Our proprietary assets span various asset classes, sectors and countries. As we are well aware of the impact our investment decisions may have, investing our own assets in a responsible way is very important to us. Whether we are researching and analysing companies and countries, voting as shareholders or selecting asset managers, we integrate Environmental, Social and Governance (ESG) factors into our processes as much as we can.
Our asset manager, NN Investment Partners (NN IP), manages the majority of our proprietary assets. As a provider of specialised SRI funds since 2000, and a signatory to the UN PRI since 2008, NN IP has a long experience in identifying ESG-related opportunities and/or risks on which portfolio managers base their investment decisions.
ESG integration is an integral part of NN IP’s investment processes. All analysts have access to ESG data from several data/research providers, which includes information on how each company scores on different ESG factors compared to its sector average, and if there are any relevant structural issues or controversies to consider. The analysts incorporate this data into their investment cases, thereby looking at the materiality for each company that is reviewed for investment. This process is applied to equities and corporate bonds. A similar procedure is in place for government bonds; however, instead of using ESG data on a company level, we make use of ESG data at a country level.
Sustainability of real estate
We strive to integrate ESG across all asset classes. In line with our ambition, NN Group formalised a sustainability approach for its own real estate portfolio. Specific responsible investment (RI) guidelines were developed, which set out the expectations of our (external) real estate managers. These guidelines can be downloaded here.
Since 2014, NN Group has been a member of the Global Real Estate Sustainability Benchmark (GRESB). We use the annual Real Estate Assessment to evaluate and engage with our real estate investments with the aim to improve the sustainability performance of our portfolio. For information on how we perform in GRESB, refer to disclosures in the NN Group Annual Review and the 2020 Carbon Footprint Report (see download link lower on this page).
ESG integration in private equity
In 2016, NN Group developed responsible investment (RI) guidelines for private equity. NN Group invests in funds that are managed by external private equity managers. The guideline defines our approach to integrate ESG factors in the selection and appointment of new private equity managers. Where it concerns existing investments in funds, we seek to actively engage with the managers to raise awareness on the importance of ESG factors during the evaluation and ongoing management of its private equity portfolio companies. To monitor the funds in which we invest, we developed an ESG dashboard. This dashboard is part of our internal performance reports and tracks the progress of the private equity funds and managers towards meeting our expectations.
Shareholder voting and engagement
The exercise of voting rights is one of the most effective ways for investors to hold company management accountable. The execution of proxy voting has been delegated to NNIP and its Voting Committee. To guide the voting considerations on behalf of NN Group’s proprietary equity portfolio, NNIP has a Voting Policy Proprietary Investments. This policy reflects the principle that company management should base their decisions on the long-term interest of the company and its shareholders while acting responsibly to all stakeholders. NN IP uses an external service provider to support the process of proxy voting but all voting decisions, however, are made internally on a case-by-case basis. All votes cast at shareholder meetings can be reviewed on the website here.
Apart from exercising voting rights, NN IP also actively engages with the companies in which we invest. Through engagement NN IP aims to understand the risks and opportunities of each specific investment case, and to use NN’s influence as an investor to encourage companies to improve their ESG practices, thereby ensuring sustainable long-term value that also benefits society as whole. NN Group has developed an Engagement Standard for Proprietary Assets which includes minimum requirements for engagement related to NN’s Proprietary Assets.
As an asset owner we are required to comply with the national laws implementing the revised EU Shareholder Rights Directive. This means that, in addition to our voting and engagement policies, we disclose specific information included in the asset management agreements for the proprietary equity portfolio. This information can be downloaded here.
Carbon footprint and net-zero commitment
Environmental issues, such as climate change, represent both risks and opportunities for a long-term investor like NN Group. To better understand investment risks associated with climate change and the transition to a low-carbon economy, we measure the carbon emissions connected with a large part of our proprietary investment portfolio. The results of the annual carbon footprint analysis are included in the NN Group Annual Review. We also published a separate document on this.
The 2020 Carbon Footprint Report also includes a chapter on the climate-related scenario analyses that we performed for our proprietary investment portfolio. As part of our strategy to address climate change, climate-related disclosures and risk and opportunity analysis as recommended in the Taskforce Climate-related Financial Disclosures (TCFD) are important cornerstones. For NN's reporting in line with the TCFD recommendations, please also refer to the 2020 NN Annual Review, pages 50-53.
At NN, we want to help accelerate the transition to a low-carbon economy. We are committed to transition our proprietary investment portfolio to net-zero carbon emissions by 2050 to align with the 1.5℃ target of the Paris Agreement. This commitment was announced at our Capital Markets Day on 24 June 2020 and follows steps. NN Group has already taken, such as the phase out strategy of thermal coal-exposed proprietary investments by 2030 (refer also to the Statement on Coal).
These steps underline our (inter)national commitments and collaborations, such as our membership (and representation in the board) of the Institutional Investors Group on Climate Change (IIGCC), NN IP’s participation in the collaborative engagement initiative Climate Action 100+, and our signing of the Paris Pledge for Action (2015) and the financial sector commitment to the Dutch Climate Agreement (2019).
We believe in the use of engagement to create beneficial change. Therefore , we will only decide to restrict individual companies when engagement is not (or no longer) considered feasible to change a company’s conduct or involvement in specific business activities. This decision will not be taken lightly and only where we believe that restriction is a balanced and proportionate response, or when such restrictions are demanded by law (read more on our policy here).