|
Responsible engagement overlay (reo®)
As of 2009 Nedlloyd Pension fund has appointed F&C Netherlands as its SRI manager. F&C uses its reo® solution to implement Nedlloyd Pension fund’s SRI strategy.
Dialogue with companies The reo® solution proposed by F&C consists of engagement and active voting at shareholder meetings. reo® acts as a framework (or overlay) and is not a screening service. It therefore does not limit portfolio construction or investment selection.
Through reo®, F&C encourages companies to actively manage a broad range of ESG issues that could impact the long-term sustainability of the company and investment performance. By means of reo®, companies are encouraged to enhance risk management, operating performance, accountability and transparency. Attention is paid to environmental, social and corporate governance issues that could impact company performance. This approach differs in two important ways from traditional sustainable investment:
- The method of reo® is cooperation. Instead of avoiding certain investments, F&C works with companies to solve complex issues.
- The emphasis of reo® is on questions of sustainability which have an actual effect on shareholder value in the near, medium or long term.
The objective of reo® is to encourage companies to actively manage sustainability issues in the interests of long term value to investors. All companies are contacted at least annually and encouraged to actively manage any ESG issues that could impact performance. Companies facing the greatest combination of risks and opportunities will be the subject of more prolonged detailed engagement. As a prominent institutional investor, F&C is pre-eminently placed to exercise considerable influence in this area.
Cooperation and government policy
Working directly with investee companies is of central importance. Much of F&C’s work consists of one-to-one meetings with these companies. However, participation in industry working groups, trade associations and collective initiatives can help raise standards and improve practices across a group of companies without compromising competitiveness. Therefore, F&C works closely through a number of collaborative initiatives to tackle systemic challenges. Often these collaborations involve joining forces with other investors, enabling resources to be pooled and the approach coordinated. Finally, participation in the development of government policies is another important feature of the reo® solution. There are always companies that voluntarily take action on important issues such as climate change, corruption or employment conditions. Despite this, changes are often only realised when laws and regulations ensure a level playing field. As an investor, F&C can play a role in informing governments and supervisory authorities which policies will improve practices, while offering long-term benefit to both society and investors.
Voting policy
On behalf of the Nedlloyd Pensionfund the asset manager observes a policy of considered voting. Consequently, account is taken of specific market and company information, as well as internationally accepted standards for sound corporate governance. In this context a principled but pragmatic attitude is important: if a company deviates from what is considered ‘good practice’, it should provide a clear explanation for why this deviation is appropriate, and this explanation will be given careful consideration. We do not apply a simple ‘tick the box’ approach.
|
|
English Summary 