Sustainability - SEB Group€¦ · Sustainability is an essential part of our fund management. Our Stockholm office is staffed by approximately 115 specialists working in the areas

SustainabilitySEB Investment Management

January 2017

SEB INVESTMENT MANAGEMENT AB

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SUSTAINABILITY

The SEB Group provides banking & financial services and insurance services to private customers, corporates and institutional investors. SEB is organised in relation to our client segments, consisting of four divisions: Large Corporates & Financial Institutions, Corporate & Private Customers, Life & Investment Management and the Baltics.

SEB was founded in 1856 as one of the first commercial banks in Sweden. Since then SEB has become a major financial institution, committed to deliver customer value, building on the strong heritage of entrepreneurship, international outlook and long term perspective.

Today, SEB is present in some 20 different countries, employing around 16 000 people. The bank serves 3 000 corporates and institutions, 400 000 small and medium-sized companies and 4 million private customers.

SEB is the leading bank for large corporates in Sweden with a forefront position in providing corporate services in the Nordic countries and Germany. In addition SEB has a particularly strong position in Asset Management and Private banking in the Nordic countries. Universal banking services are provided by SEB in Sweden, Estonia, Latvia and Lithuania.

THE SEB GROUP

The Management Company SEB Investment Management AB (SEB IM AB) is a wholly owned subsidiary of Skandinaviska Enskilda Banken AB (publ), (SEB). The Management Company was established 19 May 1978 and has its registered office and head office in Stockholm. SEB IM AB is established under the laws of the Kingdom of Sweden and supervised by Finansinspektionen, the Swedish Financial Supervisory Authority.

As of January 1, 2016 SEB IM AB is part of the division Life & Investment Management although the divisions’ two units are kept

legally separate. The reason for the new organisational structure is to continue strengthening the Group’s customer focus.

On November 2, 2016 SEB’s Luxembourgish magement company, SEB Asset Management S.A., merged with SEB SEB IM AB. In connection to this, SEB IM AB opened a branch office of Luxembourg. The branch is established under the laws in the Grand Duchy of Luxembourg. The funds of the branch are supervised by the Comission de Surveillance du Secteur Financier (CSSF), the Financial Supervisory Authority in Luxembourg.


SEB IM AB is one of the Nordic region’s largest asset managers. The fund company manages approximately SEK 800 billion for private persons as well as institutional investors. We manage everything from broad solution products to niche funds within individual asset classes such as equities, interest-bearing securities, hedge funds, commodities and private equity. In total, we have approximately 120 funds registered in Sweden and in Luxembourg.

As one of the largest institutional investors in the Nordic region, our clients expect us, in our role as shareholders in companies, to act responsibly. This is why it’s essential for us that the companies we invest responsibly manage any environmental, social and governance impact that they may be associated with through their

business activities. We believe that companies who work with sustainability structurally and long term will become more successful companies, and thereby have the opportunity to become more profitable investments for our unitholders. Our work with sustainable investment takes a variety of forms – from endea-vouring to influence companies in the right direction to actively selecting companies based on specific sustainability themes. Regarding our fund management, we also exclude investments in companies that are operational in certain sectors or activities that are significantly problematic in terms of sustainability and can be perceived as unethical.

SUSTAINABILITY FOR US


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SUSTAINABILITY

All our management teams actively integrate sustainability in their investment decisions. We place considerable significance on identi-fying and searching for exposure in what we regard are important sustainability themes. By integrating sustainability in our investments we aim to benefit our unitholders in the long-term.

One of our goals is for all our funds to have a basic level of sustain-ability written into their investment strategy. This basic level con-sists of excluding companies that manufacture or sell controversial weapons such as antipersonnel land mines, cluster munitions, chemical and biological weapons. We exclude companies involved in the production or marketing of these types of weapons from our equity funds and bond funds as well as several index funds that bear the name of SEB and are included in SEB’s fund offering.

Additionally, we refrain from investing in companies involved in the development and production of nuclear-weapons programs or that produce nuclear weapons. We believe that the use of nuclear weapons would cause great human suffering which would violate fundamental human rights, which is why we regard nuclear weapons as controversial weapons. Although some countries are allowed to hold and maintain nuclear weapons under the Non Proliferation Treaty of 1968, all treaty signatories have committed to disarmament. We exclude companies that develop nuclear weapons in our active fixed income funds, equity funds and several

index funds that bear the name of SEB and are included in SEB’s fund offering.

Since 1 July 2016, our funds do not invest in companies where turnover from the extraction of thermal coal exceeds 20 percent. This exclusion is also part of the basic level of sustainability for our funds. During the past year, we have actively integrated sustain-ability into our investment processes when we select and include companies in our funds. We regard this as a continuous process.

