Responsible Investment & the Stewardship
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Responsible Investment & The Stewardship Funds AV612388_SP99883_0721.indd 1 22/07/21 10:39 AM What this guide covers We hope the information in this guide is helpful and that it broadens your knowledge of what it means to invest responsibly, how we do this at Aviva and why we believe it’s important to deliver responsible investment solutions for our customers. Here’s what the following pages cover: Here for you today, for a better tomorrow 3 Our expertise 4 What are the Stewardship Funds? 5 Stewardship philosophy and criteria 7 Exclusions, engagement and outcomes 8 Governance of the Stewardship Funds 12 Stewardship Lifestyle Strategy 13 – 15 Helping you to understand risk 16 Risk warning codes 17 Appendix 19 Glossary 24 – 25 2 The Stewardship Funds and responsible investment AV612388_SP99883_0721.indd 2 22/07/21 10:39 AM Here for you today, for a better tomorrow “ Everyone wants to do the right thing for themselves, their families and the world we live in. They need businesses like ours to help them do that. At Aviva, we use our scale, influence and experience to help our customers, our people and the communities we’ve served for over 300 years. We want to help give our customers the confidence to make informed savings and investment choices. Through the investments we make together, we can create a fairer, greener and better world for everyone. We’re with you today, for a better tomorrow.” Amanda Blanc, Aviva Group CEO “Being responsible – in both life and investing – should never be about creating an ethical straitjacket, but there are a few guiding principles and rules of thumb that can help us all. First, we can all make a difference. Second, harness Pareto’s Principle. Pareto taught us that 20 per cent of our efforts account for 80 per cent of our results, or impact. Along with our core values, this should guide our behaviour and where we prioritise our time. We can identify the areas that will drive the most impact and focus our attention there. By doing this, daunting problems can become less so. Third, “It is better to be roughly right now, than perfectly right when it is too late.” The complexity of sustainability is not insurmountable. As we develop various coping strategies, and despite some inevitable and unintended hiccups, we should remember that while we can’t be perfect, we can be better.” Marte Borhaug, Global Head of Sustainable Outcomes at Aviva Investors aviva.co.uk 3 AV612388_SP99883_0721.indd 3 22/07/21 10:39 AM Our expertise Responsible investment is something we’ve been doing at Aviva for decades... You can be reassured that for us sustainability isn’t a fad. Investing responsibly is something we’ve been doing for decades. As far back as the 1970s we were holding companies to account by voting at their annual meetings. For us, responsible investment is a way to get the best possible return for you in the long term. We’ve always believed that companies which conduct their business in a responsible and sustainable way are more likely to succeed over time, benefiting both you and society. Find out more about our work in this space, and that of our dedicated asset manager, Aviva Investors, in the chart below: 2001 Aviva Investors founding CDP signatory (previously 2017 Carbon Corporate Human Disclosure Rights Benchmark 1994 Project) & first 2007 2016 launched at Among first asset manager Aviva is founding 2012 Asked to join Aviva’s offices asset managers to formally signatory to Founded Corporate 2015 European to publish integrate ClimateWise Sustainability CEO speaks at UN Commission’s High Responsible Investor Corporate corporate and Accounting Reporting Coalition General Assembly Level Expert Group Award for Innovation Governance responsibility to for Sustainability with call to action at on Sustainable on Sustainable & Industry Voting Policy voting policy Principles Rio+20 Conference Finance Finance Leadership 2017 1970 2020 1970 1995 2006 2010 2014 2016 2018 2019 Voting at Pledge at the UN Founding Aviva Investors Launched Asked to join the UN award for ESG Manager of company summit to ‘balance signatory of in vanguard of Roadmap for Financial Stability sustainability work the Year, Global meetings of economic the Principles signing the UK Sustainable Board Taskforce The World Investor Group development, the for Responsible Stewardship Capital Markets on climate-related Benchmark Alliance Investment welfare of people Investment Code & Sustainable financial disclosures is launched Excellence Awards and a sound Capital Markets Stewardship environment, by Manifesto Disclosure incorporating these (Asset Manager) considerations into award category at business activities’ the ICGN Global Our achievements • We’ve been a leader of responsible investment for nearly 40 years. • Aviva Investors was among the first asset managers to publish a Corporate Governance voting policy in 1994. • Aviva was the first carbon-neutral international insurer in 2006. • We were awarded the UN Momentum for Change Award in 2017 for our commitment to reducing our environmental impact, and for helping to write the world’s first corporate governance code and the UN Principles for Responsible Investment. • ESG manager of the year 2019 - Global Investor Group Investment Excellence Awards. 