Socially Responsible Investing Engagement Report 2017

Triggering sustainability improvement

A key element in our SRI strategy is active engagement and dialogue with the companies we may invest in to create lasting positive change. Where appropriate, we seek to discuss substantial and relevant issues about ESG performance, aiming to improve the business performance of companies to contribute to a more sustainable world.

In this SRI Report, you can read about how we identify the most sustainable companies, and how we contribute to further improving the sustainability performance of companies.

Socially Responsible Investing is too complex to be captured in a few metrics. For that reason, we present our 2017 activities in the context of numbers, stories, and activities, which highlight our approach.

Engagement highlights

In 2017, we assessed 49 new companies, of which 22% were selected for possible investment.
On concrete questions we asked companies, we had a response rate of 88%.
276 number of companies in our portfolio
276 is the number of companies selected for possible investment in 2017.  
270 occasions had a dialogue
We had dialogue with a total of 176 companies on 270 occasions.

 

 

 

Key achievements

Engagement with companies is one of the cornerstones of our SRI strategy and therefore an integral part of being a responsible shareholder. Through dialogue with the companies we invest in, we aim to maximise their positive impact. We believe this dialogue can strengthen a company’s insight into the issues that are important to shareholders and help to create long-term value.

Sustainability performance

Triodos IM uses a diverse range of indicators to assess the sustainability performance of listed companies. This allows the funds to determine how sustainable a company is compared to its peers.

The table shows the sustainability scores of the portfolios of Triodos’ two SRI funds - Triodos Sustainable Bond Fund and Triodos Sustainable Equity Fund - in comparison with the sustainability scores of their respective indices.

Average Indication
Scores  (0 - 100)

Bond
portfolio


iBoxx%
EUR non -sovereign index

Difference

Equity
portfolio

MSCI
World Index

Difference

Enviroment7464+106857+11
Social7467+76358+5
Governance7064+66560+5

 

The scores are based on Sustainalytics ratings, using customised weight settings. For bonds, the sustainability scores relate to the non-sovereign constituents of the Triodos Sustainable Bond Fund portfolio and the index.

Ratings are available for all but one of the companies and institutions in the Triodos Sustainable Bond Fund portfolio. Around 79% of the constituents are covered in the rating for the index. Sovereign bonds are not included in the above scores.

The Triodos Sustainable Equity Fund portfolio consists of companies that offer sustainable products or services as well as companies that offer the highest degree of sustainability within their sector. The sustainability score of the Triodos Sustainable Equity Fund portfolio represents 97% of the invested assets in the portfolio. The companies for which no sustainability rating is available are classified as companies with sustainable products or services. The table shows the scores as per 31 December 2017.

Top 5 engagement topics 2017

as % of the total engagements compared to 2016

Top 5 topics

Proxy voting 2017

As a shareholder, Triodos IM votes at the annual general shareholders’ meetings (AGM) of the companies we invest in.

100
In 2017, we voted at 100 shareholder meetings, deviating from PIRC’s standard voting recommendations in 7% of all agenda items. We voted in line with company management on 60% of agenda items, slightly up from 59% in 2016.
proxy voting
We voted in line with company management on 60% of all 1,375 agenda items, the same as in 2016. We voted against management on 35% of all agenda items, up from 33% in 2016. We abstained on 6% of all agenda items, down from 8% in 2016.

We obtain voting advice from Pensions & Investments Research Consultants (PIRC) Services but apply our own voting guidelines to the PIRC advice and review each recommendation before voting.

AGM focus on diversity

Our 2017 AGM focus topic was diversity. In December 2016, we sent a letter to 104 portfolio companies, announcing that for the AGMs in 2017 the fund would focus on diversity. We called upon them to publicly disclose their policies, programmes and targets for promoting diversity within the organisation, to develop targets for board diversity and to publicly disclose evaluations of this policy and the actual achievements.

17 companies responded, and only four of those set targets: Novo Nordisk, Canadian National Railway, Inditex, and Smith & Nephew. Board diversity remains on our engagement agenda.

 

Minimum standards

Triodos Investment Management does not fund any business engaged in activities that are harmful to individuals, society or the environment.

Companies selected for their sustainable activities or their sustaina­bility performance must also meet these pre-determined and well-documented standards to qualify for investment. We may make an exception if a company commits itself to meeting the criteria in the near future.

The views on sustainable corporate behaviour evolve over time with increasing knowledge and insight, our criteria continuously evolve as well. We regularly update our criteria to ensure that they reflect the latest views on sustainability within Triodos IM and in society in general.

In 2017, the fund reconsidered its position on several minimum standards:

Outlook 2018

In 2018, we will enhance our engagement and voting practises. And we will continue our work on minimum standards to make sure they take into consideration latest developments and best practices in relevant industries.

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