We integrate environmental, social and governance (ESG) factors into our investment management process. We do this because we believe that these factors are some of the drivers of long-term investment risks and returns.
When assessing an investment, we look at a range of financial and non-financial criteria. Financial criteria can include balance sheet strength, valuation or future earnings. Non-financial criteria can include management strength, industry composition, environmental factors (e.g. pollution, resource usage, climate change), social factors (e.g. human rights, health and safety, diversity) or governance factors (e.g. corruption, transparency, board structure).
For the avoidance of doubt, we do not make investments in companies or industries based solely on ESG factors.
Companies or industries that have any ESG issues are subject to further review. These reviews cover both existing and prospective investments and consider some or all of the following:
Depending on the results of our review we might continue to hold, review on a periodic basis, divest, or exclude the company or industry as an investment.
If we buy units in a fund that isn't managed by us, our investment might be exposed to companies we would ordinarily exclude. This possibility is factored into our decision to buy any such units.
Sustainable International Share Fund
There are additional responsible investment considerations taken into account by the Sustainable International Share Fund.
The Sustainable International Share Fund invests in the NN (L) Global Sustainable Equity Fund (the GSE Fund). The GSE Fund invests in a diversified portfolio of equities issued by companies that:
Any holdings in the GSE Fund are selected on the basis that they fulfil these criteria with a "best-in-class" approach.
The GSE Fund is managed by NNIP Asset Management B.V. (NNIP). In deciding what to invest in, NNIP follows a four-step investment process involving primary research, portfolio construction, execution, and monitoring. The investment universe for the GSE Fund is approximately 2,000 equities and ultimately NNIP invests in those sustainable equities which are attractively priced and have both above-average growth and above-average return expectations.
When conducting its primary research NNIP takes responsible investment into account by:
For the avoidance of doubt, equities that are involved in cluster munitions, landmines, tobacco, gambling and pornography are all excluded from the GSE Fund's investment universe.