Download Investor Award on Climate-Related Disclosures

International Award on Investor Climate-Related
Disclosures
Content
Company profile and mission ................................................................. 3
Climate, Water, and Land .................................................................... 3
The basis ........................................................................................ 4
Proactive approach ............................................................................ 7
Active Ownership Activities ................................................................. 14
Reducing CO2 emissions ...................................................................... 21
Communication ................................................................................ 27
Future........................................................................................... 32
Appendix ....................................................................................... 33
Methodology: Measuring our Carbon Footprint ........................................... 33
Green Bond Policy ............................................................................ 41
Company profile and mission
ACTIAM is a Dutch responsible fund and asset manager, located in Utrecht, the Netherlands, with
€55.9 billion in assets under management (30 June 2016). Responsible asset management is imbedded
in our DNA and we continue to invest to maintain that leadership. Our mission is to assist our clients
in achieving their investment goals by providing them sustainable performance, service, and advice.
ACTIAM provides fund management services to both retail and institutional investors and asset
management services to institutional investors. All assets under management (equities, fixed-income
securities, property, and cash resources) are invested in line with ACTIAM’s Fundamental Investment
Principles. We do so by following a rigorous selection process without giving up financial returns;
investments should not violate international standards and conventions, and ACTIAM’s own principles.
Achieving behavioural change of entities is central in ACTIAM’s approach. On behalf of its clients,
ACTIAM uses its position as a partial owner of or lender to an entity to stimulate that behavioural
change. In addition to providing financial returns, we want to help address the key challenges facing
society today.
Climate, Water, and
Land
In the coming decades,
world
population and
welfare are expected to
grow considerably, putting
increasing pressure on
earth and its resources.
Based on these trends and
the materiality for our
investments,
ACTIAM
chose three focus themes
for
its
responsible
investment
activities:
climate, water and land.
These three topics are
crucial for our vision: a
liveable world, where people can live in good health, with sufficient income and proper housing. This
is aligned with our strategy “From Insight to Impact”: by making our portfolio and the impact of
investments transparent, we can aim to make a positive impact. Our goal is to contribute to the
United Nation’s Sustainable Development Goals.
As a signatory of the Paris Pledge for Action, ACTIAM wants to contribute to meet the ambitions as
set out by the Paris Agreement: limit global warming to 2°C above pre-industrial levels and pursue
efforts to limit the increase to 1.5°C. The IPCC calculated that a reduction in carbon emissions of 4070% is necessary in 2050 (compared to 2010 levels) in order to achieve the “2-degree scenario” with
high probability1. In line with this scenario, it is ACTIAM’s objective to reduce the carbon footprint of
all investments by at least 25% in 2025 and at least 40% in 2040 and to review the ambition of these
targets on a regular basis. We apply all our tools (e.g. active ownership, ESG-integration, exclusion,
etc.) to achieve this goal. For example, as part of our energy transition policy, companies that obtain
15% of their revenue from coal or utilities with >50% coal in their energy mix are engaged and can
face exclusion if their strategy towards a low-carbon economy is insufficient or not credible. With
respect to ACTIAM’s own operations, our buildings, operations, and management are already carbon1
https://www.ipcc.ch/pdf/assessment-report/ar5/syr/SYR_AR5_FINAL_full_wcover.pdf
neutral after using carbon credits (see “onderReducing CO2 emissions” for more information) and
efforts are being undertaken to decrease the carbon footprint.
Through our investments and (on behalf of our clients) our influence as a partial owner of or lender
to an entity we are able to contribute to the transition to a low-carbon economy; to reach the goals
that we have set, and to limit the carbon-related risks in our portfolio. As an institutional investor,
there are several tools that we can use for this cause. The underlying principles are to reward
frontrunners, and “the polluter pays”. The various tools contribute to our goal in different ways,
which will be addressed below.
Since signing the Paris Pledge for Action, ACTIAM has taken several steps in order to meet its indicative
targets of reducing its carbon footprint by at least 25% by 2025:







The Paris Agreement was added to our Fundamental Investment Principles;
the energy transition and green bonds policies were updated;
climate change was made one of ACTIAM’s three focus themes;
targets for carbon reduction were formulated;
ACTIAM joined PCAF (Platform Carbon Accounting Financials);
ESG-integration guidelines were updated by including assessments of ‘worst offenders’ and
positive selection (explained later);
and carbon data into the ESG-score on a sector level, thus underweighting carbon intensive
sectors.
The basis

Fundamental Investment Principles
The Fundamental Investment Principles (FIP) for companies and sovereigns form the basis of
ACTIAM’s responsible investment practices: they outline ACTIAM's criteria for responsive
engagement2 and exclusion. These principles are derived from international treaties,
conventions and best practices, such as the UN Global Compact, and relate to a variety of
important themes: human rights, fundamental labour rights, corruption, the environment,
weapons, and customer and product integrity. ACTIAM does want to be involved in activities
that cause serious environmental damage through pollution, biodiversity loss, or the depletion
of natural resources. Also related to the environment, ACTIAM added the Paris Agreement to
its Fundamental Investment Principles, forming a basis for responsive engagement with or
exclusion of companies that are insufficiently working towards a low-carbon economy. This
measure has already been taken for several companies. An up to date overview of companies
excluded by ACTIAM can be found here. However, ACTIAM prefers to enter into dialogue with
a company (engagement), focusing on behavioural change. The Fundamental Investment
Principles are applicable to all assets managed by ACTIAM itself.
For the remainder of the assets – those that are managed externally - ACTIAM developed a
'third parties framework'. ACTIAM expects its external asset managers to be a PRI (Principles
for Responsible Investment) signatory. Of all externally managed assets, about 2% is managed
by non-PRI signatories, as opposed to 5% in the previous year. These investments are managed
by alternative managers. They are older and illiquid investments; with any new investment
through external managers it is a prerequisite that the external manager is a PRI signatory.
2
ACTIAM distinguishes different types of engagement. Responsive engagement is conducted with companies
that violate our policies, proactive engagement is conducted with companies where we see a risk or
possibilities for improvement, with a focus on the climate, water and land themes, and collaborative
engagement is when we cooperative with other investors in achieving behavioural change.
If the external investment is structured as a segregated mandate, we enforce adherence to
our exclusion list. If the investment vehicle is a mutual fund, we are bound by the broader
investment guidelines set for the fund. We will still point out the importance of avoiding
investment in the names on our exclusion list, but enforcement in this case is not possible.
Moreover, we ask external managers to vote proxies and to engage on our behalf. For
segregated accounts, we vote the stocks in managers' portfolios ourselves (supported by a
service provider), in line with our ESG voting policy. On a regular basis, we evaluate the
outcome of the voting process and the current strategy and results of engagement activities.
ACTIAM created a questionnaire for external managers to measure the application of ESG
criteria in the investment process. This questionnaire is used for pre-assessment purposes.
The ESG score of this questionnaire makes up 1/6 of the total score that we assign to external
managers for their services. The ESG criteria covers (1) the availability and quality of ESG
policies (issues it must cover are human rights, labour rights, environment (including climate
change), anti-corruption, and controversial weapons), (2) the incorporation of ESG data in the
investment decision making process, (3) the application of exclusionary criteria and the
amount of overlap with the ACTIAM exclusion list (in case of pooled funds), (4) the execution
of active ownership by the manager, and (5) finally the level of transparency and reporting.
The ESG score of the questionnaire puts particular focus on the manager’s ESG integration in
their decision making process. We communicate openly about the criteria to our existing and
evaluated external managers and engage with them to improve their alignment with ACTIAM’s
vision. Our policy is to have a minimum of four contact moments every year with every
external manager in our portfolio, preferably at least two of which are face-to-face meetings.
In practice, the frequency of interaction typically exceeds the minimum requirement. ESG /
responsible investing and examples of good responsible investment practices by other
managers are topics at every monitoring meeting. Moreover, ESG characteristics of the
portfolio and the impact of ESG issues on financial performance is reviewed.
The scope of ACTIAM’s policies depends on the nature of the externally managed funds. In
case of segregated mandates, ACTIAM’s Fundamental Investment Principles and energy
transition policies, as well as other policies that lead to exclusion of companies, can be and
are applied. This is the case for two equity funds, a North American and Asian fund managed
by T-Rowe Price and Capital Group respectively. The green bonds policy does not apply as the
funds are equity funds. In case of mutual funds, as described above, we cannot enforce our
policies but we will communicate policy updates and exclusions to these managers.

Energy Transition Policy
The Energy Transition Policy builds on the Fundamental Investment Principles and sets out
criteria for responsive engagement or ultimately exclusion of companies in the energy sector.
ACTIAM conducts responsive
engagement with
Oil companies that are active in offshore Arctic oil drilling.
ACTIAM conducts responsive
engagement with
Utilities that have been involved in a number of nuclear
incidents with possible safety risks.
ACTIAM conducts responsive
engagement with
Oil and gas companies that refuse to give insight in the
social and environmental consequences of shale gas/oil or
the application of best available techniques.
ACTIAM conducts responsive
engagement with
Oil companies where more than 20% of production consists
of tar sands and there is a lack of (credible) strategies to
reduce this exposure.
ACTIAM conducts responsive
engagement with
Mining companies where 15% or more of their average
revenue in the past 3 years comes from thermal coal and
there is a lack of (credible) strategies to reduce this
exposure.
Utilities where 50% or more of the energy mix consists of
coal and there is a lack of (credible) strategies to reduce
this exposure.
ACTIAM conducts responsive
engagement with

Exclusions
ACTIAM can exclude entities from investment if they violate our principles and are unwilling
to change. We take great care in determining whether a company should be excluded from
our investment universe. Excluding companies with a high exposure to fossil fuels or high
carbon intensity can reduce the carbon footprint of our portfolio, however it would not change
the actual carbon emissions in the real economy. For this reason, we prefer to work towards
behavioural change of the entities in which we invest. Nevertheless, exclusion is a tool we
sometimes use, for example when companies do not want to collaborate and after repeated
pressure still do not take steps to reduce their impact on the climate.
As of September 2016, 87 companies were excluded from investment as a result of violating
ACTIAM’s Fundamental Investment Principles (broader than climate). Regarding the
environment and climate change, several companies have been excluded due to involvement
in mountaintop removal, Artic oil, and coal power generation. These companies include
Gazprom OAO, ArcelorMittal, DTE Energy and others. For a current overview of our exclusions,
please see: http://www.actiam.nl/en/sustainability/exclusions.
How this tool helps us achieve our goals: we see exclusion as a last resort as we would first
try to achieve behavioural change. Exclusion does not help us achieve our goal of decreasing
the amount of GHG that are emitted in the world, it is rather a tool to manage risks by limiting
our exposure to companies that are insufficiently willing to work towards a low-carbon
economy as set out by the Paris Agreement.
Proactive approach

