create conflicts and human rights violations, and exacerbate social inequality. To change these patterns and create more sustainability and social justice, many different stakeholders need to change course: governments, companies, consumers and financial institutions, to name some of the most important. For all of them, changing course is difficult and inhibited by existing rules and regulations, ingrained habits and practices, outdated technologies, as well as vested interests.

To support the movement towards more sustainability and social justice, the profound research and advice we are offering is much needed. We see it as our role to unravel the facts, to analyse the patterns, to expose the vested interests. But also to show the options for change, to look for solutions and to stimulate stakeholders to change course. Our research and advice should be used as a lever for change, providing insights as well as opportunities.

Over the year Profundo has actively supporting NGOs, financial institutions and governments in their mission towards sustainable development. In responsible investment, our experience builds upon a long history of comparative research on financial institutions regarding various environmental, social and governance (ESG) factors, such as human rights, nature and biodiversity, climate change, corruption, taxes and subsidies, conflict areas, and undemocratic regimes.
        

01.2. Indicate whether you have policies that formalise the incorporation of your beliefs in your business offerings.

01.5. Additional information [OPTIONAL]

As Profundo is not an asset owner, nor an asset manager, we do not need a responsible investment policy. Moreover, our coverage of topics and the area of expertise is wide and diverse and the projects are customized to the needs of our clients, which makes it even more complicated to design a one-size-fits all policy. For the advisory services, we fall back on the knowledge and experience of previous research and assignments. We have a Strategy Paper that describes our mission and a Sustainability Policy for our own business operations in order to act in line with our mission. The objective of any assignment should always meet our mission regarding sustainable development.


SG 02. Publically available policies (Not Applicable)


SG 03. Norms used to develop policies (Not Applicable)


SG 04. Policy offerings to clients

04.1. Indicate whether you offer any of the following policies to clients.

Off the shelf
Tailored
Asset class-specific RI guidelines
Sector-specific RI guidelines
Screening/exclusions policy
Engagement policy
(Proxy) voting policy
RI guidelines set out within the Investment Policy Statement (IPS)
RI guidelines set out in a freestanding RI policy
Multi-year RI implementation project plan
Conflict of interest management policy
Stockbroker allocation policy
Securities lending policy
Other, please specify (1)
Other, please specify (2)
Other, please specify (3)
None of the above

04.2. Provide a brief description of the key elements, any variations, or exceptions applying to these policies.

We advise institutional investors in designing and/or revising their RI policy. While doing so, client's motivation and interest is of utmost importance, however we guide them to include the most impactful and relevant aspects for their investment beliefs and investment policy, based on international standards on ESG factors, to be included in the RI policy. All offerings are tailormade and a description of key elements cannot be made. 


SG 05. ESG/RI in business offerings

05.1. Describe how you include ESG/RI factors as an integral part of your business offerings.

Business area

Advisory and Consultancy

How you include ESG/RI factors

Profundo works for pension funds, asset managers, charity funds, wealth management, and other institutional investors that have the ambition to become a responsible and sustainable investor. With more than 25 years of experience, a strong reputation, and acknowledgement of many leaders in sustainability, Profundo differentiates itself from other service providers through its objective approach and in-depth knowledge of societal problems and concerns of NGOs. Profundo tailors its offerings to clients’ specific requirements. We offer several advisory services:  

  1. Responsible Investment (RI) policy evaluation and advice
  2. Development and evaluation of RI strategy
  3. Portfolio ESG analysis and risk assessment
  4. Impact investing advice
  5. Training and workshops

Our services mentioned above include responsible investment as our core belief and the offerings include designing strategy and approach to deal with wide range of ESG issues that are present in our clients’/ investors’ portfolio. 

Research and Data Provision

How you include ESG/RI factors

Profundo conducts research on various sustainability issues such as water scarcity, waste management, climate change, tax evasion, biodiversity, human rights encompassing a wide range of sectors/companies such as mining, oil and gas, weapons, tobacco, pharmaceuticals, and chemicals. Therefore, we believe that ESG underlines all our research offerings and responsible investments are our expectation from the society at large.    

The most common formats of our research include:

  • A company's CSR profile 

In a CSR profile of a company, we describe its organisational structure, subsidiaries, products and markets. We analyse its CSR policy and gather information on possible controversial activities and products. We expand a CSR profile with an analysis of the financiers of the company, the subsidies received and the taxes the company pays.

  • Analysis of a chain or industry

In a study of a commodity chain or an industry (such as the biofuel industry, the electricity sector or the arms industry), we analyse who the major and influential players are. We examine trading and investment relationships, map controversial activities, and analyse the role banks and other financial institutions have.

