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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 31.12.2019, we had engaged with companies on the following topics:

TopicNumber of dialogues

Climate change/greenhouse gas emissions

24

Water

11

Other environmental issues

31

Human rights, child labour and labour rights, local communities/indigenous rights

73

Other social issues

19

Board structure and independence

11

Remuneration

5

Other governance issues

9

Total

209

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 2020, we expect that we will vote for further shareholder resolutions on ESG issues.

In 2019, we voted at 143 general meetings in Norway and 73 internationally. Of these, we voted against management’s recommendations for 36 Norwegian companies and 27 global companies.

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 2019

Goals for 2020

Achievements in 2019

  • Engaged with companies on human rights, labour rights and children’s rights. We had 72 dialogues with companies on human rights related issues in 2019.
  • Developed and published an expectations document on gender equality and diversity.
  • Updated and published an expectations document on human rights.

Goals for 2020

  • Continue engagement with companies on human rights. Specifically on children’s rights in supply chains.
  • Focus on human rights in high-risk countries.

Achievements in 2019

  • Continued proactive dialogue with Norwegian companies on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) together with Norwegian investors.
  • Assessed portfolios using Carbon Delta’s scenario analysis tool.
  • Had 24 company dialogues on climate change related issues.
  • Developed a systematic approach to voting on topics related to climate change at company general meetings and voted.
  • Received LuxFlag Environmental Label for DNB Renewable Energy (valid 01.01.2020-31.12.2020).
  • DNB Renewable Energy received the FNG label with three stars for the second year in a row.
  • Reported to the PRI on climate change questions for the first time.
  • Published portfolio carbon footprints for fixed income for the first time (in addition to equity carbon footprints).

Goals for 2020

  • Continue proactive TCFD dialogues with Norwegian companies (suggest focusing on Nordic banks in phase three of the project).
  • Continued developed of TCFD reporting and scenario analysis.
  • Finalise the avoided emissions project.
  • Join phase four of the sustainable proteins engagement with FAIRR.

Achievements in 2019

  • Updated expectations document on serious environmental harm.
  • Engaged in the Mining and Tailings Safety Investor Initiative.
  • Engaged in the Meat Sourcing engagement through FAIRR/Ceres.
  • Continued engagement with companies on water directly with companies and in collaboration with other investors. We had 11 dialogues with companies on water-related issues in 2019.

Goals for 2020

  • Finalise our expectations document on water.
  • Continue engagement with companies on water.
  • Co-lead on Gerdau through the Mining and Tailings Safety Investor Initiative.
  • Join phase two of the meat sourcing engagement through FAIRR/Ceres.

Our thematic engagement

In 2020, our engagement strategy prioritises the following shorter-term thematic engagements.

Achievements in 2019

Goals for 2020

Achievements in 2019

  • Continued working through PRI working groups on deforestation (palm oil, soy and cattle).
  • The palm oil engagement now focuses on all elements of the value chain, including buyers, processors, growers and lenders (banks).
  • PRI are yet to initiate the working group on timber, so we have not been able to start this work yet.

Goals for 2020

  • Join PRI working group on palm oil in Fast Moving Consumer Goods companies.
  • Continue engaging with companies on sustainable palm oil, soy and cattle.
  • Join phase two of the meat sourcing engagement through FAIRR/Ceres.
  • Join phase four of the sustainable proteins engagement with FAIRR.

Achievements in 2019

  • Developed and published an expectations document on gender equality and diversity.
  • Developed a systematic approach to voting on topics related to gender equality and diversity at company general meetings.
  • Tailored proxy voting guidelines with ISS in line with own voting guidelines.
  • Have engaged with companies on this topic.
  • Signed an investor letter promoting the Women’s Empowerment Principles, which was sent to global companies.
  • Developed a systematic approach for identifying target companies for engagement, and have created a framework for engagement.

Goals for 2020

  • Simplify engagement framework for dialogues with companies.
  • Active ownership engagement on this topic.

Achievements in 2019

  • Defined data privacy and security, cannabis, healthcare and gambling as relevant sub-topics under this theme.
  • Had a proactive engagement focusing on tech companies on this topic of data privacy and security.
  • Developed an approach to engaging with companies on the unethical marketing of formula milk.

Goals for 2020

  • Continue using a systematic approach for engaging with companies on this topic.
  • Engagement on unethical marketing of formula milk will begin, in collaboration with other Norwegian institutions.

Achievements in 2019

  • Reassessed the relevance of including risks and opportunities associated with oceans under the scope of an expectations document on water and determined that a separate expectations document on oceans is most appropriate.
  • Had proactive engagements with aquaculture companies in Norway covering several topics; including protein sources in feed (linked to deforestation and land-use) and climate change (Task Force on Climate-related Financial Disclosures).

Goals for 2020

  • Develop expectations document on oceans.
  • Determine systematic approach for engaging with companies on this topic.

Achievements in 2019

  • Continued working through PRI working groups on palm oil, soy and cattle.
  • Continued engagement with companies on supply chain topics such as living wages and child labour.
  • Engagements on product safety and quality, deforestation and land-use and human rights that overlap with this theme.

Goals for 2020

  • Join PRI working group on palm oil in Fast Moving Consumer Goods companies.
  • Continue engaging with companies on sustainable palm oil, soy and cattle.
  • Continue engaging with companies on the topic of living wages in the apparel sector.
  • Consider engaging on new sub-topics within this theme, such as ESG issues in regards to responsible sourcing and modern slavery.

Achievements in 2019

  • New thematic focus area introduced in 2020.

Goals for 2020

  • Develop and use framework for systematically engaging with companies on biodiversity.
  • Begin engaging with companies exposed as operating in UNESCO World Heritage Sites.

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.