ESG scores
Making optimal use of the existing bodies of knowledge of ESG and portfolio management
expertise, we are taking the integration one step further by consistently applying an ESG
scoring methodology to the investable entities (including sovereigns). This applies to specific
equity and fixed income funds 3. At present, the ESG score does not apply to externally
managed funds. ACTIAM is working on implementing ESG scores for these externally managed
funds.
The methodology for the ESG scores has been jointly developed by our ESG specialists and
debt and equity portfolio managers as well as the manager selection team. The ESG score
reflects the sustainability of the entity on different indicators.
Applying this framework facilitates and assures balanced investment decisions, taking into
account both financial and non-financial aspects of any investment. It allows evaluation of
the ESG active positions of portfolios relative to the benchmark and can be used in developing
client specific ESG strategies with positive ESG biases, and integrating ACTIAM’s focus themes
climate, water and land.
The ESG score consists of three components: a BGP score, an ACTIAM sector score, and an
ACTIAM analyst score. A company can receive an ESG score of 0-100. The BGP score is based
on quantitative and qualitative data that ACTIAM purchases from a data provider. 147 ESG
indicators weight policies, behaviour, and a company’s product. Policies account for 40% of
the score, behaviour for 55% and products for 5% of the BGP score. A company’s final ESG
score is based on (1) the industry it operates, (2) the company’s policies, behaviour, and
product it offers, and (3) ACTIAM’s vision on the sustainability of the company.
3
Zwitserleven Europees Aandelenfonds, SNS Euro Aandelenfonds, RZL Euro Aandelenfonds, Zwitserleven
Obligatiefonds, SNS Euro Obligatiefonds, RZL Euro Obligatiefonds en Zwitserleven Credits Fonds.
Examples of environmental indicators that each company is assessed on when relevant are:
Environmental policy,
Environmental reporting,
Environmental, Water, Hazardous Waste, and Air Emissions, and Other Environmental
Management Systems,
 Biodiversity Programmes,
 Site Closure & Rehabilitation,
 Sustainability Impact Assessments,
 Oil Spill Disclosure & Performance,
 Water Intensity
 Forest Certifications
 EMS Certification
 Certifications (forest, EMS, suppliers,
 CDP participation
 Scope of GHG Reporting
If the company makes use of the WBCSD/WRI GHG Reporting Standard or related sector
guidelines, it receives full points.
 GHG Reduction Programme
If the company has set quantitative targets at group level and has set a clear deadline for
reaching these targets, it receives full points.
 Green Logistics Programmes
 Carbon Intensity
The company receives full points if its carbon emissions intensity is well below the industry
average.
 Carbon intensity Trends
If the company's carbon intensity trend shows a decline of 25% or more over the last 3-5 years,
it receives full points.
 Renewable Energy Use,
If 10% or more of the company's primary energy use comes from renewable energy sources,
the company receives full points.
 Recycled Material Use
 Fleet Emissions and Efficiency
If the company's fleet average CO2 emissions are below 120 (g/km) and have decreased by
more than 15% over the last three years, it receives full points.
 Green Building Investments and Share of Green Buildings,
 Eco-Design
 Environmental Fines & Penalties



Furthermore, a sector score is computed by
ACTIAM, which looks at the sustainability of
the sector. In relation to climate, a sector’s
carbon intensity and absolute carbon
emissions on scope 1 and 2 levels are
considered.
The
sector
score
can
add/subtract 20 points max. to/from the ESG
score. The table to the rights lists the
sectors’ climate scores.
The third component is the analyst score,
which can add/subtract another 20 points
max. to/from the ESG score. The analyst
score is a company-per-company score,
which considers the analyst’s view on the
company’s sustainability. This also provides
the opportunity to integrate qualitative
information, such as the company’s
collaboration during an engagement process,
into the ESG score.
The analyst can also select so called ‘worst
offenders’, for example companies with high
water risks, high carbon emissions, and/or
strategies that do not align with ACTIAM’s
energy transition policy. These companies
receive a -20 analyst score and are removed
from the funds to which the ESG scoring
methodology is applied. Companies which
have obtained more than 10% of their
average revenue of the past 3 years from coal
mining and utilities companies of which the
energy mix consists for >25% of coal, are
considered ‘worst offenders’ and thus
excluded from these funds.4
Sector scores climate
Score
Multi-Utilities
-20
Electric Utilities
-20
Oil, Gas & Consumable Fuels
-20
Metals & Mining
-20
Chemicals
-20
Construction Materials
-20
Airlines
-20
Food Beverage & Tobacco
-10
Capital Goods 2: Building Products++
-10
Automobiles & Components
-10
Paper & Forest Products+ Containers &
Packaging
-10
Transportation & Logistics
-10
Consumer Services
-10
Food & Staples Retailing
-10
Gas Utilities
0
Pharmaceuticals, Biotechnology
0
Capital Goods 1: Aerospace & Defense++
0
Energy Equipment & Services
0
Commercial & Professional Services
0
Semiconductors & Semiconductor Equipment
0
Consumer Durables & Apparel
10
Telecommunication Services
10
Media
10
Diversified Financials
10
Insurance
10
Household & Personal Products
10
Retailing
10
Water Utilities
20
Banks
20
Renewable Energy
20
Health Care Equipment & Services
20
Software & Services
20
Real Estate
20
Technology Hardware & Equipment
20
Front-runners and companies with best practices are rewarded via the positive selection
process. Companies which contribute to climate change solutions and/or the transition
towards a low carbon economy, receive a bonus on their ESG score, makes them more
appealing to invest in, because the ESG score of ACTIAM’s active portfolios should be as high
as possible.
Climate-related criteria for positive selection are:
 Revenue from renewable energy generation (linear: more revenue leads to a higher
bonus).
 Revenue from energy efficient products / products that help avoid carbon emissions
such as windmills, but also products that (for example) make homes more energy
efficient (linear: more revenue leads to a higher bonus).
4
As stated above, this currently only applies to Zwitserleven Europees Aandelenfonds, SNS Euro Aandelenfonds,
RZL Euro Aandelenfonds, Zwitserleven Obligatiefonds, SNS Euro Obligatiefonds, RZL Euro Obligatiefonds en
Zwitserleven Credits Fonds.
The graphs and table below give an insight in the 10 best and 10 worst performers in terms of
the ESG score, how the score is constructed, and whether these companies are over weighted
or underweighted in the European equity funds (SNS, RZL, and Zwitserleven), relative to the
benchmark (BM). ACTIAM also reports on this in the quarterly ESG report (as of October 2016,
published online but available in Dutch only).
PF = 66
BM = 55
Company
GECINA SA
KINGFISHER PLC
GAMESA CORP TECNOLOGICA SA
VESTAS WIND SYSTEMS A/S
SVENSKA CELLULOSA AB SCA-B
HAMMERSON PLC
HENKEL AG & CO KGAA VORZUG
MARKS & SPENCER GROUP PLC
DEUTSCHE BOERSE AG
NOKIA OYJ
Total score
1005
1002
96
96
95
94
92
92
91
91
Company
Total ESG
Score
45
42
42
40
39
38
23
23
22
8
OC OERLIKON CORP AG-REG
SIKA AG-BR
NESTLE SA-REG
BNP PARIBAS
PETROFAC LTD
STANDARD CHARTERED PLC
ROYAL DUTCH SHELL PLC-B SHS
BARCLAYS PLC
HSBC HOLDINGS PLC
BHP BILLITON PLC
5
10 highest ESG scores
BGP-score Sector score
79
19
70
15
76
0
76
0
60
15
64
19
67
15
62
15
77
14
57
19
10 lowest ESG scores
BGP-score Sector score
35
39
38
40
51
38
40
23
22
43
0
-3
2
0
-5
0
-10
0
0
-20
Analyst score
15
19
20
20
20
11
10
15
0
15
Weighting
Analyst score
Weighting
10
6
2
0
-7
0
-7
0
0
-15
The maximum ESG score is 100, also when the sum of the components exceeds a score of 100.
ACTIAM’s three focus topics climate, water, and land, are integrated in the ESG score. For
the future, we are focusing on improving the integration of water, land, and climate-related
indicators even further in the ESG score. This would entail setting more specific and
measurable objectives for those subjects and integrating clearly linked indicators in the model
to be able to steer the portfolios and to report of progress and impact. We expect to see next
steps to become effective during the first six months of 2017. Moreover, ACTIAM is seeking to
improve its positive selection criteria for companies contributing to climate change solutions
and/or the transition towards a low carbon economy. Our criteria for positive selection are
continuously evolving. We anticipate to be able to further benefit from the combined
knowledge of our analysts and portfolio managers about sustainable investments and their
respective financial and extra-financial returns. We are anticipating a continuation of
improving indicators and selection criteria. The ESG team and the Equity portfolio
management team are jointly responsible for managing the integrated strategy.
ESG included in the remuneration
The remuneration of the employees working at the Front Office of ACTIAM, consists of a fixed
and variable pay. The variable payment is related to so called KPI (performance targets).
Performance targets for each employee are set in the first quarter of a performance period
(a calendar year). After the performance period has ended, the extent to which the
performance targets have been achieved are used as a basis for determining whether an
employee is eligible for variable remuneration. Part of the KPIs is the ESG score. The higher
the ESG score, the higher the variable payment. There is also a minimum level of the ESG
score required (1 point above the benchmark score). This is part of the restrictions of our
mutual funds and a knock out criteria for the variable payment.
How this tool helps us achieve our goal: the ESG score helps us (1) decrease carbon-related
risks and (2) stimulate investment in frontrunners regarding climate change. Although the ESG
score helps us decrease exposure to carbon intense sectors or companies, it does not withdraw
our investments completely (except for so called ‘worst offenders’ in the specific funds). This
means that we will still be a partial owner of or lender to entities, maintaining the opportunity
to influence these companies through active ownership and work towards behavioural change.
Scope of the policies
The scopes of the climate related policies and tools differ because some apply only to specific
asset classes, specific funds or specific clients (further outlined below). This table is aimed
at providing an overview of the scope of the policies that are relevant for climate change.
Climate-related policy
Fundamental Investment
subsequent exclusions
Principles
and
Energy transition policy and subsequent
exclusions
Green bonds policy
Investment policy for the extractives sectors
ESG score, positive selection,
offenders (negative selection)
Engagement
Voting
Carbon footprinting
ASN policies
worst
Scope
All of ACTIAM’s investments, including
externally
managed
funds
through
mandates. Assets managed externally
through mutual funds where we cannot
enforce our ESG policy are an exception.
All of ACTIAM’s investments, including
externally
managed
funds
through
mandates. Assets managed externally
through mutual funds where we cannot
enforce our ESG policy are an exception.
All fixed income investments managed by
ACTIAM, with the exception of externally
managed funds.
All of ACTIAM’s investments, including
externally
managed
funds
through
mandates. Assets managed externally
through mutual funds where we cannot
enforce our ESG policy are an exception.
Currently apply to the following funds:
Zwitserleven Europees Aandelenfonds, SNS
Euro
Aandelenfonds,
RZL
Euro
Aandelenfonds,
Zwitserleven
Obligatiefonds, SNS Euro Obligatiefonds,
RZL Euro Obligatiefonds en Zwitserleven
Credits Fonds.
All investments
All internally managed equity investments
and externally manages assets through a
mandate are subject to ACTIAM’s voting
policy, except for ASN funds, where the ASN
voting policy applies. In case of externally
managed mutual funds, we expect the
manager to vote and take ESG and climate
criteria into account but cannot enforce our
own voting policy.
Applies to all investments, however due to
methodology limitations we currently
measure our equity funds, credits funds and
sovereign bonds funds.
Apply to all ASN investments. In the future,
this will also apply to SNS investments.
Please see below for more information.
Client Mandates
For mutual funds, climate, and general ESG issues are integrated in investment decisions
based on ACTIAM’s policies and clients cannot enforce custom policies. In case of a mandate
or a client-specific fund, clients can determine their own climate strategy in consultation
with ACTIAM. This would be in close collaboration with ACTIAM’s ESG-team. ACTIAM’s partners
expect a pro-active stance on climate change as it is a focus topic for most of them. We are
in continuous dialogue with our clients to ensure that their expectations regarding climate
change and other ESG issues are met. We strive for a high standard of transparency regarding
the limitations and benefits of certain products regarding climate change. For example, the
ability to steer investments (invest/divest) differ per product; there is more opportunity for
this in active funds than passive (index) funds. The ESG team is often part of the sales pitches
and meetings with clients to ensure that the information about responsible investment is up
to date and well-understood.
Clients and beneficiaries who have intentions to shift their investments towards products
aligned with the energy transition are:
A bank with primary focus on climate and a long-term goal regarding climate change and
investments. The bank drafts its own ESG policy. ACTIAM currently manages seven funds for
this bank, all of which are sustainable.
SNS recently decided to adopt a new sustainability policy for its
investments. The bank has the target to be climate neutral by 2030. SNS
is currently also working on making its mortgage and mutual fund
portfolio more sustainable.
Our client Zwitserleven, a pension insurer, focuses on “Aging in a liveable
world.” Climate (change) is an important theme for Zwitserleven. Due to
its investments and investment strategy, Zwitserleven has been #1 in the
VBDO “Benchmark on Responsible Investment by Insurance Companies in the Netherlands.”
for four consecutive years. VBDO is the Dutch Association of Investors for Sustainable
Development which gathers institutional and private investors that want to contribute to
sustainable development.
Climate change is one of the issues that Zwitserleven raises awareness on. The company has
communicated the wish for a new responsible investment fund. The criteria for the new fund
were to follow the benchmark, outperform the benchmark’s (MSCI World Index) ESG-Score,
and have a lower carbon footprint than the benchmark. ACTIAM presented different scenarios,
which allow a carbon footprint reduction of up to 75% and a tracking error of less than 1%. At
present, the fund is not yet implemented.
Pensioenfonds SNS REAAL expects 100% coverage of ESG policies. In case
of externally managed assets, the third parties framework applies.
ACTIAM and Pensioenfonds SNS REAAL are currently collaborating in a
working group to make its investments more sustainable.
Similar to Zwitserleven, one of Reaal’s key performance target for ACTIAM
is doing well in the VBDO “Benchmark on Responsible Investment by
Insurance Companies in the Netherlands.” This research looks at many
different aspects of ESG and ESG integration and is therefore a good
reflection of the sustainability approach. In 2015, Reaal ranked second in the
Benchmark, after Zwitserleven.