We seek opportunities to improve the contribution of commodity chains and industries to a sustainable development of producing countries, and to reduce the damage done to people and environment. We advise NGOs about strategic options to address businesses, financiers and governments on their responsibilities.

  • Financial analysis of companies or projects

For a specific company or project (a dam, paper plant or coal-fired power station), we research in what way financial institutions - such as banks, pension funds, insurers, asset managers, development banks and export credit agencies - are involved in its financing. We map all investment schemes - loans, credits, guarantees, shares, bonds, etc. - in order to determine where opportunities arise for influencing. Additionally, we advise NGOs how to point these financiers to their responsibilities.

  • Ranking investors in an industry

We research in what way financial institutions - such as banks, pension funds, insurers, asset managers, development banks and export credit agencies - are involved in financing controversial industries (such as the palm oil sector, coal mining industry or cluster munition manufacturers). Also, we can research the financing of companies that conduct business with an oppressive regime.

Research can be aimed at financial institutions from a specific country or at the largest investors worldwide. We map all investment and financing schemes, or only their controversial financial products and investment schemes (commodity investments, derivatives, etc.). This research will result in a ranking of financial institutions.

  • Social cost-benefit analysis

We make a social cost-benefit analysis of policy intentions, proposed investment projects, or complete economic sectors, in which the economic benefits are weighed against the external costs for people, environment and society.

  • Assessment of responsible investment and financing policies

We compare responsible investment and financing policies of financial institutions with international standards, conventions and guidelines, on many sustainability issues (from climate to labour rights, from biodiversity to corruption). In this analysis, we also include tools that financial institutions use to implement their policies (voting, engagement, covenants in loan contracts, exclusion lists, etc.). Thus, we analyse what actions financial institutions take to support sustainable economic development. This kind of analysis can result in a ranking of financial institutions, but also offers strategic starting points for NGOs to confront financiers with the promises they made in their policies.

 


SG 06. Outsourcing of services (Private)


SG 06.2. Outsourcing of services (Not Applicable)


SG 07. Providing training/education

07.1. Indicate whether you provide training/educational services on ESG/RI. Tick all that apply.

07.2. Describe the main components of your training/educational services on ESG/RI and any variations depending on the group you provide training/education to.

For the development of RI policy for any institutional investor, we organize workshops and provide training to the management and the board, employees and other stakeholders, to orient them towards RI. These sessions also help us design the RI policy in-line with stakeholders' expectations.

Further, communication with stakeholders is essential in fulfilling an institutional investor’s ambitions to be transparent and accountable. A good understanding of the responsible investment policy helps employees to apply it in their daily work. For the employees of investors, as well as for external managers and advisors, and for participants and other stakeholders, we organize workshops or training sessions on all issues that have been included in the responsible investment policy. We make clear which problems are addressed, which ESG criteria have been adopted, and how they can be applied in practice. Profundo also supports its clients in the organization of a seminar or conference, by developing the program, writing the background paper, selecting relevant speakers and managing the seminar itself.


SG 08. Level of involvement in collaborative organizations and/or initiatives

08.1. Select the collaborative organisation and/or initiatives of which your organisation is a member, or in which it participated during the reporting year and the role you played.

Collaborative Organisation/Initiative

Provide a brief commentary on the level of your organisation’s involvement in the initiative [OPTIONAL]

          
        
          Member of the Dutch Vereniging van Beleggers voor Duurzame Ontwikkeling (VBDO, Foundation of Investors for Sustainable Development).
        

Provide a brief commentary on the level of your organisation’s involvement in the initiative [OPTIONAL]

          
        
          Member of Dutch network of organisations interested in Corporate Social Responsibility (CSR): MVO Nederland.
        

Provide a brief commentary on the level of your organisation’s involvement in the initiative [OPTIONAL]

          
        

08.2. Additional information. [OPTIONAL]


SG 09. Applying, advancing and promoting the PRI principles

09.1. Describe how your organisation applies, advances and promotes the PRI Principles.

We are signatories of PRI. We apply the PRI principles, amongst others, while designing RI policy for our clients. While advising our clients, we refer to PRI to stress the importance and relevance of responsible investing. To further expand our offerings or to widen our institutional investors client base, we often read PRI publications. We try to attend the PRI meetings as we find it a great opportunity to network.

09.2. Highlight whether there are any ways that your organisation would like to engage further with the PRI. [OPTIONAL]

We would like to become more active in the PRI Collaboration Platform and start or support engagement programs and in the PRI Academic Network to cooperate with researchers on studies.