We aim to follow the same sustainability criteria for our white label funds, index funds and funds-of-funds as we follow for SEB’s other funds. However, different index fund may exclude different companies, depending on which external supplier provides the sustainability analysis. The process of excluding a company from an index fund can take some time. Most of SEB’s fund-of-funds meet our sustainability criteria by investing in SEB funds or external funds selected by SEB. When our fund-of-funds invest in non-SEB funds, the external fund manager is required to sign the UN Principles for Responsible Investment or to follow an equivalent sustainability framework. SEB pursues an active dialogue with external fund management companies whose funds invest in companies that SEB has excluded.

SUSTAINABILITY IN THE INVESTMENT PROCESS

By being an active shareholder, we endeavour to safeguard the unitholders’ joint interest in ownership issues and influence companies in their sustainability work to effect change. In Swedish companies, where we are often among the largest shareholders, which means that we are able maintain direct dialogue with the companies’ management teams and boards of directors. Additio-nally we collaborate with other large investors and vote at annual general meetings (AGM). In 2016, we participated in 35 nominating committees of Swedish companies.

If the dialogue with a company does not lead to a change after a reasonable period of time, we consider excluding the company from our investments.

In companies outside the Nordic region, we usually cooperate with other investors through, for example, CDP and PRI Clearinghouse. We also collaborate with Hermes EOS, one of the world’s leading players in company dialogues, which has continuous dialogues directly with corporate management and boards of directors. Our cooperation with Hermes EOS started in 2016.

In the past few years, we have worked for increased diversity in companies’ boards of directors. Another goal we work with is to ensure the independent evaluation of boards of directors of the companies in which we invest.

Our foremost focus areas in our engagement process with other investors within the framework for CDP and PRI in 2016 and 2017 include the following:

• Climate issues with a focus on palm oil production.• Climate issues related to carbon emissions by European

energy companies, with a specific focus on coal combustion• Human rights at mining and commodity companies.• Human rights with a focus on access to medicine in develo-

ping countries

During 2017 we have a number of new initiatives that we aim to implement during the year.

RESPONSIBLE AND ACTIVE OWNERSHIP


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SUSTAINABILITY

Within our fund range, we offer sustainable, ethical and thematic funds for both private clients and institutional investors. Additionally, we offer impact investing funds that seek to create both financial return as well as positive social and/or environmental impacts that are actively measured.

Not only do our sustainable equity funds place considerable focus on the environment, but our fund managers invest actively in companies that work to make progress in the environmental area, such as carbon emissions, water utilisation and the handling of toxic waste. Additionally, the funds completely exclude investments in companies that are involved in coal, gas, and/or oil exploration and extraction. We also manage a number of funds with an ethical profile.

What our ethical and sustainable funds have in common is that they do not invest in companies that verifiably breach international norms regarding: human rights, labour rights, environment and/or corruption. We especially consider the UN Global Compact (www.unglobalcompact.org) and OECD’s Guidelines for Multinational

Companies (www.oecd.org). Moreover, the funds do not invest in companies that generate more than 5 percent of their turnover from:

• Production of alcoholic beverages and/or tobacco product• Production and/or active distribution of pornography• Production and/or sales of weapons• Commercial gambling

Financial investments that have a broader positive impact that just the financial return are found at this level. Two product categories that respond to this demand are e.g. green bonds, which directly or indirectly have a positive effect on the climate and environment and microfinance.

Since July 2013, SEB has started four microfinance funds*. Today the funds have approximately 430 MEUR of assets under manage-ment, spread over a large number of microfinance institutions around the world. Our microfinance funds are available only to professional investors.

OUR SUSTAINABLE PRODUCT OFFERING

SEB signed the Principles for Responsible Investments (PRI) in 2008 and we focus strongly on following the six principles. In 2015 we also signed the Montreal Carbon Pledge, committing ourselves to measuring and publishing the climate footprint of our funds.

SEB has also adopted a number of sector policies, which detail how we work with companies regarding issues such as child labour, the environment and water supplies. Moreover, SEB IM AB is a member of Swesif, and cooperates within the framework of the investment initiative Sustainable Value Creation. Sustainability-related analysis is obtained from two external suppliers, MSCI and Sustainalytics - specialists in this area. Our partners also include Hermes EOS, ISS Ethix, CDP and PRI Clearinghouse.

Sustainability is an essential part of our fund management. Our Stockholm office is staffed by approximately 115 specialists working

in the areas of portfolio management, securities analysis, product liability, fund information, fund administration and risk. Our staff includes a sustainability team who contribute specialist competence, and whose work is integrated in SEB IM AB’s overall sustainability efforts.

