If large multinational companies begin to move in a more sustainable direction, even if it only is a small step, the wider impact will be significant. That is why Triodos Research actively engages with companies on issues regarding social, environmental and corporate governance performance, in order to increase awareness, motivate change and ensure long-term shareholder value. The recently published SRI Engagement Report presents an overview of Triodos Research’ engagement activities in 2016.
“Company engagement has always been a key element of our Socially Responsible Investment strategy”, explains Rosl Veltmeijer. “Through active dialogue we aim to motivate change and improve companies’ social, environmental and governance (ESG) performance. Three of the main topics last year were arms, climate change and animal testing.
Strict screening on involvement in the arms industry
A number of years ago Triodos Bank decided to apply zero-tolerance to financial institutions that have financial interests in companies that are involved in anti-personnel mines and cluster bombs. “In 2016 we added nuclear weapons to that list,” says Veltmeijer. “Research by Triodos Research brought to light that various financial institutions in which we invest do indeed have interests in companies that are active in the nuclear weapons industry. During the past year we discussed our conclusions with those institutions and we have given them until January 2019 to withdraw from this sector. We give them time to achieve this, but if they do not make enough progress we sell our shares. Through this approach we encourage companies to take the right steps,” explains Veltmeijer. “That is the essence of our investment view: subject companies to a rigorous screening process and maintain a dialogue with the selected companies in order to get them to move in the right direction."
Active climate policy
Achieving the goals that were agreed during the 2015 Paris Climate Conference depends for a large part on the efforts undertaken by the corporate sector. Veltmeijer: “This is why at the beginning of 2016 we contacted the 137 companies in which we held shares in order to ask them what they were planning to do to reduce their carbon footprint. We subsequently entered into a dialogue about our comments and recommendations with around 20 companies.
Veltmeijer: “We assess, for instance, whether companies are changing over from fossil fuels to sustainable energy quickly enough. We also want companies to abstain from lobbying against the implementation of stricter European climate guidelines. In addition, we find it important that companies are open and transparent about their own climate goals and their progress in this respect. Each year, the Carbon Disclosure Project, an international NGO, prepares an overview of the carbon emissions by companies. In order to be included in this overview, companies must supply their own data. We expect the companies that we invest in to do so.”
No animal testing
The Triodos funds also do not invest in companies that use animal tests when developing products for personal grooming or household use, except when such tests are legally required. Veltmeijer: “We make an exception for companies that develop pharmaceuticals. For these companies animal testing is often unavoidable and moreover often mandatory. But for this sector, too, we require companies to have a clear policy aimed at minimising the number of animal tests. It is also important to us that they are open about the tests that they carry out.”
Engaging for change
Engagement with companies is one of the cornerstones of our SRI strategy. Through dialogue with the companies we invest in, we aim to maximise the positive impact of our investee companies on society. We view engagement as an integral part of being a responsible shareholder. We raise awareness of sustainability issues by engaging with companies throughout the initial research process and subsequent dialogues, and by providing them with a written analysis of the sustainability performance of their operations. This dialogue strengthens a company’s insight into those issues that are important to shareholders and we believe it can add to a company’s ability for long-term value creation.