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Principles for Responsible Investment
Aviva Investors is a founding member of the UN Principles for Responsible Investment (UNPRI) programme.
Launched in April 2006, these principles have become the global benchmark for responsible investing. By signing up to them, institutional investors signal their duty to act in the best long-term interests of their beneficiaries.
We believe that over time, environmental, social and corporate governance (ESG) issues can affect the performance of investment portfolios – across companies, sectors, regions and asset classes. We also recognise that applying these principles helps to govern ESG impacts and benefit society as a whole.
We are proud of our key role in this initiative, and our commitment is demonstrated in the UN Progress Report (UNPRI 2007) , in which we are highlighted as a case study.
Since 2008, we have included the PRI in the draft contracts that we propose to our clients. This enables our clients to assess our performance in relation to the principles, and holds us to account for delivery against our commitments.
The six PRI are outlined below, with brief examples of how they are being applied by Aviva Investors.
1. Incorporation of ESG issues into investment analysis and decision making processes
ESG issues are embedded in our investment process. Our analysts and fund managers are expected to consider whether there are any material ESG risks when forming views.
We have taken practical steps to be well-informed:
- A material proportion of our commission is used to support ESG research
- Every 10 weeks the head of the Sustainable and Responsible Investments (SRI) team chairs our business meeting. SRI and corporate governance colleagues routinely attend
- The research of the Corporate Governance and SRI teams is shared internally
- Our training course for colleagues, run in partnership with City University’s Cass Business School, includes a module on ESG.
In addition, during 2010 our chief investment officer (CIO) engaged directly with the managing directors of our key sell-side brokers to highlight the importance that we place on ESG issues as an integral part of investment research.
Our understanding of ESG issues is widely recognised by the global investment community.
In 2010, Aviva Investors achieved second place in the Thomson Reuters Extel/UKSIF SRI and Sustainability Survey , which looked at fund managers’ “understanding of SRI and sustainability investors”. This ranking was based on evaluations by 20 sell-side firms and 253 buy-side firms from 20 countries.
Involvement from the fund management community in this study has more than trebled since the survey was launched in 2003, indicating that corporate responsibility (CR) risks and opportunities are increasingly recognised as factors in investment decisions.
2. Active ownership and incorporation of ESG issues into ownership policies and practices
We believe that well-governed companies that operate in a responsible and sustainable way will be better able to create long-term shareholder value. So, we are active on behalf of clients and have incorporated ESG issues across the breadth of our share ownership policies and practices. In promoting high standards of corporate governance, we include a range of CR issues when voting at AGMs.
This policy highlights, for example:
- The inclusion of appropriate information on material CR issues within business reviews
- The ability of remuneration committees to consider their CR performance when setting executive director rewards
- The importance that we place on the board’s role in setting a company’s values and standards.
Since 2001, it has been our approach to vote against the report and accounts of a company if it does not disclose what we consider to be material CR performance information. Read a summary of our voting record .
3. Seeking appropriate disclosure on ESG issues by the entities in which we invest
We actively promote greater corporate accountability on ESG issues, and look for enhanced disclosure across a broad range of our assets and at face-to-face meetings.
One distinctive element is our CR disclosure voting. This currently applies to all FTSE 350 and FTSE EuroFirst 300 Index companies and specific client portfolios (a subset of our full governance voting policy), and states that we expect these companies to disclose information on their exposure to, and management of, key environmental and social risks.
Where companies publish insufficient information, we may abstain or vote against the resolution to rubber stamp the report and accounts.
As far as we are aware, we were the first institutional investor in the world to adopt such a policy, and it remains a distinguishing element of our overall responsible investment strategy. We are in the process of expanding this active voting policy to cover the MSCI World Index.
4. Promoting acceptance and implementation of the principles within the investment industry
We promote acceptance of the PRI in three main ways.
(a) Our award-winning ‘Investment Tutor’ is a free training resource for pension fund trustees. The course includes a module on ESG which states:
“Aviva Investors is a member of the UNPRI. We highly recommend that pension schemes consider becoming a signatory to the UNPRI, because the initiative seeks to keep its membership well informed and at the forefront of the various fascinating debates on sustainable and responsible investing.”
(b) Our contracts commit us to sharing the results of the PRI assessment of our performance with clients. We believe this level of transparency will help them to hold us to account for being responsible investors, at no additional cost. To our knowledge, we are the first investment manager in the world to do this.
We believe that this is a truly effective way of promoting the acceptance and implementation of the PRI within the investment industry, and would encourage the UNPRI to consider making it a membership requirement.
(c) In 2010, a number of Aviva employees spoke at global PRI promotional events to provide a case study of implementation.
5. Working together to enhance effectiveness in implementing the principles
We believe that investors have a collective interest in promoting high standards of corporate governance and corporate responsibility. In many cases, that collective interest is best promoted through collaborative engagement.
We are a large and influential asset manager in our own right, but where we believe it’s more efficient and effective to collaborate, we do so.
In addition to collaborative links with various institutions – such as the International Corporate Governance Network and the Association of British Insurers (ABI) – we have signed up to numerous collaborative engagement initiatives within the PRI clearing house. Our CEO, Alain Dromer, is currently chairman of the ABI Investment Committee.
We also participate in a wide range of national and international associations focused on responsible investment and ESG issues. These include:
6. Reporting on activities and progress towards implementing the principles
Transparency to our clients is fundamental to our approach. As well as undertaking contractually to share the results of our PRI assessment, we provide detailed reports to clients on our use of voting rights and, where appropriate, hold briefings on corporate engagement.
Our corporate governance policy and voting statistics are published on the Aviva Investors website, including our actual voting record on a company-by-company basis. We have asked the UNPRI to publish our response to every questionnaire that we have submitted.
It is important to note that, to enable company consultations with shareholders to be honest and constructive, we treat these as client-confidential and generally avoid public comment about ongoing engagement. However, we have made a number of exceptions – notably when we want to publicly welcome progress or coerce intransigent companies to respond.
Aviva Investors reports its PRI performance in full at: www.unpri.org/report10
The summary of Aviva Investors’ performance (below) shows that there has been a substantial increase in participants to the PRI, which we welcome. This does mean that it has become harder to achieve the top quartile score. It should be noted that the scores are based on self-assessment and, therefore, there is scope for inaccuracy and unintentional error. However, we have consistently performed ahead of the median.
Aviva Investor’s performance – in depth view 2010 *
Your organisation's 2010 per Principle scores against all IMs (all asset classes)
Historic performance against peers showing trends *
Your organisation's historical quartile performance against all investment managers
*PRI disclosure: Scores have been calculated based on signatories’ self-assessment and using the scoring methodology approved by the PRI Assessment Group. Although a limited verification exercise was undertaken with a proportion of signatories, responses have not been independently audited by the PRI Secretariat, PRI Assessment Group, or any other third party. Individual results including comparisons to the overall results (quartiles) are indicative and do not imply an endorsement of signatory activity. While this information is believed to be reliable, no representations of warranties are made as to the accuracy of information presented, and no responsibility or liability can be accepted for any error, omission or inaccuracy in this information.