Green bonds
ACTIAM actively invests in
green bonds and works on the
development of the market
through several initiatives
such as the Green Bond
Principles and the Climate
Bonds Initiative. Green bonds
can contribute to the energy
transition, as they (give
investors the opportunity to)
specifically finance climatefriendly investments. Given
there are no internationally
accepted standards to define
what is “green enough” to be labelled a green bond, ACTIAM drafted its own green bonds
policy in 2014, and an update followed in 2016. Bonds that are labelled “green” by ACTIAM’s
ESG-analysts receive a bonus on their ESG-score and are thus considered “positive selection”,
making the bonds more attractive for investments in portfolios where the ESG score and ESG
target apply. A partial bonus will be given in case of doubts about the existing transition
strategies and investments which are necessary for the transition to a business which is less
dependent on fossil fuels and water.
In case of a partial bonus, after the relevant bond is released and purchased, ACTIAM will
start an engagement process, which should indicate if the publisher is capable to dissolve any
doubts ACTIAM has with regard to their transition strategy. If indeed, the publisher does play
an active role in the transition towards more sustainable business practices, only then will
the publisher still get the maximum bonus of +20. In case there has been no improvement,
then the bonus will remain at +10. For further information, a detailed green bond policy is
added to the appendix.
How this tool helps us achieve our goal: green bonds provide a way for ACTIAM to invest in
climate-friendly activities and the energy transition on behalf of its clients. It thus helps us
achieve our goal in a positive way: investing in those activities that are needed to facilitate
the energy transition, such as renewable energy, energy-efficient housing and low-carbon
transport.
Active Ownership Activities
On behalf of its clients, ACTIAM uses its position as a partial owner of or lender to an entity to
stimulate behavioural change and strive for a reduction in companies’ carbon footprint. We will
address some sectors, activities or products with more scrutiny, as they are exposed to higher climaterelated risks. Our assessments of these risk-risk categories relies on the following questions:



Does the asset class or sector have a high carbon intensity?
Does ACTIAM have (relatively large) investments in this asset class or sector?
Is it possible to exert influence on the entities in which we invest?
We divided the carbon footprint of our equity funds into different sectors. As shown in the figure, the
sectors Materials, Utilities, and Energy account for 78% of the carbon footprint of our equity funds.
Based on this division, we selected hotpots, which we focus our engagement on: Energy, Materials,
Utilities and Food & beverages. Though only 2% of our carbon footprint stems from the Food &
beverages sector, the sector has a large carbon footprint through its Scope 3 GHG emissions and close
relation to ACTIAM’s focus theme Land. We believe that we can have the greatest impact by
particularly engaging with companies in these sectors. Within the chosen sectors we make a selection
of industries, individual companies, and activities (e.g. Artic oil drilling, coal mining, coal power
generation, shale oil/gas, tar sands, meat production) that are vulnerable to the risks in the area of
climate change. For engagement, we look at the 4 pillars which are necessary to achieve the 2degrees scenario, namely: renewable energy, energy efficiency, reduction of greenhouse gas
emissions from sources other than fossil fuels and CO2 storage in or underground.

Engagement
To achieve behavioural change towards more climate-friendly business conducts, we conduct
engagements with companies. This means we enter into a dialogue with the management and
communicate which goals we would like to company to achieve. Engagement is one of the
tools we use to decrease our own carbon footprint.
ACTIAM makes a distinction between responsive and proactive engagement. Responsive
engagements are a reaction to violation of our principles and can lead to exclusion, as
described above. Proactive engagement is undertaken to highlight possible risks and areas of
improvement for companies. In case of proactive engagement, we engage with a company
before problems arise. It often concerns companies that face certain risks due to the nature
of their business, but have limited or no policies in place or have yet to implement them
effectively. Here we seek to give companies an extra boost to develop policies and
management systems in order to prevent such incidents from happening in the first place. On
average, 51% of our engagements are proactive, 9% are positive selection, and 35% are
collective engagements where we collaborate with other investors. 5% are responsive
engagements.
During a proactive engagement process regarding climate change, we can ask companies to:

To implement concrete, measurable and time bound reduction targets for
greenhouse gasses that are in line with the Paris Agreement.
o Reduce greenhouse gas emissions in absolute and relative terms (per
unit)
o Reduction of both indirect and direct emissions of greenhouse gases










To take energy efficiency measures
To choose renewable energy sources for energy supply
To achieve breakthrough technologies
To report risks and opportunities in climate change (such as to test reserves of
fossil fuels at a 2 and/or 1,5 degrees scenario)
Support for (under)expertise incentives for board members regarding successful
climate strategy
Transparency to increase lobbying with governments on climate policy
To make a constructive contribution to the achievement of global climate
objectives
To develop products that are energy efficient during use (e.g. electric cars instead
of petrol vehicles)
To apply Best Available Techniques
To realize breakthrough technologies (such as green concrete consisting of
recycling materials instead of regular concrete based on cement)
However, this list is not exhaustive: proactive climate change engagements can include other
objectives than mentioned above.
Impact of our Engagement
Progress of ACTIAM’s engagement activities is collected and published on a quarterly basis.
During the reporting year 2015, ACTIAM engaged with 74 companies itself, of which 34 were
comprehensive, meaning there was extensive contact with the companies on a continuous
basis. Of these 74 engagements, 41% were related to environment and 50% were overlapping
ESG issues; the remaining 9% of individual engagements were related to social or corporate
governance issues. As a result of ACTIAM’s engagement efforts, five companies committed to
a change, and three companies demonstrated change. Further, ACTIAM engaged with 271
companies through collaborative engagements. Examples of positive engagement results are:
-
In a collective engagement with CDP and other investors in Q3 in 2015, major global auto
manufacturers were asked for climate change related disclosure. We asked for their
assessment of the material risks and opportunities presented by climate change, both in
their direct operations and throughout the value chain. A first letter was sent to 17 target
companies and conversations were held with Daimler, Suzuki, Honda, BMW, and
Volkswagen. As a result of an engagement with Suzuki, the company started reporting of
its impact on climate change. As a result of Volkswagen’s engagement, the corporation
became more aware of the importance of supervision and had a change in structure.
Furthermore, ACTIAM supported a collective engagement on carbon disclosure through
PRI, which currently engages with 125 companies.
-
As a member of the PRI Steering Committee on Fracking, ACTIAM has been actively
engaging with companies that are involved in fracking activities for several years. In 2016,
proactive engagement efforts included 26 oil and gas exploration and production
companies and 4 oilfield services companies. The engagement was aimed at pushing
companies to strengthen their disclosures in the area of air emissions, raising awareness
regarding water quality risks, promoting accountability to communities, and encouraging
enhanced integration of fracturing and sustainability management into governance
systems. Findings showed that disclosures on air emissions increased, on average, from
14% to 35% between 2013 and 2016.
-
As a result of Wärtsilä’s engine-fraud scandal earlier in 2016, a conversation was held
with Wärtsilä’s CEO. As a result, internal procedures were changed, the company’s code
of contact updated, and guidance to employees was improved.
-
As a result of our energy transition policy, current engagement efforts focus on oil and
gas, mining, and utility companies with the aim of encouraging companies to divest in
high carbon fossil fuels and align their strategies with the 2-degree scenario. Letters were
sent out to four oil and gas companies and eighteen utilities companies. First
conversations with respondents are scheduled for September 2016. A meeting with Shell
is scheduled for the end of 2016. Previous engagements with oil and gas companies
focused on drilling for oil in the Arctic. A letter was sent out to companies, and details of
the engagements were discussed in more detail.
How this tool helps us achieve our goals: behavioural change is the only way to decrease
carbon emissions in the real economy, and engagement is one of an investor’s main tools to
achieve this. Decreasing companies’ carbon emissions through active ownership thus not only
decreases the carbon footprint of our investments, but also the actual carbon emissions,
which is our ultimate goal.

Voting
ACTIAM uses its voting right as shareholder, on behalf of its clients, to push companies to
become more sustainable. This can be achieved through voting on proposals of the board, on
proposals of other shareholders, or by filing our own proposals. We do so based on our own
voting policy, which extensively addresses ESG-related (shareholder) resolutions.
We expect high risk companies, or in other words companies within sectors that are
considered to be high risk within our focus themes, to have a strategic long term vision. As
mentioned above, for climate we consider the Energy, Utilities, Materials and Food &
beverages sectors to be of high risk. The risk management strategy should be sufficiently
integrated in the responsibilities and remuneration of the management, internal controls and
annual reports. These expectations are integrated into our voting policy. We will assess these
companies with more scrutiny when deciding how to vote on management and shareholder
resolutions.
In the End of September 2016, ACTIAM’s voting policy was updated. The new policy will be
uploaded to our website in the upcoming weeks. A new climate guideline has been added to
request financial institutions to report on GHG emissions and climate change risks. Moreover,
our fundamental investment principles (Human Rights, Fundamental Labour Rights,
Corruption, The Environment, Weapons, and Client and Product Integrity) are better aligned
with our focus themes climate, land and water.
In regard to climate change, ACTIAM tends to vote for shareholder proposals that:
 Report on the risks and opportunities related to climate change, including but not
limited to physical risks, policy risks, supply chain risks, legal risks and market risks
such as technology shifts;

Request quantitative and/or qualitative reporting on environmental and social
impacts of shale energy operations, or on efforts to mitigate methane emissions
resulting from such operations;

Request quantitative and/or qualitative reporting on the environmental and social
impacts of other operations exposed to significant climate change risk;

Request that the board or member of the board is responsible for climate change
management policies;

Request the adoption and implementation of policies regarding the prevention of
climate change. This may include (absolute or relative) science-based or other goals
to reduce direct and indirect greenhouse gas emissions, adopt measurable energy use
reduction targets and energy efficient practices, in line with the ambitions set out in
the 2015 Paris Agreement;

Request reporting on the company’s energy management policies, practices and
metrics in line with the GRI;

Request reporting on the consistency of company capital expenditure strategies with
policymakers’ goals to limit climate change, including analysis of risks and
opportunities associated with high-cost low-demand scenarios;

Request that companies integrate a robust carbon price into their capital expenditure
approval process;

Request increasing climate-friendly investments or dividends rather than using capital
on high-cost, high-carbon fossil fuel projects with a high risk of stranding;

Request the adoption of climate change criteria in procurement policies;

Oppose public corporate lobbying that aims to prevent legislation addressing climate
change, deforestation or renewable energy.

