Active Ownership
21
Engagement
We believe that improved management of sustainability risks and opportunities is vital to creating returns with responsibility, and that engagement can result in competitive advantage, increasing the likelihood of companies being successful in the long run – benefitting companies, clients and society at large.28
Engaging with our investee companies enables us to address material sustainability risks and opportunities.
international norms or conventions or those involved in ESG- related incidents. Significant deviation from the relevant peer universe on PAI metrics may also trigger engagement. 3. Thematic engagement This type of engagement is initiated for investee companies with the most material exposure to one or several of our four focus areas: • Biodiversity • Climate • Good governance • Human rights 4. Political engagement We may participate in activities that can be considered as political engagement, including public policy dialogues with governments as well as public authorities on specific ESG issues, through feedback on regulations and expressing support to policy makers through public endorsement in investor statements. These type of activities are subject to careful consideration and diligence. We always assess the appropriateness of an activity that could be considered as political, before we decide to enter into it, and always assess the potential impact of such activity. Our activities focus solely on ESG issues, and do not intend to favour any specific political party or ideology. We believe that our participation in politi- cal activities can contribute to long-term value creation and have a positive impact on society. Each theme is closely aligned with the SDGs and relevant ESG risks and has been selected and defined through close collabo- ration between ESG specialists, portfolio managers, financial analysts and clients. In addition to engagements with compa- nies, we are increasing our work in the sovereign engagement sphere. All of our engagements are tracked in our in-house database and reviewed by the RI team to monitor progress.
Our engagement activities combine the perspectives of portfo- lio managers, financial analysts and ESG specialists to form a holistic opinion and establish coherent engagement objectives. Portfolio managers actively participate in engagement activi- ties together with our ESG analysts. Engagements often run over several years and are carried out either by NAM alone or in collaboration with other institutional investors. During the engagement period, we conduct regular meetings with the company and track progress against pre-defined engagement objectives. Engagement may entail a dialogue with the companies’ executive bodies, influence on board composition, cooperation with other investors on joint voting at annual general meetings, and generally keeping a strict eye on the company. The dialogue allows us to put forward our expec- tations on corporate behaviour and to support companies in enhancing their sustainability performance. Progress reports and outcomes of the engagement are communicated to port- folio managers and financial analysts, allowing the information to be considered in investment decisions. In cases where an engagement relates to critical issues for the specific investment case or the general investibility of a company, failure to meet expectations will entail escalation of the issue through other stewardship activities, such as voting, and ultimately the con- sideration of quarantine or divestment.
Our engagement activities typically fall into one or more of four categories:
1. Investment-led engagement This relates to material ESG-related risks or opportunities identified by portfolio managers, financial analysts and ESG analysts via our company assessments.
2. Norms- and incident-based engagement (including PAI): These engagements cover companies that are in breach of
NAM’s engagement activities are carried out on behalf of all our funds, and follow this process:
Research and engagement dialogues/meetings
Engagement selection
Engagement plan with objective
Report progress or escalate
28) There can be no warranty that an investment objective, targeted returns and results of an investment structure is achieved. The value of your investment can go up and down, and you could lose some or all of your invested money.
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