The processes for responsible investments are supported by a systematic ESG screening of Nordic and international companies. We engage the service of experienced and well known screening providers, ISS Ethix and MSCI ESG Research Inc. a wholly owned subsidiary of MSCI Inc., to perform the actual screening. The outcome of the screenings, adapted to reflect the SEB Group’s ESG policies, constitutes the basis for our investment decisions.

RESOURCES AND COMMITMENTS FOR SUSTAINABILITY

*Past performance does not guarantee future performance. The value of investment funds and other financial instruments may rise as well as fall and there is no guarantee you will recover your original investment. Key investor information documents and prospectuses are available on SEB’s websites.


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SUSTAINABILITY

This is a general overview of our sustainability activities at SEB and SEB IM AB. Further information is available at SEB’s website www.sebgroup.com.

Information about our fund offering is available at the website of SEB IM AB: www.seb.se/fondbolaget (Swedish domiciled funds) and at the website of the Luxembourg branch: www.sebgroup.lu/asset-management.

A complete list companies we exclude from our funds, on a basic level, is available at www.sebgroup.lu/asset-management/sustainability.

WOULD YOU LIKE TO KNOW MORE?

SEB and/or SEB IM AB are members of the following associations and organisations that aim to promote responsible investments:

• SEB AB has been a signatory of the United Nations Principles for Responsible Investments (PRI) since 2008

• SEB is a member of Swedish, Finnish and Danish Sustainable Investment Forums, SIF’s. An example of this engagement is that SEB, together with five other Swedish financial institu-tions, has made sustainability profiles on fund level available in the Swedish premium pension system.

• SEB is a member of Sustainable Value Creation, a collabora-tion between major Swedish institutional investors, aiming to raise awareness of ESG issues on board level in the 100 largest listed companies in Sweden.

• SEB has over the years, via the PRI Clearing house and in colla-boration with a number of international investors, worked with the themes of anti-corruption, as well as hydraulic fracturing (fracking) in the shale gas industry.

• SEB has revised and strengthened its Climate Change Position Statement and decided to gradually shift away from coal. SEB will consequently not enter into new business relations with companies that have substantial part of their business

activities in coal mining in coal mining, nor provide finance for new coal power plants.

• SEB joined the Paris Pledge for Action in December 2015, where major cities, regions, companies and investors from around the globe promised to quickly and effectively help implement the Paris Agreement and accelerate the trans- formative changes needed to meet the climate change challenge.

• SEB IM AB has signed the Montreal Carbon Pledge, in which investors commit to measure and publicly disclose the carbon footprint of their investment portfolios.

Additionally, SEB supports the following international codes and agreements:

• The UN Global Compact• The OECD Guidelines for Multinational Enterprises• UN Environment Programme Finance Initiative• The Equator Principles• The Carbon Disclosure Project• ICC Business Charter on Sustainable Development

MEMBERSHIPS THAT SUPPORT RESPONSIBLE INVESTMENTS

This document produced by SEB contains general marketing information about its investment products. SEB is the global brand name of Skandinaviska Enskilda Banken AB (publ) and its subsidiaries and branches. Neither the material nor the products described herein are intended for distribution or sale in the United States of America or to persons resident in the United States of America, (U.S. Persons), and any such distribution may be unlawful. The information presented in this material has been obtained or derived from sources believed to be reliable, but SEB makes no representation as to their accuracy or completeness, and SEB accepts no liability whatsoever for any loss, damage or claim arising therefrom. Information in relation to tax aspects, if any, has been based on the laws and regulations in force as per the date of this material, and may be subject to subsequent change. Further, such tax information has not been tailored to the individual circumstances of the recipients of this material, and in order for the recipient to evaluate the tax treatment or effects of an investment; the recipients must consult their own tax advisers. The recipient is solely responsible for any investment decisions, and this presentation alone may not form the basis for an investment decision. Instead, any investment decisions should be based on the detailed information regarding the fund(s). If the recipient or the fund invests in financial instruments denominated in a foreign currency, changes in currency exchange may affect the return on the investment. For funds with share classes which aim at hedging the currency exposure (for SEB funds this is usually indicated by an “H” in the name of the share class), SEB makes no representation or warranty as to fully achieving the hedge of the currency exposure. SEB assumes that the recipients, prior to any investment decision, inform themselves as to the detailed information which is included in the placement memorandum, management regulations and/or articles of incorporation, prospectus or Key Investor Information Documents for the investment funds, which can be obtained from the SEB websites. For investment advice regarding investments tailored to the recipient’s individual circumstances and situation, the recipient(s) should contact advisors at SEB. Please note that the offering of units in the funds may be restricted in certain jurisdictions. This document may not be used to make an offer or solicita-tion for sale of units where such offer or solicitation is unlawful.