Request that financial institutions report on GHG emissions and climate change risk
linked to financed activities, including exposure to fossil fuel activities.
During the first half of
2016, ACTIAM voted on
approx. 48 shareholder
proposals
regarding
climate
and
energy
issues. Likewise to last
year, ACTIAM supported
several “Aiming for A”
resolutions at AGMs in
2016. The “Aiming for A”
investor
coalition
is
currently undertaking indepth engagement with
the ten largest UK-listed
extractives and utilities
companies, alongside expanding to become Pan-European. As a result of the shareholder
proposals the coalition filed, Anglo American, BP, Glencore, and Shell agreed to increase
transparency and disclose their strategy on the risks and opportunities posed by climate
change. Another example of our active ownership is the Shell shareholder resolution by Follow
This urged Shell to become a renewable energy company by investing the profits from fossil
fuels in renewable energy. Though the resolution did not pass (it received 2.78% of the votes),
ACTIAM voted in favour of and publicly endorsed the shareholder proposal and was the only
institutional investor to do so. During Suncor Energy’s Annual General Meeting in April 2016,
ACTIAM voted in favour of NEI Investments’ proposal to urge Suncor to report on its climate
change related initiatives and strategies. The shareholder proposals received 98.18% support.
In 2016, ACTIAM expanded its voting activities and is actively seeking conversations with other
shareholders to co-file shareholder proposals. Together with Walden Asset Management as the
co-filer, ACTIAM pressed ConocoPhillips to disclose on their climate lobbying during this year’s
Annual Meeting. The aim of the shareholder proposals is for ConocoPhillips to evaluate if their
public policy advocacy and lobbying is consistent with positive climate solutions or if their
funds are used to oppose climate legislation or regulation. The lobbying by oil and gas
companies on climate policy is increasingly under scrutiny globally. This resolution received
25% voting support in 2016. ACTIAM committed to co-filing this shareholder resolution in 2017
as well.
How this tool helps us achieve our goals: Likewise to engagement, actively voting at
shareholder meetings or filing resolutions for these meetings helps us achieve behavioural
change of the companies that we invest in, which could lead to a decrease of carbon emissions
in the real economy.

Memberships and Partnerships
Collaboration with other organisations and other investors can increase our effectiveness.
Whenever possible, we will try to collaborate with other parties to increase our impact. Below
are some examples of our partnerships.
ACTIAM is a member of the Carbon Disclosure Project (CDP). CDP is a
collaboration between international investors such as ACTIAM. The CDP
collects relevant information on companies by sending them an annual
questionnaire, which looks at CO2 emissions and broader effects of climate change.
Furthermore, the protection of natural resources like water and forests is an important topic.
This information helps investors to make more sustainable choices. In fact, our energy
transition engagement with companies in the fossil fuel industry is based on CDP data and
questionnaire answers. Since 2004, ACTIAM supports the CDP “forests program” and “water
program.”
ACTIAM is an active member of the Climate Bonds Initiative since
January 2015, which is investor-focused and the only organisation in
the world working solely to mobilize the largest capital market of all,
the $100 trillion bond market, for climate change solutions. Besides
being a member, ACTIAM is co-organiser of investor statements regarding climate bonds and
participates in the Climate Bonds Standard Industry Working Group. This working group
develops criteria, which securities must meet to qualify as climate bonds. This contributes to
the trustworthiness and sustainability of the climate bonds market.
The Green Bond Principles are voluntary process guidelines that
recommend transparency and disclosure, and promote integrity in
the development of the Green Bond market. Especially now that the
market is growing fast, it is good to set up such guidelines. ACTIAM is a member of the Green
Bond Principles and a member of the executive committee, because of its position in the
climate bonds market. ACTIAM is currently active in the following working groups of the Green
Bond Principles: Defining green, Impact reporting and Social bond.
The UN-supported Principles for Responsible Investment (PRI) is an
international network of investors. The aim of this initiative is to
integrate sustainability in the investment process. ACTIAM signed the
PRI and is an active member since its establishment in 2006. ACTIAM is a member in several
steering committees and is active in several joint initiatives. In the annual PRI investor
evaluation, ACTIAM consistently scores highly across all categories. We have achieved the
highest possible score for active ownership, an A+, positioning us among the top 10% of
investment managers worldwide. We are an active member in the Steering committees on
Palm Oil, Fracking, Fixed Income Workstream (and Advisory Group member), and are a
founding signatory sponsor of the Principles for Investors in Inclusive Finance. The steering
committee on fracking is a collective engagement to address social and environmental aspects
of fracking. Managing methane emissions is an important aspect of the engagement. Collective
engagements are made through The Collaboration Platform (formerly the Clearinghouse). It
is a unique private forum that allows signatories to pool resources, share information, and
enhance their influence on ESG issues.
Furthermore, ACTIAM is one of the eleven Dutch financial institutions, which jointly
established the platform naming Platform Carbon Accounting Financials (PCAF). The initiative
was founded by our client ASN Bank and is focused on developing a standard method for the
calculation of the carbon footprint of investments.
In 2015, ACTIAM set up a partnership with FSC Netherlands, focusing on
deforestation challenges. FSC is a global, not-for-profit organization
dedicated to the promotion of responsible forest management worldwide.
During the partnership, ACTIAM can deliver responsible investment tools and FSC Netherlands
can deliver knowledge. ACTIAM is the first fund and asset manager to enter into a partnership
with FSC Netherlands. As part of the partnership, FSC and ACTIAM focus on two new
engagement projects, entering into a dialogue with companies: one focused on increasing the
use of certified wood and one focused on haltering deforestation through commodities
cultivation. The international, independent FSC-label ensures that resources for wood and
paper products come from responsibly managed forests, with consideration of the people that
are dependent on the forest.
ACTIAM is an active member of GRESB. GRESB is an industry-driven
organization committed to assessing the sustainability performance
of real assets around the globe, including real estate portfolios (public, private and direct).
ACTIAM uses the information provided by GRESB to better understand immediate climate
change risks (e.g., flooding, energy efficiency regulations), engage with the management of
our real estate holdings and take advantage of sustainability-related investment
opportunities. Moreover, ACTIAM participates in the GRESB Green Bond Working Group to
share information, evolve best practices, and drive greater adoption of green property bonds.

Studies
ACTIAM studied the possibility of integrating climate change at a more strategic level. Our
study examined the possibilities and outcomes of reducing emissions at asset class, sector,
and company level. Reducing emissions at company or sector level is quite common, but
approaching it at the level of asset classes is in its pioneering phase. However, the results
showed that reducing the carbon emission by 25% at an asset class level leads to a 10% loss
on return. The study concluded that it is more efficient to approach climate change risks at
a company or sector level – thus within the asset class - than between asset classes. The
carbon emission turned out to be very concentrated within an asset class: about 80% of the
emission is caused by 20% of the companies. The utilities industry is responsible for a very
large amount: 55% of the carbon footprint researched in the study. Thus, by excluding the
most polluting companies or sectors, we could notably reduce our carbon footprint. However,
ACTIAM aims to reduce its carbon footprint on a company/sector level through active
ownership with companies and pushing them to align their activities and strategies to the 2-
degree scenario. It is therefore a last resort to exclude these companies in order to reduce
our carbon footprint. However, ACTIAM aims to reduce its carbon footprint on a
company/sector level through active ownership with companies and pushing them to align
their activities and strategies to the 2-degree scenario.
Reducing CO2 emissions
As a Montréal Carbon Pledge and Paris
Pledge for Action signatory, ACTIAM has
committed to measure and publicly
disclose the carbon footprint of its
investment portfolio on an annual basis
and to reduce the carbon footprint of all
investments by at least 25% by 2025 and
by at least 40% by 2040 (compared to
2010).
To align ourselves to the 2-degree
scenario, our own carbon footprint
(buildings, operations, and management)
is of importance, which we try to reduce as much as possible and compensate for via Gold Standard
certified activities to stay climate-neutral, but more so companies and other entities’ carbon
footprint, which ACTIAM is a partial owner or lender of. Hence, we differentiate our GHG emissions
reporting in two sections:

Measuring our own footprint
VIVAT, ACTIAM’s parent company, measures and reports its GHG emissions in accordance
to the principles of the Greenhouse Gas Protocol. This means that we report per scope:



Scope 1: report on CO2 emissions as a consequence of our direct energy consumption
(e.g. gas);
Scope 2: report on CO2 emissions as a consequence of our indirect energy consumption
(e.g. electricity);
Scope 3: report on our indirect CO2 emissions (e.g. due to commuting, air travel,
leased cars, etc.).
In 2015, VIVAT set itself several ambition targets to reduce energy consumption of at least
3% annually, for owner, occupant, and suppliers to choose only sustainable and energyefficient materials for building management purposes, for our buildings, operations, and
management to be fully climate-neutral, and 100% of energy to be generated from
renewable sources. Besides purchasing green energy directly from the source (Dutch wind
and Dutch biogas), we offset our remaining CO2 emissions from our internal business
operations and mobility by purchasing credits that are at least Gold Standard (GS). As a
result of this, our buildings, operations, and management is fully climate-neutral.
Energy consumption of offices (in gigajoules)
Energy consumption kWh per FTE
Energy consumption kWh per m2
2015
1,833
113
2014
2,148
132
Share of green energy offices (% of total)
2015
100%
100%
2014
100%
100%
Business travel and commuting
Operations
2015
5,086
168
2014
5,416
311
Net emissions
5,254
5,727
Gross emissions
8,315
9,327
% Green electricity
% Green gas
Carbon emissions (in tonnes)
More information is available in the attached annual report of VIVAT.

