Investment Plan – Sustainable MeGreen

The different underlying investments are selected based on a process that involves both traditional financial analysis and ESG analysis.

Generally speaking, the sub funds aim to invest in companies and institutions that focus on sustainable development and actively consider:

• the environment: for example, by managing water and greenhouse gas emissions or through a green purchasing policy;
• their role within society: for example, by providing good working conditions or striving towards customer satisfaction;
• effective corporate governance: for example, by ensuring that the Board of Directors is independent or having a good remuneration policy.

In practice, this means that the idea of "Green Performance" does not just simply consider financial criteria. The sustainability score for investment candidates also plays a key role in building the portfolio.

Different factors are taken into account when selecting and monitoring underlying investments. These factors are assessed by NN Investment Partners (NN IP) – the manager for the selected sub funds.

1. Exclusions as a result of actions or violations to standards

Most notably, when selecting underlying investments, companies and governments that severely or seriously violate internationally recognised standards set out in the United Nations Global Compact (among others) or human rights are excluded from the selection.

2. Exclusions as a result of business behavior

Companies (and even countries) that are involved in some of the following business operations below are also excluded from the selection:

• producing and/or selling controversial weapons,
• tobacco,
• gambling and "adult entertainment",
• fur and "special" leather,
• coal mining,
• ...

3. ESG scoring

Companies are then classified using a scoring system developed by NN IP. This system is based on:

• the opinion of NN IP analysts about the risks and opportunities for a company and,
• the ESG ratings given to the company by Sustainalytics, a global leader in corporate governance and ESG research and ratings.

This ESG score will be taken into account when making the final selection of underlyings for the portfolio. In practice, a company with a high financial score will not be selected if its ESG score is lower than the sector's average.

4. Impact investments

Impact investments are also taken into consideration when selecting underlyings. These are investments that set out to achieve “measurable” social or environmental goals. A good example of this are green bonds. Issuers of green bonds invest this the proceeds into projects which, for example, demonstrably reduce carbon emissions.

Beyond these selection criteria, managers for the selected sub-funds ensure active monitoring and engage with the companies in which they invest. This is done via: voting or active shareholding and engagement

5. Voting or active shareholding

This engagement embraces the belief that companies that focus enough on good governance obtain the best long-term results. Therefore, good governance must be promoted among the companies in which the sub-fund manager is investing.

For example, companies in which the sub-fund is investing must be open about how the members of the management committee and the management processes ensure that sufficient attention is given to issues such as climate risks and compliance with social standards.

In order to promote good governance in the companies in which it is investing, the manager actively uses the voting rights attached to the shares. It is currently focusing on three important areas: 1) sustainability, 2) the board's effectiveness, and 3) aligning directors' pay with the company's strategy.

6. Engagement

In addition to playing a role via the voting policy, the manager also engages with the companies in which it is investing in other ways. Proactive conversations are taking place with company directors in order to discuss ESG rules and promote them further if necessary.

In addition to financial criteria, how sustainable investment candidates are and the efforts that they are making to become more sustainable therefore play a crucial role in building the portfolio.

More information about the methodology used for sustainable investments