SG 10. Actions taken to promote responsible investment

10.1. Indicate which of the following actions your organisation has taken to promote responsible investments, independently of collaborative initiatives.

10.2. Additional information. [OPTIONAL]


SG 11. Long term trends

11.1. Indicate which of the following long-term trends are addressed in your product outputs.

11.2. Explain how this long term trend affects your product outputs.

Climate change risk research has been one of the most common topics of our research in the past years.

11.2. Explain how this long term trend affects your product outputs.

Resource scarcity can be the occasion and motivation for doing research with questions such as: how to avoid the resources become scarce? What are the implications for nature and local communities when the search for specific resources is more complex, risky and expensive? This trend leads to concept of circular economy.

          Trends, market players, ESG risks and value chain analysis of commodities with increasing demand (i.e. soy, palm oil, sugar and livestock).
        

11.2. Explain how this long term trend affects your product outputs.

Commodities such as soy, palm oil, sugar, cocoa, has been the focus of our research for various clients. These clients have major concerns about the implications of rising demand for these commodities, also considering the negative impact of current production.

          Land rights conflicts and pressure on biodiversity and human rights
        

11.2. Explain how this long term trend affects your product outputs.

Increasing pressure on available agricultural land, due to rising global population and demand for biofuels, leads to conflicts with local communities and deforestation and environmental degradation. 


SG 12. Business certifications/accreditations (Private)


SG 13. Interaction with asset owners

13.1. Indicate whether you interact with asset owner clients.

13.2. Indicate the typical frequency and type of interactions with your asset owner clients.

Type of interaction

Frequency

Frequency

13.3. Tick boxes across level of employment of investor contact (C-level, PM etc.) and subject areas typically addressed with the contact(s).

Level of employment

Subject area(s)

          We discuss aspects of a responsible investment policy under consideration.
        

Subject area(s)

          We discuss aspects of a responsible investment policy under consideration.
        

Subject area(s)

          We discuss aspects of a responsible investment policy under consideration.
        

Subject area(s)

          We discuss aspects of a responsible investment policy under consideration.
        

SG 14. Aligning approach with investor goals

14.1. Describe how you align your organisation’s philosophy on and approach to ESG/RI with investor goals.

          As an organization, we believe that investors have a tremendous responsibility to invest their money in right companies/investment products that do not conflict with and preferably contribute to sustainable development. To promote responsible investment (RI), we advise institutional investors to formulate an advanced RI policy which covers all the topics such as climate change, biodiversity, deforestation, human rights, labor standards, weapons, animal welfare etc. To us, the more in-depth the policy is, the better will be the investment decisions and strategies to apply the policies.
        

14.2. Additional information. [OPTIONAL]

We do not have many institutional investor clients, but this area is aspirational and we would like to grow this business segment more in the near future.


SG 15. ESG recommendations not aligned with investor goals

15.1. Describe what steps you take, if any, when your ESG recommendations are not in line with investor goals.

          We try to convince the investor as ultimately, it is the investor's decision. However, by quoting relevant best practices, highlighting the risks involved in a particular aspect we try and show them the risks involved.
        

15.2. Additional information. [OPTIONAL]


SG 16. Seeking feedback from clients

16.1. Indicate whether you seek feedback from clients on your RI/ESG services and product offerings

16.2. Describe how you use this feedback on your RI/ESG services and product offerings.

We have formulated a standard process of taking feedback from our clients and sharing it internally for learning purposes. Feedback process is a part of our overall project life cycle. We have designed a template that is shared with our clients after the completion of each project that we do. The feedback provided by the client is then shared with the project manager, team members, and other stakeholders to understand the areas that need improvement in our deliverables. By regularly following this practice we continuously endeavour to learn and enrich our research and advisory services.


SG 17. Managing conflicts of interest

17.1. Indicate whether your organisation has a policy for managing potential conflicts of interest.

17.2. Describe how you manage potential conflicts of interest.

We provide assessments of investment and finance policies of a number of financial institutions (on behalf of our NGO clients) and also advise financial institutions on how to improve their investment and finance policies (making it more sustainable and integrating ESG indicators). If the financial institutions rated in the one research are also asking us for advice on their policy we could have a conflict of interest. Therefore, we will not advice financial institutions on improving their policy. But we do think we could offer them other services, such as writing thematic reports or analysing ESG risks of particular companies that can form a part of their investment decision process.

17.3. Describe how you ensure that company employees do not derive any personal gain from the use of information collected during your work process.

We have an Anti-Corruption and Fraud Policy in place that describes expected behaviour from all our employees. Our people are committed to perform their work with the utmost level of integrity.


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