Measuring our investment portfolio’s carbon footprint
ACTIAM invests in companies that emit greenhouse gases through their activities. By
measuring the carbon footprint of the companies we invest in, we can calculate the carbon
footprint of our investment funds.
For our active ownership, on a line by line level, carbon footprint data are indicators of
(carbon) efficiency of a given company and a metric to compare companies within a peer
group or over time. This information can be useful for engagement purposes, among others.
From an asset management perspective, insights in a company’s carbon footprint are vital for
assessing our risk exposure: a high carbon footprint implies a potentially high risk, for instance
if a significant carbon tax is imposed on polluting industries – in line with the social cost of
carbon – or, if technological developments reduce the demand for fossil fuels (in case of
energy companies).
What funds have been measured so far and what are the results?
ACTIAM has published the carbon footprint of all of its equity and one credit fund. The
methodology has been rolled out for fixed income classes (corporates, sovereigns, regions,
supranational, covered bonds, agencies, guaranteed financial, public banks, ABS, RBS,
and small other investments) and equity classes. The methodology applied to all asset
classes can be found in the appendix. Though we measure our impact through investments
in green bonds, we do not include GHG avoided into our carbon accounting model yet.
This is due to fundamental differences between absolute carbon emissions polluted and
carbon emissions avoided. The impact and recent developments of our green bond
investments is communicated about in our quarterly reports.
The first results have been calculated and published (see quarterly sustainability report).
Every six months, we report our carbon footprint in the ESG quarterly reports and on our
website. These results in the attached table are compared with the carbon footprints of
the relevant benchmarks. In this way, we can understand the performance of our
investment funds. In total, the listed equity and credit funds’ carbon footprint is 13.32%
lower than the respective portfolio benchmark. The Zwitserleven Europees
Aandelenfonds, RZL Europees Aandelenfonds, and SNS Europees Aandelenfonds’ carbon
footprint is approx. 40% lower than the respective portfolio benchmark. Besides
‘negative’ selection, positive selection has also contributed to this. Companies like Amer
Sports and Nordex have for example, since 2013, been added to the investment universe
by ‘positive selection’. The reduction in carbon intensity between the second quarter of
2016 and the measuring point before that, has taken place due to the new investment
policy of European Equity Funds, where through ESG-integration, the theme Climate is
targeted.
+ The carbon footprint of the ACTIAM Responsible Index Fund Equity Europe has decreased
as well, due to ArcelorMittal being excluded 6 months ago. ArcelorMittal has a high carbon
footprint. Because this firm is not in the portfolio of ACTIAM anymore but is still present
in the relative benchmark, a relative and absolute improvement has taken place.
As of January 2017, ACTIAM’s carbon footprint for all funds with publicly listed equities,
credits or sovereign investments will be made public.
Assets under management in
Equity Fund
the fund (per 30/06/2016)
Emissions of the
Emissions of the relative
Portfolio (in ton CO2
benchmark (in ton CO2
equivalent)
equivalent)
Relative
Absolute
difference
difference
portfolio
portfolio
benchmark
benchmark
Absolute CO2 emissions
equal to driven km’s with
passenger car
Zwitserleven Vastgoed Fonds
€ 135.987.414
544,39
543,57
0,15%
0,8
2.872
Zwitserleven Europees Aandelenfonds
€ 893.696.920
71.047
119.871
-40,73%
-48.824
-170.821.205
ACTIAM Responsible Index Fund Equity Europe
€ 1.282.126.346
165.258
173.037
-4,50%
-7.779
-27.216.495
ACTIAM Responsible Index Fund Equity Pacific
€ 513.432.832
65.556
64.949
0,93%
607
2.123.719
ACTIAM Responsible Index Fund Equity North America
€ 1.650.390.043
122.189
122.863
-0,55%
-674
-2.358.133
RZL Europees Aandelenfonds
€ 322.060.391
25.756
43.456
-40,73%
-17.700
-61.927.235
SNS Europees Aandelenfonds
€ 67.538.193
5.397
9.105
-40,72%
-3.708
-12.973.231
RZL Amerika Aandelenfonds
€ 52.968.880
3.535
4.091
-13,59%
-556
-1.945.285
SNS Amerika Aandelenfonds
€ 11.322.170
755
874
-13,62%
-119
-416.347
Zwitserleven Credit Fonds
€ 392.616.411
71.159
74.041
-3,89%
-2.882,00
-10.083.293
Total
€ 5.322.139.600
531.196
612.831
-13.32%
-81.634
That’s over 7,000 times
-285.614.633
around the world!
40%
30%
20%
10%
0%
2010
2011
2012
2013
2014
2015
Q2 2016
-10%
-20%
-30%
The above figure displays the carbon intensity of ACTIAM’s active European equity funds
(Zwitserleven Europees aandelenfonds, RZL Euro Aandelenfonds, SNS Euro Aandelenfonds).
With carbon intensity we refer to the amount of CO2(equivalent) emitted per invested Euro.
The purple line in the figure displays the path that must be taken to achieve ACTIAM’s target:
at least 25% less CO2 intensity by 20256. The red line displays the CO2 intensity of the managed
funds.
6
This target does not only count for the active European equity funds, but also for ACTIAM’s other
investment categories.
In 2013, ACTIAM invested in 6 out of the 31 most carbon intensive companies, which
represented merely 2% of the total portfolio. As a result of ACTIAM’s investment in these 6
carbon intensive companies, our portfolio was not in line with the reduction target path of 4,69%; instead the realised increase was +35%.
In 2014, ACTIAM only invested in 1 out of the 31 most carbon intensive companies, and
excluded five companies. Further, ACTIAM started investing in more energy-efficient
companies, which lead to a large decrease in the CO 2 intensity of ACTIAM’s active European
equity funds and a reduction target of -21% comparing to 2010 levels. Compared to the data
point in 2015, there has been an improvement in the CO 2 intensity and it is currently even
below ACTIAM’s target. For Q2 2016, a reduction target of -9% was planned and a reduction
target of -14% was realised. Part of the reduction between 2015 and 2016 can be explained
by the implementation of the improved ESG score. As a result, worst offenders (high carbon
intensive companies) are no longer part of our active investment funds. Instead, positive
selections with higher ESG scores are made more attractive to invest in. The table of best
and worst performers in regard to ACTIAM’s ESG score, shows that relative to the portfolio
benchmark, 9 of 10 best performers are overweight.
As our carbon reduction target applies to all investments, we are currently in the process of
making these intensity pathways for the other assets for which we are able to calculate the
carbon footprint.
There are several limitations with the following climate reporting. At present, it is only
backwards looking (starting from 2010) and catches merely a moment in time. Hence, the
methodology does not consider a company’s (long-term) strategy. Despite having a high
carbon footprint at the moment, a company might have clear strategies to significantly reduce
its carbon footprint, thus being exposed to lower risks in the long-term. That’s why ACTIAM
is currently considering the possibility of conducting a scenario analysis to assess which
companies’ strategies are aligned with the Paris Agreement to collective limit global warming
to well below 2°C. Further, the methodology only looks at a company’s absolute carbon
emissions, and does not compare the company to its peer group. A company might have a high
carbon footprint, and as such be eliminated from our portfolio. However, when comparing
the company to its peers, it might have a lower carbon intensity. Moreover, an aggregate
number like this does not give an indication of the company’s underlying assets. As such, it is
difficult to assess its asset-related carbon risks.
ACTIAM decided to only to use scope 1 and scope 2 carbon emissions, because information for
scope 3 carbon emissions is not as reliable yet. As a result, one ignores a company’s risks
related to its scope 3 carbon emissions, the emissions in its supply chain. More importantly,
it is easy to reduce one’s portfolio’s carbon footprint by merely excluding carbon-intensive
companies (or sovereigns, for which we have also developed a carbon footprint methodology).
However, this does not reduce the absolute carbon footprint. This is not ACTIAM’s aim.
ACTIAM aims to reduce companies’ carbon footprint through its active ownership activities
(especially through engagement). In order to properly value risks and opportunities however,
it is still of importance that the quality of scope 3 emissions data increases.
Choices made when calculating ACTIAM’s footprint
The carbon footprint of an investment fund can be calculated in different ways. The result
depends on the calculation method used, but also, for example, on the values that are used.
Therefore, we find it important to be transparent about our methodology of calculating our
carbon footprint. Thus, ACTIAM made the following choices:

We look at the absolute carbon emissions of the company
Only by reducing absolute carbon emissions, can the effect on climate change be
restricted. ACTIAM does not use relative carbon emissions. Despite relative emissions
being a good indicator of the efficiency of the company, a small number does not per se
mean that the effect on climate change is also small.

We look at scope 1 and scope 2 carbon emissions of the company
Reasons for not including scope 3 carbon emissions is that there is less reliable information
available and if there is information available, there is a chance of double counting. The
carbon emissions of a company that are considered as scope 3 emissions might be the
same carbon emissions as another company’s scope 1 and 2 carbon emissions.
Scopes
Advantage
Disadvantage
Scope 1
No double counting.
Too little data.
Scope 1 & 2
Data available; market
standard; relative little
double-counting.
Double counting in
Utilities.
Scope 1 & 2 & 3
Progressive image; using all
data.
A lot of double
counting; very little
reporting done.
As such, the choice was made to currently use scope 1 and 2 carbon emissions: Because
it is easy to implement, there is fewer double counting, and it is the market’s standard.

