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Active Ownership and ESG-integration

Active ownership

Active ownership, through company engagements and voting, is undertaken to ensure that our investment universe is in compliance with DNB’s Standard for Responsible Investments and to encourage companies’ development in a positive direction. Another way to influence companies in a positive manner, is by voting at general meetings.

Active ownership

Our company dialogue

Company dialogues may be undertaken to discuss specific ESG incidents (reactive), or to improve companies’ general performance with regards to ESG risks and opportunities (proactive).

As at 30.06.2019, we had engaged with companies on the following topics:

TopicNumber of dialogues

Climate change/greenhouse gas emissions

7

Water

10

Other environmental issues

13

Human rights, child labour and labour rights

18

Local communities/indigenous rights

10

Other social issues

16

Corruption

12

Board structure and independence

4

Remuneration

4

Other governance issues

8

Total

102

See more detail of examples of company dialogues in our annual and quarterly reporting.

Voting

Our voting guidelines state that we shall vote at all Norwegian general meetings for listed companies we have ownership in, and we have adopted a systematic approach to determining which global companies’ meetings we will vote at:

  • Companies where we have a significant position
  • The largest holdings in each active portfolio
  • Strategically important items, and ESG-related topics

Voting will primarily happy by proxy, but we will physically attend shareholder meetings in certain cases. Our proxy voting service provider, ISS, facilitates the voting process by providing both standard voting analyses, and analyses based on our own voting guidelines. These resources are used to inform our voting decision between the RI team and our PMs. Reoccurring themes include remuneration, issuance of shares, Board structure, double roles (between the Board, management and Nomination Committee) and capital structure (including authorisations). We are also increasingly seeing credible shareholder proposals related to ESG themes, specifically in regards to climate-related disclosure. Other ESG topics include reporting on political lobbying, gender pay disparity and responsible tax practices. In 2019, we expect that we will vote for further shareholder resolutions on ESG issues.

In 2018, we voted at 139 general meetings in Norway and 31 internationally. Of these, we voted against management’s recommendations for 34 Norwegian companies and eight global companies.

As at the 1st of August 2019, we had voted at 116 general meetings in Norway and 63 general meetings internationally.

Our long-term focus areas

To help guide our work and to inform the active ownership processes, we define long-term and shorter-term, thematic focus areas.

Our three long-term focus areas have been identified as areas of concern within responsible investments in the coming years and are inherently connected to various other key ESG challenges.

Achievements in 2018

Goals for 2019

Achievements in 2018

  • Continued engagement with companies on human rights, labour rights and children’s rights directly with companies and in collaboration with other investors

Goals for 2019

  • Write and publish expectations document on gender equality & diversity (will overlap with the human rights theme)
  • Continue engagement with companies on human rights, labour rights and children’s rights directly with companies and in collaboration with other investors

Achievements in 2018

  • Wrote and published an expectations document on climate change
  • Continued engagement with companies on climate change directly with companies an in collaboration with other investors
  • Joined the UN Environment Programme Finance Initiative’s (UNEP FI) Task Force on Climate-related Financial Disclosures (TCFD) Investor Pilot Project, which developed a methodology and tool for portfolio scenario analysis
  • Joined a TCFD working group together with Norwegian investors targeting Norwegian companies within sectors that are highly exposed to climate-related risks and opportunities
  • DNB Renewable Energy received the FNG label with three stars

Goals for 2019

  • Continue TCFD work through UNEP FI TCFD investor pilot project and through TCFD working group with Norwegian investors
  • Continue engagement with companies on climate change directly with companies and in collaboration with other investors
  • Continue to enhance climate change strategy

Achievements in 2018

  • Continued engagement with companies on water directly with companies and in collaboration with other investors

Goals for 2019

  • Write and publish an expectations document on water
  • Continue engagement with companies on water directly with companies and in collaboration with other investors

Our thematic engagement

In 2019, our engagement strategy prioritises the following shorter-term thematic engagements.

Achievements in 2018

Goals for 2019

Achievements in 2018

  • Joined additional UNPRI working groups on deforestation and land-use (soy and cattle)
  • Continued engagement with companies on deforestation and land-use directly or in collaboration with other investors

Goals for 2019

  • Consider joining an additional UNPRI working group related to deforestation and land-use
  • Continue engaging with companies on sustainable palm oil, soy and cattle through UNPRI working groups
  • Continue engagement with companies on deforestation and land-use directly or in collaboration with other investors

Achievements in 2018

  • Joined additional UNPRI working groups on deforestation and land-use (soy and cattle)
  • Continued engagement with companies on deforestation and land-use directly or in collaboration with other investors

Goals for 2019

  • Consider joining an additional UNPRI working group related to deforestation and land-use
  • Continue engaging with companies on sustainable palm oil, soy and cattle through UNPRI working groups
  • Continue engagement with companies on emerging markets supply chains directly or in collaboration with other investors

Achievements in 2018

Not relevant - new focus area in 2019

Goals for 2019

  • Write and publish expectations document on water (this will overlap with the oceans theme)
  • Determine systematic approach for engaging with companies on this topic (both directly and in collaboration with other investors)

Achievements in 2018

Not relevant - new focus area in 2019

Goals for 2019

  • Write and publish expectations document on gender equality and diversity
  • Write and publish voting guidelines for global companies, including expectations specifically related to gender equality and diversity
  • Update tailored proxy voting guidelines with ISS to include gender equality and diversity aspects
  • Determine systematic approach for engaging with companies on this topic (both directly and in collaboration with other investors)

Achievements in 2018

Not relevant - new focus area in 2019

Goals for 2019

  • Systematically engage with companies on this topic (both directly and in collaboration with other investors)

ESG-integration

We have close dialogue with our portfolio managers on ESG risks and opportunities.

Based on our screening and in-house research, we highlight potential ESG risks and opportunities to the portfolio managers in addition to alerts on controversial issues. Furthermore, we also provide inputs and recommendations about divesting or investing in securities.

ESG and CO2 data is incorporated into our portfolio management system and is available to all of our investment professionals. Our portfolio managers use this data in their company risk assessments, financial modelling, and investment decision making. We have also developed a system for capturing changes in companies’ ESG scores and potential or realised breaches in international norms and standards. This information is sent to portfolio managers on a regular basis. Through this information, we aim to identify warning signals of potential larger incidents. This data may trigger further investigation and discussion with the RI team regarding potential risks and opportunities and the financial effect from this. These discussions may trigger actions such as further investigation, engagement in dialogue with the company, or impact on the investment decision.

The process for ESG integration is constantly evolving, and we aim to further develop the systematic financial modelling utilising material ESG factors.