4 The Stewardship Funds and responsible investment AV612388_SP99883_0721.indd 4 22/07/21 10:39 AM What are the Stewardship Funds? 1. Heritage Launched in 1984, the Stewardship UK Equity Fund was the UK’s first social and environmentally screened fund. 2. Screening, company engagement and measuring the Funds’ ESG credentials ESG stands for environmental, social and governance criteria. These are the factors which investment managers use to decide how well a business is performing with regard to its impact on the environment, on society, and therefore its role in the communities where it operates, and also how a company functions in general, in terms of executive pay, diversity and shareholder rights, for example. The Stewardship process involves three layers: screening/excluding firms that carry out harmful activities and practices; engagement with companies to foster change; and measuring the Stewardship Funds’ ESG or environmental, social and governance performance. Companies must be aligned with the Stewardship values, namely that they do not harm the world in which they operate. Certain sectors - alcohol, gambling, tobacco, coal and oil - will always conflict with the Stewardship values and are therefore excluded. 3. Scale and experience in Stewardship team Aviva Investors and Stewardship have a long history of engaging with companies to help them become more aware of the risks they face and to encourage positive change. An experienced fund management team sits alongside a well-resourced team of more than 20 experienced responsible investment professionals. 4. The Stewardship Fund range covers the key asset classes Customers can access UK and international equities, fixed income, or a blend of equities and fixed income via the Stewardship Funds. There are five funds in the Stewardship range - the Stewardship UK Equity, Stewardship Equity Income, Stewardship Bond, Stewardship International Equity and Stewardship Managed Funds. 5. Stewardship and Aviva Investors combine their expertise as responsible investors The Stewardship LIK Equity Fund was the first ethical fund of its kind in the LIK when it was launched in 1984. The Stewardship Funds, the Stewardship LIK Equity Fund, the Stewardship LIK Equity Income Fund, the Stewardship International Fund, the Stewardship Bond Fund and the Stewardship Managed Fund have been managed by global fund management group Aviva Investors since April 2018. aviva.co.uk 5 AV612388_SP99883_0721.indd 5 22/07/21 10:39 AM Working together to create a better world for you to retire into and for your family to inherit More and more of us want to know that our pension savings are being invested in businesses that contribute positively to the world around us to help create the type of world we want to retire into, and the world that the generations after us will inherit. At the same time, as a guardian of people’s money, we believe we have a duty to use our customers’ money in a responsible way, to help foster change across businesses, whether that be for the environment, for society or for people’s lives and communities, and the world in general. Stewardship Lifestyle Strategy With this in mind, in July 2019, we combined our expertise as a leading pension provider, with the fund management expertise of Aviva Investors and the heritage of the Stewardship Funds to create the Stewardship Lifestyle Strategy. The Stewardship Lifestyle Strategy, which is described in detail on page 13, incorporates both ethical, environmental, social and governance (ESG) consideration. The strategy gives you the opportunity to invest responsibly throughout your retirement journey, and in this way enables you and your pension to have a positive impact on the earth and its people. 6 The Stewardship Funds and responsible investment AV612388_SP99883_0721.indd 6 22/07/21 10:39 AM Stewardship philosophy and criteria Philosophy Launched in 1984, the Stewardship Funds have a proud heritage as the UK’s first ethical fund range, while also incorporating environmental, social and governance (ESG) considerations. The aims of the Stewardship Funds have remained broadly consistent since then: 1. Exclude companies that do not meet certain ethical standards or that harm society or the environment 2. Support companies that make a positive contribution to society 3. Encourage better business practices through shared ownership and dialogue The Stewardship Funds’ philosophy recognises that the contribution companies make to a sustainable society depends both on the products and services they provide and the way they provide them. Shareholders have a responsibility to address these issues actively with the companies they invest in to deliver a positive outcome for their customers, suppliers, employees, local communities and the environment. Criteria Companies and their shareholders can and do make a positive contribution to society.