We look at our ownership and/or the value of our loan in relation to the enterprise
value of the company
To calculate the carbon emissions of a company that ACTIAM is responsible for, one has
to know the value of the company. This is often determined by the value of listed shares
on the basis of market capitalisation. This presents a problem for companies that are not
publicly traded. The enterprise value of the company does not only consider the
company’s assets, but also debt. This allows us to value both, listed and non-listed,
companies. The disadvantage is, however, that the numerator (from which we divide the
carbon emissions) can get bigger when we only look at the market capitalisation, and the
carbon emissions per unit thus smaller. We limit this disadvantage by formulating our
target as a relative decrease over time.
𝐸𝑉 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝 + 𝑆ℎ𝑜𝑟𝑡 𝑇𝑒𝑟𝑚 𝐵𝑜𝑟𝑟𝑜𝑤𝑖𝑛𝑔𝑠 + 𝐿𝑜𝑛𝑔 𝑡𝑒𝑟𝑚 𝐵𝑜𝑟𝑟𝑜𝑤𝑖𝑛𝑔𝑠7
 We retrieve the carbon information from Bloomberg
Within the model, external data is used. For companies that are publicly traded, data is
provided by Bloomberg. For non-listed companies, we look at the companies’ annual reports.
Carbon footprint of sovereign bonds is based on data provided by Eurostat (more information
available in the appendix). Within ACTIAM, the choice was made to receive the carbon data
from an external data point. As a result of outsourcing the data acquisition, ACTIAM is entirely
dependent on the input data. Besides manually looking at annual reports for non-listed
companies, ACTIAM has no influence on the data it receives. When the data is not correct, it
is only possible to give feedback to Bloomberg. Thus ACTIAM is entirely dependent on
Bloomberg with respect to data delivery.
7
For banks, postal deposits are also included
When carbon data is unavailable, the choice was made at ACTIAM to still gave the company a
value. If this is the case, we take a proxy. This estimation is based on the GICS/Iboxx subsector average value, in which the company operates in. If the company’s sales are known,
you can multiply the sector’s average carbon emissions/sales by the company’s sales to get a
carbon value estimate.
Proxy per industry =
∑ 𝑐𝑎𝑟𝑏𝑜𝑛 𝑒𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠 𝑝𝑒𝑟 𝑖𝑛𝑑𝑢𝑠𝑡𝑟𝑦
∑ 𝑆𝑎𝑙𝑒𝑠 𝑝𝑒𝑟 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑝𝑒𝑟 𝑖𝑛𝑑𝑢𝑠𝑡𝑟𝑦
When carbon data is estimated, sales per company per industry is used due to its lowest
standard deviation. We compared actual and estimated carbon values of companies reporting
their carbon footprint using the following variables for size of venture to see which variable
comes closest to the reported carbon value: Sales, three year average sales, employees, total
assets, book value equity, market capitalisation, proxy enterprise value, and total value.
By looking at the standard deviation, it is possible to see which variables comes closest to the
actual reported carbon value. Hereby counts: the lower the standard deviation the closer the
estimated value is to the actual numbers.
Variable
Sales
Sales average 3-year
Employees
Total Assets
Book value Equity
Market Capitalization
Total Market Value
Proxy Enterprise Value
Standard Deviation –
Tonnes CO2 Eq
11.935.969
17.079.350
16.874.976
16.517.457
16.816.318
15.919.469
16.125.242
15.642.914
It is important to note that there are 4 sectors that significantly push up the standard
deviation. These are:
Variable
Metals & Mining
Multi-Utilities
Construction Materials
Electric Utilities
Standard Deviation –
Tonnes CO2 Eq
55.978.195
46.275.029
37.450.970
16.295.442
The conclusion made from this is that sales give the best predictable value to use as a rescaling
value for missing carbon values in our portfolio. When we look at the relative difference,
instead of absolute, then it is predominantly companies with a lower emission output who
dominate. Currently, when we look at the names where value are missing, then these are not
in high emitting sectors. Thus it is currently not necessary to do further research into better
explainable values.
Communication
Communication Strategy
ACTIAM has fully integrated ESG and the focus themes climate, water and land in its
communication plan. ACTIAM uses a segmented approach in its communication. This means
that different target groups are identified and the type of information and media used are
specified for each target group. We will, for example, rather use social media for
communication to retail clients, press releases for official and newsworthy communication,
columns for an audience with some level of investment knowledge, etc. However, some key
points of ACTIAM’s ESG / climate communication strategy are:
o
o
o
o
o
Thought leadership: we want to be a thought leader on the combination of financial
return and ESG, as well as our focus themes climate, water, and land, and inclusive
finance based on our microfinance activities.
Close by: when communicating about ESG and climate change, which can be quite
technical, we make sure to add examples that are nearby for the reader. For example,
when we communicate about a green bond in our portfolio, we will try to find
examples of projects financed by the green bond that are physically close by, such as
renewable energy projects in the Netherlands.
 Our Q2 Sustainability Report, for example, we reported that by investing in
KfW’s green bond, ACTIAM’s customers can avoid round 6800 tons GHG
emissions and compared it to the average emissions of Dutch households.
Simple: we try to use straight-forward examples and understandable language to
explain complex issues like climate change.
Recognisable: when communicating about climate change, we try to use brands,
companies, or labels that retail clients know to make it recognisable.
Solution-oriented: we try to limit communicating about problems and use solutionoriented language. We also translate problems into actions that the reader can
actually take.
Media
ACTIAM uses different media for its communication about ESG and climate related
activities. The below table is aimed at giving insight in the different media/tools and the
frequency of use:
Medium / tool
ACTIAM website
Social media
Quarterly ESG report
Columns
Presentations
Intranet
Press
Frequency of use
Ad hoc news messages; quarterly update of
exclusions and engagement overview; ad
hoc updates on investor statements. Should
be accessible and understandable for all
visitors, but we expect that mostly
proactive visitors, benchmark researchers
and clients of our funds visit the website.
Some planned and some ad hoc
communication. Short news messages that
we sometimes use to link to longer
messages on our website. Targeted mainly
at retail investors.
Published every quarter. Contains
information about engagements, voting and
other ESG activities. Different central
theme every quarter (e.g. climate change,
green bonds, deforestation). Readers are
mostly institutional clients or proactive
readers, however we try to re-use the
content in a more accessible way, for
example through social media.
Targeted at retail clients but with basis
knowledge of investing. Planned monthly.
Targeted mainly at institutional investors or
retail investors with advanced investment
knowledge. Ad hoc basis.
Messages on an ad hoc basis. Target
audience are ACTIAM and VIVAT employees.
Used mainly to create awareness of trends
and developments and the ESG activities.
Ad hoc, as this requires press interest.
Target audience depends on the platform
and can range from an uninformed retail
audience to advanced retail investors or
institutional investors.
Much of the communication is ‘ad hoc’ because the reason for communication cannot be
planned (e.g. a new green bond bought, an engagement success). However all communication
is preceded by a plan where the target audience and media to be used are set out. In addition,
there are different ‘unique selling points’ that ACTIAM identified and that we refer to in most
of our communication: ESG integration, impact measurement, active ownership, green bonds
and impact investing. The focus themes climate, water and land are also structurally used as
a framework to communicate about ESG activities. For example, when communicating about
climate-related news, we will refer to climate change being our focus theme, why it is an
important challenge, what the main drivers are and how the news fits into our strategy.
External Communication
Communication is aimed at informing (potential) clients about climate related developments,
risks, opportunities and how these factors are integrated into ACTIAM’s responsible
investment activities. It is ACTIAM’s mission to be fully transparent to its clients,
beneficiaries, and affiliates about its ESG integration and its approach to the issue of climate
change. As such, ACTIAM uses many channels of communication.
On social media, ACTIAM is a responsible asset and fund manager who you follow, because it
represents what you stand for. ACTIAM uses Twitter and LinkedIn to interact with its target
groups and to share relevant information on products, services, and (international)
developments. Our social network accounts inform our retail clients about ACTIAM’s ESG
activities and raise awareness on relevant global ESG issues. ACTIAM continues its Thought
Leadership marketing strategy to inform its followers. In addition to this, ACTIAM publishes
quarterly ESG reports to give clients a profound insight of ACTIAM’s ESG progress and
integration. Quarterly ESG reports are published on our website (in Dutch) and also written
on a client-to-client base.
From insight to impact
ACTIAM strives for transparency and wants to give insight in the funds’ investments.
Ultimately we want to report on impact, but the first step is reporting about the outcomes of
investment decisions. One example is the latest quarterly ESG report, where we report on the
percentage of companies in a specific fund (European equity fund) that have a climate, water,
waste and biodiversity policy, versus the percentage of companies in the benchmark with a
such policies. We also mention the relevant Sustainable Development Goal. Below is the chart
that provides insight into companies with a climate policy. The outer ring represents the
percentage of companies with a climate policy in our portfolio; The inner ring represents the
percentage of companies with a climate policy in the benchmark.
Presentations and publications
ACTIAM organises conferences,
seminars,
and
presentations
regarding responsible investment,
impact investing, ESG, and other
topics. During the first half of
2016,
ACTIAM
gave
13
presentations, joined 9 panels and
2 round tables, and published 11
articles
about
responsible
investment, green bonds, ESG
integration in fixed income
portfolios, deforestation, water
and carbon risks, and the antibiotics use in the meat industry. In June, for example, ACTIAM
joined a panel discussion together with Aegon, ABN Amro, and Oekom Research to discuss
carbon risks. Topics that were discussed during the panel, were companies’ climate approach,
positive and negative selection, green bonds activities, stranded assets, and carbon
footprinting.
The Head of the ESG Team, Dennis van der Putten, regularly writes columns for
Fondsnieuws.nl, aimed at raising awareness regarding ESG related issues and responsible
investment. Fondsnieuws.nl is an independent journalist platform, which focuses on
investment professionals. Columns published in Feburary 2016,
“Waar is hier de
nooduitgang?” (Where is the exit?) and “Klimaatverandering ook risico voor financials”
(Climate change also a risk for financials) discuss how the financial sector faces risks as a
result of the energy transition and stranded assets. The financial sector plays an important
role in facilitating investment needed for the energy transition. However, financial
corporations could face significant risks if CO 2-related assets were to depreciate as a result
of stricter climate policies. The column “Trump is the bomb,” published in September 2016,
discusses the Paris Agreement, the requirements for the agreement to enter into force,
countries’ carbon reduction targets, and the how the election of a new President in the United
States can influence the Paris Agreement.
Besides raising our direct clients’ awareness about climate risk,
we actively seek to raise our clients’ employees’ and
beneficiaries’ awareness as well. Together with our client,
Zwitserleven, we use presentations and publications as means
of communication. The latest brochure “Puur voor later”
(English: Pure for later) aims at raising readers’ awareness in
regard to responsible investment and green bonds (see
attachments). During this year’s “Pension Event 2016,” the
Head of ACTIAM’s ESG Team, Dennis van der Putten, gave a
presentation (see link) about the need for responsible
investment and climate risk. Topics that were discussed during
the presentation are countries’ reduction objectives, recent
media attention in the Netherlands, and its impact on
industries and investment returns. As part of employee
training, Zwitserleven’s new employees must pass an online training. PRI, VBDO, Montréal
Carbon Pledge, and the Paris Pledge for Action are some of the topics that employees are
trained and examined about.
ACTIAM also organises its own
seminars. In July 2015, for example,
ACTIAM organised a roundtable
discussion
about
the
climate,
environmental, and financial risks
associated with offshore oil drilling in
the Arctic. Participants included other
investors, NGOs
(for
example,
Greenpeace and Follow This), clients,
representatives from the oil sector, academics and other experts. During the debate, the
individual weighting of these risks and the best approach to reduce these risks was discussed.
Some of the key discussion points and findings were that investors generally find engagement
a good tool to influence companies’ behaviour; the risks of Arctic oil drilling over the medium
to long term are not well outlined and academics’ knowledge is not sufficiently incorporated
into investor studies; there was no unanimous opinion about the acceptability/manageability
of risks; in the context of the 2 degrees scenario, there are serious concerns about Arctic oil
exploration.
Internal Communication
To improve internal communication on ESG, ACTIAM introduced an internal ESG newsletter,
which is sent to all employees every 2-3 months, improved ESG communication on the
intranet, and informs employees on updates relating ESG integration during quarterly
employee meetings. ESG is a fully integrated aspect of board meetings. Further, board
members are educated on responsible investing with focus on climate change. Furthermore,
joining initiatives such as the Montréal Carbon Pledge and the Paris Pledge for Action were
communicated extensively to ACTIAM’s employees. An infographic (see attachment), with the
aim of raising awareness on ACTIAM’s focus topics water, land, and climate and its strategy
“From Insight to Impact” was created. The infographic will be shared on the website, with
employees and clients, and hung up around ACTIAM’s buildings in the near future.
Future
Looking forward, ACTIAM will continue to contribute to the Paris Agreement to collectively limit global
warming to well below 2°C. Further, ACTIAM is going to continue to collaborate with other investors
and regulators/policy makers to improve the sector’s approach to climate change. Collaborative
engagements will be mainly through the PRI Collaboration Platform.
Future efforts will aim at improving ESG communications internally. Wishes to integrating the whole
company and establishing climate-related discussions were raised. Besides measuring our portfolio’s
carbon footprint, ACTIAM intends to improve its current impact measurement. A possible indicator to
measure on, for example, the amount of renewable energy generated by companies that we invest
in. This would especially be interesting for green bond projects, which often disclose information on
its social impacts as well. At present, we disclose information on our equity funds’ carbon footprint
and try to visualise it by comparing the absolute CO 2 emissions to km driven with a passenger car,
wishes by a client was raised to disclose information on a client-per-client basis.
Additionally, ACTIAM is considering the possibility of conducting a scenario analysis to assess which
companies’ strategies are aligned with the Paris Agreement to collective limit global warming to well
below 2°C.
Appendix
Methodology: Measuring our Carbon Footprint
Methodology for Equity and Corporates (FI)
Proper consideration is necessary to determine which CO 2 data provider to use. Three parties
(Trucost, Southpole, and Bloomberg) were contacted. During the assessment, we looked at the
coverage and quality of data provided. A fictional portfolio was sent to all three parties with +/- 90
companies of different sectors, size, and availability of CO 2 data. This made it possible to look at
differing outcomes in a fair manner.
The conclusions were as followed:
1. Data provided by Southpole and Trucost relatively correspond the most
2. Per provider, the biggest polluters, measured in CO2t-equivalent, are situated relatively close
to each other (less than 20% relative difference)
3. Biggest differences lie in the moderate chosen CO2 model, with relatively low emission
4. Total CO2 emissions of the requested portfolio are very similar
CO2
Party
Advantage
Disadvantage
Bloomberg
When no benchmark is purchased,
No extra costs; fast to implement; then a lot of data is missing/ Only
known data provider; great coverage Scope 1&2; less coverage on water
and land; little historical data
Trucost
Clearly defined data. In addition to
Includes costs. Data quality is
Scope 1 and 2 CO2 data, it also includes
another point. Additional actions
water and land variables. Great
are necessary to organise the data
historical coverage
Southpole
Has a tool
coverage
in
Bloomberg;
Includes costs. Data quality is
great another point. Additional actions
are necessary to organise the data.
Data is focused on sales
As the most differences in the data are incorporated in the model, no additional costs apply, and our
acquaintance with the use of Bloomberg, the choice was made to keep Bloomberg.
Carbon-data Methodology Bloomberg for Equity and Corporates
The CO2 emissions is based on data found and formulated by Bloomberg. The following methodology
is applied:
a.
b.
c.
d.
Bloomberg-collected Total GHG emissions; if not available Bloomberg-collected Total CO2 emissions; if not available CDP collected Total GHG emissions; if not available Estimated data; Total GHG is here defined as Scope 1 + Scope 2 emissions. Total CO 2 emissions
are a subset of GHG emissions and for most companies CO2 will compose >90% of Total GHGs.
By using the above methodology, it is possible to obtain the value for CO2 for all businesses. When a
business calculates its emissions using point d, one makes use of statistical data from an external
source. Here we look at similar companies (same size, same industry etc.) to assess the CO2 value.
The model identifies which companies this applies to.
The information provided by Bloomberg concerns “CO2 equivalents”. This means that emissions of
different greenhouse gases of a company are converted to the climate impact of CO2. Thereby, it is
possible to work with one digit rather than a number for each greenhouse gas.
To ensure data quality, Bloomberg indicates that data evaluations are done on a company-percompany base. Evaluations are based on indicating:
1. Errors in point/comma;
