Principal Adverse Impacts Statement BeFrank PPI
In this statement we provide more information on our overall approach to identifying, prioritising and addressing principal adverse impacts of our investment decisions on various sustainability factors. This includes the expectations we have of our asset managers. This statement consists of the following four sections:
1. Description of principal adverse sustainability impacts
2. Description of policies to identify and prioritise principal adverse sustainability impacts
3. Engagement policies
4. References to international standards
1. Description of principal adverse sustainability impacts
As part of NN Group, BeFrank PPI has a long history of responsible investing. The NN Group Responsible Investing Framework Policy (link here) reflects our overall approach to responsible investing.
BeFrank PPI considers the principal adverse impacts of its investments on sustainability factors. The present statement is the principal adverse sustainability impacts statement of BeFrank PPI.
BeFrank PPI uses a combination of methods to mitigate principal adverse impacts. The key ones are exercise of voting rights, engagement with investee companies, and exclusions. Which (combination of) methods we apply depends on the nature of the topic, as well as on the specific context of the investment that is causing the adverse impact. Also, given that external asset managers manage our assets, we select where possible asset managers that apply these methods.
Excluding companies from our investable universe means that we or our asset managers can no longer influence them to mitigate their adverse impacts. For this reason, where possible, we prefer an engagement-led divestment approach, only excluding companies when engagement is either not deemed feasible or is unlikely to change a company’s conduct or involvement in specific business activities. Certain types of companies are excluded on the basis of their (main) business however, such as weapons or tabacco. The exact way principal adverse impacts are considered depends on various factors, such as on the type of fund or strategy, asset class, asset manager, and availability of reliable data.
More information can be found in the NN Group Responsible Investment Framework policy.
2. Description of policies to identify and prioritise principal adverse impact sustainability factors
Our approach is a reflection of our investment beliefs, our organisation’s values, relevant laws, and internationally recognised norms and standards, based on which minimum requirements have been developed that have to be adhered to in the investment process.
We structurally assess our investment universe based on our norms-based RI criteria and we expect from our asset managers to have the same or similar processes in place.
BeFrank expects the investment funds it invests in to act in accordance with international standards, such as the United Nations Global Compact, UN Guiding Principles on Business and Human Rights and OECD Guidelines for Multinational Enterprises. When companies are assessed to severely and systematically violate these standards, we expect our asset managers, where possible and feasible, to start an engagement process. Companies are put on the exclusion list when engagement is not or no longer considered feasible to change the conduct or involvement in specific business activities of those companies. Such a decision will not be taken lightly and only where we believe that exclusion is a balanced and proportionate response.
Companies are put on the exclusion list when they demonstrably have activities in the trade of arms to central governments or non-state actors that are sanctioned by a UN or EU arms embargo. This is also the case for companies that develop, produce, maintain or trade ‘controversial weapons’. Weapons that we define as controversial include anti-personnel landmines, cluster munitions, biological weapons, chemical weapons, depleted uranium ammunitions, white phosphorus weapons, and nuclear weapons. Also companies are put on the exclusion list that are involved in the production of tobacco, up to a certain limit active in unconventional oil or gas, or thermal coal mining. Finally, sovereign issuers against which arms embargoes have been issued by the UN Security Council are also on the exclusion list. On a case-by-case basis, it may be decided to also exclude sovereign issuers on other grounds. The NN Group Exclusion list is publicly available on the RI policies page of NN Group’s website. For other external managers goes that their specific exclusion list may differ and applies.
When our assets are invested in funds for which BeFrank PPI does not have full discretion over the way they are managed, for example in pooled investment vehicles in which other investors also participate, we cannot enforce our exclusion list one-on-one.
Also where investments are not in violation of our exclusion criteria, these investments can still create adverse impacts, which may be addressed via exercising voting rights or via engagement, which is further elaborated upon in section III. One principal adverse impact is not prioritised over the other, but our asset managers do prioritise the resources that are allocated to addressing the principal adverse impacts, based on various factors, such as availability of data, type of investment instruments, impact on society or the environment, and the expected likelihood of successfully mitigating these impacts. Different asset managers have different approaches to addressing principal adverse impacts.
3. Engagement policies
We believe engagement and voting are effective ways for investors to hold company management accountable and to create beneficial change. We therefore expect the asset managers we choose to address where possible and feasible, principal adverse impacts via structural voting and engagement activities, underpinned by high quality research and data. Where needed we actively engage with our asset managers to further improve their practices, results, and disclosures in this area.
Next to engaging with companies that severely and systematically violate international standards (as described in section 2), we encourage our asset managers to engage on ESG themes that we believe have a material impact on society.
Furthermore, we expect our asset managers to periodically report on their engagement activities and results and we will engage with them where this is not structurally the case.
4. References to international standards
The investment approach incorporates internationally recognised standards, including the UN Global Compact, the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises. Based on these standards, the Responsible Investment Framework policy includes minimum requirements that have to be adhered to in the investment process. Our asset managers actively track indications of violations of the norms-based responsible investing criteria. Such indications include research from external ESG research or engagement provider(s), inputs from own (investment) staff, the asset managers, or information from NGOs or media sources.
We believe that part of being a responsible investor is to actively contribute and collaborate with other players in the investment value chain to further develop the field. We therefore encourage asset managers to endorse or sign relevant standards and statements, and be active members and signatories of various networks and responsible investment initiatives.