RI Annual Report 2023

Active Ownership


The engagements In Jan 2023 we joined a collaborative engagement campaign targeting producers of hazardous chemicals such as PFAS. This engagement is coordinated by the Investor Initiative on Hazard- ous Chemicals (IIHC), which is supported by the Swedish NGO ChemSec, and draws upon ChemSec’s benchmark assessments, ‘ChemScore’, of the 54 largest chemical producers in the world. During the year, we became members of the Steering Commit- tee of the IIHC and were leads on three of the engagements, acting as support on one further engagement. In November 2023, the new round of ChemScore report cards32 were released and in tandem the companies assessed in the report received letters from the collaborative initiative. In Q2 2023, we initiated our PFAS engagement program, which runs parallel to our involvement with IIHC. Since then, we have held multiple meetings with producers and other companies with exposure to PFAS to better understand their exposure, the future of the business and to relay the expectations depend- ing whether they are producers, industrial users or consumer- facing users: • Producers: we see engagements with producers as the most difficult as PFAS are frequently a core element of their business. Moving away from PFAS would therefore presum- ably result primarily from regulatory action. Nonetheless, some major manufacturers have exited the line of business citing increased stakeholder pressures as well as regulatory pressures • Industrial users: we hope to find more room to nudge them in de-risking their business by reducing exposure to PFAS – we also see this group as being significantly impacted by regulatory developments • Consumer-facing users: we clearly voice our opinion that these compounds should not be in products and that com- panies should move away from them as soon as possible – both in the interest of their consumers but also to safeguard their reputation and to avoid litigation

In total, both through IIHC and through our internal PFAS engagement stream, we’ve been in dialogue with 13 companies on the issue – mainly on the producer side. Given the wide range of use cases, the complex supply chains highest and recent intense regulatory scrutiny, we expect especially the industrial users to garner more attention in the year ahead. Moving beyond PFAS producers, our engagements have also focused on compa- nies exposed to the risks of PFAS through no fault of their own, such as within the waste management and environmental ser- vices sector, and which may ultimately develop solutions for the safe disposal or destruction. Supporting public policy In May 2023, we took park in a discussion through ChemSec with the cabinet of EU Commissioner Thierry Breton in Brus- sels and with companies actively working on sustainable alter- natives for hazardous chemicals. As the only investor present, a representative from NAM’s Responsible Investment team presented our views on chemicals regulation within the EU as well as the necessity of clear classification frameworks for sus- tainable or ‘green’ chemistry. Furthermore, we were able to discuss the importance that ESG reporting in the chemicals industry plays for us as investors at the GC3 Conference in Leverkusen, where we participated in a panel titled ‘The Role of ESG Reporting in Driving Growth of Sustainable Chemistry Investment’ together with company representatives and the European Commission.

32) ChemSec (2023): ChemScore Report 2023.

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