2. Is there any major change on an annual basis in the figures? If so, the company will be
contacted
3. When comparing the data with the median of the industry, which the company operates in,
it is not allowed to be double the standard error
4. Bloomberg makes a conversion to CO2t-equivalent
5. The model indicates the percentage of companies for which data is calculated using models
The following steps are required:
1. Collecting data
2. Cleaning up data
Within Bloomberg, the data points for the securities are delivered in the currency in which the
company reports. That is why all data must be converted into Euro, in order for all data to be
comparable with each other. The reason that it is converted into Euro’s is because ACTIAM’s funds
are presented in Euro’s. The following steps must be taken.
i.
Note currency of the company (CRNCY)
ii.
In the conversion table, search for the correct conversion value
iii.
Apply the conversion to the following variables:
- Current Enterprise Value
- Long Term Borrowings
- Current Market Cap
- Short Term Borrowings
- Sales
This can be achieved by using of the following formula: 𝐶𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 =
𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒
𝐶𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝑅𝑎𝑡𝑒
3. Calculate Enterprise Value
𝐸𝑉 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝 + 𝑆ℎ𝑜𝑟𝑡 𝑇𝑒𝑟𝑚 𝐵𝑜𝑟𝑟𝑜𝑤𝑖𝑛𝑔𝑠 + 𝐿𝑜𝑛𝑔 𝑡𝑒𝑟𝑚 𝐵𝑜𝑟𝑟𝑜𝑤𝑖𝑛𝑔𝑠8
4. Calculate CO2 emissions
To calculate the carbon emissions of funds, the following formula can be used:
𝐶𝑎𝑟𝑏𝑜𝑛 𝐸𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠 = ∑ 𝐴𝑏𝑠𝑜𝑙𝑢𝑡𝑒 𝐶𝑂2 𝐸𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠 − 𝑝𝑒𝑟 𝑐𝑜𝑚𝑝𝑎𝑛𝑦
Where, per company, the variables can be calculated in the following way:
𝐴𝑏𝑠𝑜𝑙𝑢𝑡𝑒 𝐶𝑂2 𝑒𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠 = % 𝑜𝑤𝑛𝑒𝑟𝑠ℎ𝑖𝑝 × 𝐶𝑂2 𝑒𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠 (𝑠𝑐𝑜𝑝𝑒 1&2)
% 𝑂𝑤𝑛𝑒𝑟𝑠ℎ𝑖𝑝 = 𝐴𝐶𝑇𝐼𝐴𝑀 𝑡𝑜𝑡𝑎𝑙 𝑒𝑞𝑢𝑖𝑡𝑦 𝑣𝑎𝑙𝑢𝑒 ÷ 𝐸𝑛𝑡𝑒𝑟𝑝𝑟𝑖𝑠𝑒 𝑣𝑎𝑙𝑢𝑒9
8
9
For banks, postal deposits are also included
In the case of banks/insurers: long-term borrowings + market capitalisation
𝐴𝐶𝑇𝐼𝐴𝑀 𝑡𝑜𝑡𝑎𝑙 𝑒𝑞𝑢𝑖𝑡𝑦 𝑣𝑎𝑙𝑢𝑒 = 𝐴𝑢𝑀 × 𝐹𝑢𝑛𝑑 𝑤𝑒𝑖𝑔ℎ𝑡
As previously mentioned, it is possible that data is not available. The choice has been made at ACTIAM
to still gave the company a value. If this is the case, we take a proxy. This proxy is based on the
GICS/Iboxx sector average value, in which the company operates in. If the company’s sales are known,
you can multiply the sector’s average CO2/sales by the company’s sales to get a CO2 value estimate.
Proxy per industry =
∑ 𝐶𝑂2−𝑒𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠 𝑝𝑒𝑟 𝑖𝑛𝑑𝑢𝑠𝑡𝑟𝑦
∑ 𝑆𝑎𝑙𝑒𝑠 𝑝𝑒𝑟 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑝𝑒𝑟 𝑖𝑛𝑑𝑢𝑠𝑡𝑟𝑦
5. Comparing CO2 Emissions with the Benchmark:
In order to make a good comparison with the benchmark, the choice has been made to obtain the
weights of the benchmark from Dimension. Subsequently, the same calculation is made as with our
own portfolio only this time with the weightings of the benchmark. The AuM of the portfolio is kept
the same. Thus by only changing the weightings of the positions, we only look at what the absolute
CO2 emissions of the portfolios were if we invested according to the benchmark.
Hereby it is possible to face off the benchmark in the right way against our own portfolio, we thus
can compare apples with apples.
A benchmark can best be described as a standard on which investors want to compare the performance
of their own portfolio.
An overview of the used benchmarks per fund can be found below:
ACTIAM Funds
ARIFEE
ARIFENA
ARIFEEA
ARIFEPA
ARIFENAB
ZL VASTGOED
RL EURO
SNS EURO
ZL EURO
ZL NL
SNS NL
RL NL
Benchmark
MSCI Europe
MSCI North - America
MSCI Europe
MSCI Pacific
MSCI North - America
GPR250 - Europa UCITS
MSCI Europe
MSCI Europe
MSCI Europe
AEX
AEX
AEX
The reason that these benchmarks are used is because the names which are in ACTIAM’s funds have
the most similar composition as the names which are in these funds. The reason for this is that ACTIAM
funds are based on the corresponding benchmarks.
This makes it possible to be determine in a fair way whether ACTIAM performs better than the
comparable list.
The benchmark in this case only has an influence on the CO2 emissions data
Calculating 2-degree progression
Within ACTIAM, a commitment has been made to contribute to the climate problem. Hereby we aim
for the 2-degree scenario. Which for ACTIAM comes down to the following. ACTIAM strives towards a
25% reduction in CO2-equivalent emissions of the total portfolio in 2025 versus 2010. To not be
dependent on an in- and outflow of capital in our investment portfolios, this reduction target has
been converted into invested Euro. In 2040, this percentage must rise towards 40%. The conclusion of
the IPCC, an international network where climate scientists from all over the world work together,
serves as building blocks for the chosen percentages. The IPCC states that if the concentration of
greenhouse gases in the atmosphere stabilise at around 450ppm by 2100, then there is a chance of
more than 66% that the rise in global temperature stays below 2ºC. To reach a concentration level of
450 ppm in 2100, the global greenhouse gas emissions must be 40% to 70% lower in 2050 than in 2010.
ACTIAM uses the minimum value of 40% for the year 2040.
Methodology
Hereby it is necessary to address how ACTIAM was looking back in 2010. From this point we can keep
track on a biannual basis how ACTIAM progresses in comparison to the base year.
For the following equity funds, there has been a calculation made since 2011: ZLNL / ZL Europees
Aandelenfonds / ZL Vastgoed / ARIFEE / ARIFEPA / ARIFENA / RLNL / RL Europees Aandelenfonds /
SNSNL / SNS Europees Aandelenfonds. Currently, a calculation is being set up for Zwitserleven Credit
and the bond portfolios.
The reason that measurement takes place since 2011 is that that was the first point of which
Bloomberg had CO2 data. ACTIAM does choose to uphold their chosen reduction targets, so as to
maintain a progressive stand point. From this checkpoint onwards, we look at how carbon-intensive
our portfolios are. This means that ACTIAM looks at how carbon intensive each Euro invested is. The
reason that this was chosen, is that ACTIAM is of the opinion that when AuM rise, we are also allowed
to emit more in absolute terms. Here we take the position that we want to see a reduction on the
basis of how carbon intensity of our portfolios.
To measure the points, by the end of each year, each time the positions of the portfolios are
requested. The end of the year here refers to the data 31-12, where the following years have been
included: 2011, 2012, 2013, 2014 and 2015. It was decided to keep the same methodology
retroactively as how a normal CO2 calculation would be made. By applying the same methodology we
can, over the years, compare portfolios with each other.
During the calculation, large variations within the portfolios became visible, causing a meeting to be
planned with the equity and fixed income team. The conclusion was made that a large influence is
made on AuM by market movements in our portfolios. When for example a positive market movement
takes place, our AuM will proportionally rise with it. However, the CO2 emissions of the company will
stay the same. Hereby our investments will become less CO2 intensive (less CO2 per million euro
market value), while nothing happens to the CO2 emissions and pursuits of the company.
Because of this, it has been chosen to not include market movements (or profit from the concerned
portfolio) in the calculation. This leaves us with the pure value of the made choices, where the inand outflow are also taken into account.
The following calculations are made, per portfolio, to be able to compare the correct carbon
intensities with each other.
Step 1: Search for the return at year end
Step 2: Add the percentages from 2011 cumulatively
Example year 2013:
(1 + % return 2011) * (1 + % return 2012) * (1 + & return 2013) -1
Step 3: AuM year / percentage step 2
Step 4: Calculate carbon intensity for the concerned year:
Absolute CO2 – emissions portfolio / AuM step 3
Step 5:Compare carbon intensity over the years
(Carbon – intensity year / base year carbon intensity) – 1
Methodology Sovereigns:
The following formula has been formulated:
𝑃𝑟𝑜𝑥𝑦 𝐺𝑜𝑣𝑒𝑟𝑛𝑚𝑒𝑛𝑡 𝐵𝑜𝑛𝑑 =
𝐷𝑖𝑟𝑒𝑐𝑡 𝐸𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠 + 𝐼𝑛𝑑𝑖𝑟𝑒𝑐𝑡 𝐸𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠
𝐺𝑜𝑣𝑒𝑟𝑛𝑚𝑒𝑛𝑡 𝐷𝑒𝑏𝑡
Direct emissions: State institutions’ Scope 1 emissions
Indirect emissions: State institutions’ Scope 2 emissions
Government debt: Government’s debt at the end of the year
Calculation of indirect emissions (Scope 2):
To calculate Scope 2 emissions the following methodology is applied:
Step 1: Calculate government presence in the energy sector
𝐶𝐹 𝐺𝑜𝑣𝑒𝑟𝑛𝑚𝑒𝑛𝑡 𝑡𝑜 𝐸𝑛𝑒𝑟𝑔𝑦 − 𝑠𝑒𝑐𝑡𝑜𝑟
𝐶𝐹 𝐸𝑛𝑒𝑟𝑔𝑦 − 𝑠𝑒𝑐𝑡𝑜𝑟
Step 2: Calculate the energy sector’s total CO2 emissions:
- Energy available for final consumption per kWh x Ton CO2-eq/kWh per country
-
gCO2/kwh, taking into account:
- The country’s energy mix
- Import and export of export
Data provider
To calculate the above formula, information is needed. The following parties were analyised:
Advantage
Data is available for all aspects
of the calculation, publicly
available, independent party
Disadvantage
Last availableCO2data is 2012, data is
only available for
Europe
GTAP
Global coverage
Outdated data, new
data is only available
upon payment
EDGAR
Emissions of a complete country,
data available from 1970 - 2014
No division of scope,
industry
RE-DISS
Import and export is included;
measured and monitored
annually
Only includes Europe
Eurostat
It was decided upon to use the data that is available on Eurostat and include RE-DISS’ residual mix
data. This is for the completeness of the available data and the inclusion of the country’s energy
import and export.
The following data points are retrieved from Eurostat:
NACE-classifications:
After looking at this sector description, the conclusion was made that NACE Rev.2 section O “Public
administration and defence; compulsory social security” should be used as the correct sector. For the
calculation of Scope 2, the classification D “Electricity, gas, steam and air conditioning supply” is
used.
Economic denominator:
To determine what the correct economic denominator is, the following were considered:
Economic denominator
Advantage
Gross Debt
Includes government bonds
GDP
Balance
Sheet
Disadvantage
Does not include all government income
This is the entire value of a country and not just the
investment that can be made through bonds
Includes
the
entire
government’s ability to raise
capital
ACTIAM does not invest in equity
Within ACTIAM, the choice was made to use the gross debt indicator. The most important reason being
that this the capital that ACTIAM as an investor can invest in.
Gross debt: to get to the key figure per country, it is necessary to offset the found CO2-eq emissions
against the economic value of a government. For this, it was chosen to use the gross debt per
government. This data point is also available on Eurostat. The description is as followed: “The
indicator is defined (in the Maastricht Treaty) as consolidated general government gross debt at
nominal (face) value, outstanding at the end of the year in the following categories of government
liabilities (as defined in ESA 2010): currency and deposits, debt securities and loans. The general
government sector comprises the subsectors: central government, state government, local
government and social security funds.”
Direct Emissions – Scope 1:
Air emissions accounts by NACE Rev.2 activity
This variable describes the GHG and air pollutants of all sectors. This data is based on Air Emission
Account (AEA), which is collected each year by the European Environment Agency, which is based on
Regulation (EU) ) 691/2011 consolidated version (Annex I). This means that the reported data are all
reported using the same methodology as intended under the United Nations Framework Convention
on Climate Change (UNFCCC)) and United Nations Economic Commission for Europe (UNECE).
GHG emissions are split in the following categories. The reason why these emissions are included is
because these are the GHG emissions that are considered the most detrimental to the environment.
airpol
CH4
CH4_EQ
CO
CO2
CO2_BIO
HFC_EQ
N2O
N2O_EQ
NH3
NMVOC
NOX
PFC_EQ
PM10
PM2_5
SF6_EQ
SOX
Meaning
Methaan
Methaan (CO2 equivalent)
Carbon monoxide
Carbon dioxide
Carbon dioxide from biomass
Hydrofluorocarbones (CO2 equivalent)
Nitrous Oxide
Nitrous oxide (CO2 equivalent)
Ammoniak
Non-methane volatile organic compounds
Stikstofoxiden
Perfluorocarbones (CO2 equivalent)
Fijnstof
Particulate Matter (fijnere fractie van fijn
stof
Sulphur hexafluoride (CO2 equivalent)
sulfur oxide
Relevant?
X
X
x
X
X
X
X
Points of improvement:
Within PCAF, ACTIAM has chosen, in collaboration with ASN Bank, to set the standard for the
government bond methodology. A few points arose that could be added to the model.
 Add state-owned companies to the calculation
 Methodology for Non-European countries:
At present, ACTIAM invests solely in two other countries outside of Europe: the U.S. and Canada. To
collect the respective CO2 data, a database is used that is focused on Europe. In agreement with ASN
bank, we tried to find a way to calculate the CO2 emissions for non-European governments. This will
be important if ACTIAM decides to invest in government bonds outside of Europe. The following actions
are taken at the moment:
a) Check GTAP
b) Check OECD and World Bank for CO2 data
c) Check EDGAR for accurate data
d) Check EORA multi-region input-output table
Methodology for Regions:
the same methodology is being used as sovereigns. However when information is not available about
the region, the carbon intensity number for the country where the region is located will be used as a
proxy.
Methodology for Supranationals:
the same methodology as equities applies to Supranationals. An addendum to the methodology is;
when CO2-number is not know we used the “proxy” as calculated in corresponding GICS-category and
area (Europe defined as our ARIFEE fund, Pacific defined as our ARIFEPA fund, North – America as our
ARIFENA fund).
Methodology for Covered bonds: the same methodology as equities applies to Covered bonds. An
addendum to the methodology is; when CO2-number is not know we used the “proxy” as calculated
in corresponding GICS-category and area (Europe defined as our ARIFEE fund, Pacific defined as our
ARIFEPA fund, North – America as our ARIFENA fund).
Methodology for Agencies: the same methodology as equities applies to Agencies. An addendum to
the methodology is; when CO2-number is not know we used the “proxy” as calculated in corresponding
GICS-category and area (Europe defined as our ARIFEE fund, Pacific defined as our ARIFEPA fund,
North – America as our ARIFENA fund).
Methodology for Guaranteed financial: the same methodology as equities applies to Guaranteed
Financials. An addendum to the methodology is; when CO2-number is not know we used the “proxy”
as calculated in corresponding GICS-category and area (Europe defined as our ARIFEE fund, Pacific
defined as our ARIFEPA fund, North – America as our ARIFENA fund).
Methodology for Public banks: the same methodology as equities applies to Public Banks. An
addendum to the methodology is; when CO2-number is not know we used the “proxy” as calculated
in corresponding GICS-category and area (Europe defined as our ARIFEE fund, Pacific defined as our
ARIFEPA fund, North – America as our ARIFENA fund).
Methodology for ABS autos: ACTIAM calculates a carbon intensity number based on the average
emission of their cars within their ABS portfolio. Based on a study ACTIAM knows what the average
emission per KM per car manufacturer is. ACTIAM multiplies this with the average KM driven of all
lease car within representative portfolios. This number will be the TON CO2-eq. The found number
then is divided by the amount outstanding within this fund (and multiplied with 1 million) to arrive at
the carbon intensity number.
Methodology for RMBS NL: ACTIAM calculates a carbon intensity number based on the average division
of energy labels within the Netherlands. As we know the division of energy labels we can link them
to an average use of electricity and gas of these energy labels. The use of electricity and gas are
transformed with a CO2-emission factor to a CO2-equivalent per energy label.
Based on the division of energy labels ACTIAM can calculate, based on their amount of holding in
mortgages, how much houses are allocated to every energy label.
The amount of energy labels is then multiplied with the found CO2-equivalent per energy label and
added-up together and is the TON CO2. This number is then divided by the value of our own mortgage
portfolio (and multiplied with 1 million) to arrive at the carbon intensity number.
Methodology for RMBS other than the Netherlands: Since there is not as detailed information know as
in the Netherlands, the carbon intensity of the RMBS Netherlands is being used.
Methodology for MBS US student loans: ACTIAM calculates a carbon intensity number based on the
emission of an American person. ACTIAM first calculates the emission per capita of America.
Then we calculate how many students the fund reaches. This number is multiple by the emission per
capita and we arrive at the TON CO2- eq. The found number then is divided by the amount outstanding
within this fund (and multiplied with 1 million) to arrive at the carbon intensity number.
Methodology for SME (NL, SP, IT): ACTIAM uses the carbon intensity number of their ARIFEE fund. This
number is retrieved by using the equity methodology to find the absolute carbon emission of this fund
and divide it by the asset under management (and multiplied with 1 million) to arrive at the carbon
intensity number.
Methodology for Green Bonds: ACTIAM only uses data that is officially reported on by the bond issuer.
At present, avoided carbon emissions are not incorporated in the carbon accounting.
Green Bond Policy
ACTIAM is an active player in the bond market and is aligned with different initiatives. As such, ACTIAM
holds a seat in the executive committee of the Green Bond Principles (GBP) in which transparency
guidelines are put in place for the issuing of green bonds. Next to this, ACTIAM has become a partner
of the Climate Bonds Initiative (CBI) and actively contributes to the development of standards. Such
standards make it easier for investors to see how “green” a green bond is.
This policy paper concerns the choices ACTIAM makes in the buying of green bonds aimed at creating
a positive impact. As a basis to their choices, ACTIAM takes into account the GBP and CBI standards.
Subsequently, greater focus in laid on ACTIAM’s focus themes of climate, land and water.
ACTIAM has defined three focus themes, including a number of relevant activities and technologies,
in which green bonds can positively contribute. These are:
1. Energy & Climate
 Utilities
o Fuel switch from coal to gas
 Sustainable energy
o Solar and wind energy
o Tidal and wave energy
o Biofuels
 Network management
o Intelligent electricity networks
o Energy storage
o Transformers at sea
 Financial institutions
o Green mortgages and (real estate) lending
 Industry
o Cogeneration
o Fuel switch options
o Reusable residual heat
 Transport
o Urban electric rail
o Hydrogen and electric cars
o Electric/hydrogen recharge points
o Hybrid cars and natural gas powered cars
o High speed rails
 Built environment
o Renovation of housing stock
2.






Land
Afforestation and reforestation
Sustainable forest management
Reducing deforestation
Soil restoration
Protection of biodiversity
Promoting animal welfare through organic farming
3.



Water
(Waste)water management and more efficient (waste)water purification
Clean water projects
Climate adaptation; water storage, climate buffers, river widening
What does ACTIAM define as a green bond and what not?
The ability to meet guidelines of the GBP over its process transparency does not give ACTIAM a clear
cut answer to this question. GBP is, in comparison to the CBI, not a standard which can determine
whether a projects can be considered as green. For some activities and technologies, there have been
CBI standards developed, so that investors can rate the impact of the corresponding bond (see
attachment 1). It is the case that once money has been lend and is spend on projects, it is locked in.
It can (in the meantime) not be used anymore on projects that could possibly make a greater positive
impact on the environment. It thus is necessary that also within the same type of activity or
technology, the project with the most ambitious and believable climate targets should be chosen.
Only a few of the green bonds that have been analyzed by ACTIAM are certified according to the CBI
standards. Possible reasons for the lack of certification could be: certification costs which publishers
are not prepared to pay, the strict criteria which CBI holds itself to, and too little pressure by investors
on publishers to meet CBI standards. Additionally, green bonds usually bundle together more than one
activity, yet currently not all activities have a clearly defined set of criteria. As such, internal research
by ACTIAM themselves remains necessary for the company to be able to give proper judgment over
the greenness of the bond. This investigation with regard to greenwashing is summarized in table 1.
Steps
Before issuing of green bond
1. Is the publisher of the
earmarked
green
bond
excluded on the basis of
ACTIAM’s
fundamental
investment principles?
2. Is the publisher of the
earmarked green bond a worst
offender or aligned with
controversial projects?
3. Are the financed projects
present on the exclusion list of
CBI
4. Does the bond pass ACTIAM’s
test on positive impact and
does the bond meet GBP
principles?
5. Does the publisher have a
credible, broad and ambitious
transition strategy on the
themes of climate, water and
land?
After issuing of green bond
6. Does the bond pass ACTIAM’s
test on positive impact?
Consequences of response
Yes
No
ACTIAM can’t invest in the
green bond
Go to step 2
ACTIAM can invest in the green
bond if ring-fencing is credible
and robust
Go to step 3
ACTIAM does not define the
bond as a green bond and thus
does not give a green label and
bonus ESG-score to the related
publisher
Go to step 5
Go to step 4
ACTIAM gives a green label and
the maximum bonus of +20 for
the ESG-score regarding the
concerned publisher. Go to
step 6
ACTIAM reports on the realized
positive impact
ACTIAM does not define the
bond as a green bond and thus
does not give a green label and
ESG-score to the related
publisher
ACTIAM gives a green label, but
the company only receives a
bonus +10 on their ESG-score.
Engagement only set up once
bond has been purchased
Green label remains, but
engagement is set up in case
evidence of “positive impact”
is not clear
In step 1 ACTIAM first checks whether the publisher of the green bond meets the fundamental
investment principles. Only when this minimum case met will ACTIAM move to steps 2 to 5, for both
worst offenders and not worst offenders who would like to bring green bonds on the market. Worst
offenders are publishers of green bonds with relatively a lot of controversy surrounding its behavior
and/or water and energy intensive activities. The non-green bonds of worst offenders are excluded
for the actively managed bond funds of ACTIAM.
In step 3, ACTIAM undertakes a substantive assessment of green earmarked bonds. Green earmarked
bonds for financing of activities, projects or technologies are rejected if these are present on the
exclusion list of the CBI Taxonomy list. As such, all (energy efficient) projects in the area of (clean)
coal, (shale) gas, oil and nuclear energy are excluded. In a number of circumstances will ACTIAM
deviate from this policy and will require additional demands. Without being exhaustive, ACTIAM rates
the following circumstance as unsuitable for financing by green bonds:






Building of new are working on existing dams (> 20MW), unless the project is certified
according to the Clean Development Mechanism standards
Energy efficiency upgrades of gas plants, unless the thermal efficiency will reach above 80%
Production of fuels from biomass, including fuel switch from coal to biomass auxiliary, unless
CBI standards for biofuels (attachment 1) are met
Agriculture activities, unless CBI standards for agriculture, forestry and other land usage
(attachment A) are met
Sounding and drilling for deep lying geothermal, unless projects meet CBI standards for
geothermal (attachment A)
Forestry projects for CO2 compensation, unless projects meet CBI standards for agriculture,
forestry and other land usage (attachment A)
In step 4 green bonds are checked if they meet the 4 GBP pillars of process transparency: (1) use of
funds, (2) process for project evaluation and selection, (3) management of the funds and (4)
reporting. With the help of CBI technology standards (attachment A), ACTIAM looks as to whether the
goals are ambitious enough compared to the baseline. These goals could be: number of hectares of
sustainably managed forests, reducing water pollution, improving energy efficiency (CO2 emissions
avoided), and use of renewable energy (installed capacity). ACTIAM does not define the bond as green
if the process transparency and claimed positive impact is deemed insufficient.
In step 5, ACITAM focuses its attention towards the improvement of the possibly questionable green
image of publishers of green bonds. For worst offenders in the sectors of oil and gas, mining and
energy, this questionable image is obvious. Besides, banks can play an important role in the financing
of these industries. At the same time, banks are increasingly giving out more green bonds.
For the publishing of green earmarked bonds, ACTIAM asks these publishers to be transparent over
their upcoming transition strategy, so that ACTIAM can rate any possible changes with regard to
climate friendly business practices and/or sustainable water and land usage, on their credibility and
level of ambition.
ACTIAM provides green bonds with a bonus on their ACTIAM ESG-score from +10 to +20, depending on
the reaction and participation of publishers in initiatives such as the Carbon Disclosure Project and
Voluntary Principles for mainstreaming climate action within financial institutions. A bonus of +10 will
be given in case of doubt remaining over the existing transition strategies and investments which are
necessary for the transition to a business which is less dependent on fossil fuels and water.
After the relevant bond is released and purchased, ACTIAM will start an engagement process which
should indicate if the publisher is capable to dissolve any doubts ACTIAM has with regard to their
transition strategy. If indeed the publisher does play an active role in the transition towards more
sustainable business practices, only then will the publisher still get the maximum bonus of +20. In
case there has been no improvement, then the bonus ACTIAM ESG-score will remain at +10. Step 6
also tests the reporting requirements from step 4, where the CBI standard version 2.0 is used as
guideline for the answers on the question whether positive impact has actually taken place.