SHAREHOLDER ENGAGEMENT REPORT VOTING RIGHTS EXERCICE AND ENGAGEMENT LYXOR International Asset Management Financial Year 2020 EDITORIAL In 2020, the Covid-19 crisis added to the global climate emergency and highlighted the close links between biodiversity, climate, health and society. Let’s not make this year the year of fatalism, but the year of awareness and a "climate awakening". The world of finance must take greater responsibility in meeting the challenges we face and act collectively to limit the rise in temperature to below 2°C. As an engaged and responsible asset manager and shareholder, LYXOR has the ability to influence the companies in which we invest and redirect capital towards the development of a low carbon economy. We are convinced that responsible investment creates long-term value for society and shareholders. Listening to our clients, who are increasingly concerned by the ecological transition, and based on our fiduciary responsibility, LYXOR uses its power as a Florent Deixonne, shareholder to prepare a more sustainable future and to adapt to the Head of Socially challenges of an ever-changing environment. Responsible Investments Our shareholder engagement is evidenced in concrete terms in three key figures for 2020: €14.7 billion of assets voted on, €2.6 billion of assets under management with climate-linked engagement and 19% of votes against at general meetings, testifying to our responsibility as shareholders. In 2020, we strengthened our dialogue with companies on climate change. As part of the drive to increase global awareness of this sensitive issue, LYXOR has engaged with companies on this necessary transformation, through initiatives such as the Climate Action 100+, CDP and our three thematic engagement campaigns (plastics and circular economy, localised water management, responsible cleantech) which have gained momentum this year. Furthermore, the extension of our engagement in Japan enabled us to contribute to the drafting of the first climate resolution at a Japanese company, Mizuho. The climate will continue to be our focus in the new year 2021. In the run-up to COP 26 in Glasgow in November, we will continue to engage proactively with companies on issues as important as their alignment with the Paris Agreement, their commitment to achieving carbon neutrality and their integration of climate change issues at the highest management level. We will continue to encourage companies to direct their strategic development towards serving society. We are pleased to present our shareholder engagement report for 2020. 2 CONTENTS 1. Engagement policy 7 Engagement relating to general meetings 10 Engagement relating to environmental, social and governance issues 13 Engagement relating to climate 16 2. Exercise of voting rights 28 General principles 29 Voting process 30 Overview of votes at general meetings 31 Background and voting scope 31 Analysis of the general meetings season 33 Analysis of votes against 36 Shareholders’ proposals 42 Votes derogating from the voting policy 49 Conflict of interest management 51 Appendices 52 3 KEY FIGURES* €14.7 A+ 54% Bn UN-PRI1 Rating « Active Assets voted on Shares of assets voted on2 Ownership », 2020 447 5,562 19% Number of general meetings Number of resolutions Average opposition rate at voted at analysed general meetings €10.2 €2.6 78 Bn Bn Assets under engagement Assets under climate Number of companies met engagement during the course of our engagement *The figures presented below correspond to the entire LYXOR Group composed of Lyxor International Asset Management, Lyxor Asset Management and Lyxor Funds Solutions. 1 United Nations – Principles for Responsible Investment 4 2 Based on equity-type underlying within direct replication investment vehicles. The funds where the exercise of the voting rights are delegated to an external manager are not taken into account. INTRODUCTION LYXOR International Asset Management SAS This policy is reflected in two complementary areas: (hereafter referred to as “LYXOR”) is a fully owned • An engagement policy showing how LYXOR subsidiary of Societe Generale Group. This interacts with the companies held in its document outlines how LYXOR, on behalf of its portfolios; clients, exercises its role as an engaged and • A voting policy listing the main principles of responsible shareholder. corporate governance to which the asset management company adheres and the way Convinced of the environmental, social and in which these principles are applied when governance challenges, LYXOR has defined – as an exercising LYXOR’s voting rights at general extension of its responsible investor approach and meetings. in line with its adherence to the United Nations Principles for Responsible Investment (PRI) – a LYXOR’s voting and engagement policy for the 2020 shareholder engagement policy attached to the financial year is available on the website of the securities held by the CISs (AIFs and UCITS) it asset management company, at the following manages. address: https://www.lyxor.com/en/engagement- and-voting-policy-liam-2021 In accordance with the regulation of Articles L533-22 and R533-16 of the French Monetary and Financial Code, LYXOR reports in this document the conditions under which it applied its voting and engagement policy. This reports covers the 2020 financial year. LYXOR’S 6 COMMITMENTS AS A SIGNATORY OF THE PRI 1 2 3 4 5 6 We will We will be We will seek We will We will work We will each incorporate ESG active owners appropriate promote together to report on our issues into and incorporate disclosure on acceptance and enhance our activities and investment ESG issues into ESG issues by implementation effectiveness in progress analysis and our ownership the entities in of the Principles implementing towards decision-making policies and which we within the the Principles. implementing processes. practices. invest. investment the Principles. industry. 5 THE GOVERNANCE COMMITTEE An internal governance committee oversees the implementation of the LYXOR’s voting and engagement policy. This committee is composed of the following members: Edouard Auché Florence Barjou Florent Deixonne Raphaël Dieterlin Marc Duval Secretary Chief Investment Head of Socially Head of ETF & Head of Private General Officer Responsible Index Product Wealth Investments Strategy Investments Marc Noël Philippe Rémy Paul Marouzé Déborah Yomtob Head of Legal Chief SRI Analyst SRI Analyst Affairs Compliance Officer In 2020, the Governance Committee met three times with an attendance rate of 88%. During these three meetings, the following matters were discussed : • Analysis of priority points of attention for the 2020 season • Analysis of the 2020 LYXOR’s engagement campaigns • Analysis of the 2020 voting season • Validation of the 2021 voting and engagement policy 3 88% Governance Committee meetings in Member attendance rate of the 2020 Governance Committee meetings 6 ENGAGEMENT POLICY 7 GENERAL PRINCIPES Convinced that a company’s performance is not based solely on its financial performance, LYXOR now expects the companies in which it invests to be transparent and to take the extra financial issues they face into account. Taking these environmental, social, societal and governance issues into account is beneficial to the long-term performance of companies and therefore in the long-term interest of investors. In order to promote best practices in this area, LYXOR has thus defined an engagement policy that is structured around three axes: • Engagement relating to general meetings • Engagement relating to environmental, social and governance issues • Engagement relating to climate 2020 ACTIVITY In 2020, the Socially Responsible Investments team of LYXOR had the opportunity to conduct 118 engagement campaigns (+80%) with 78 international companies. Evolution of the application of the engagement policy 118 78 65 41 36 32 Engagement campaigns Companies targetted by an engagement campaign 2018 2019 2020 8 Breakdown of engagement campaigns by theme Climate Action 100+ 2% Plastics and circular economy 9% Localized water management 3% ESG 41% Corporate governance and general meeting 45% Breakdown of companies met by geography Other countries Belgium USA 4% 2% 2% United Kingdom 2% Spain 12% Netherlands France 5% 47% Luxembourg 2% Japan Italy 2% 5% Germany 17% 9 ENGAGEMENT RELATING TO GENERAL MEETINGS Background As a representative of the CIS it manages, LYXOR Outside the general meeting period, LYXOR undertakes to exercise the voting rights attached promotes regular dialogue with companies on to the shares held by these CIS in order to corporate governance issues such as changes in promote best corporate governance practices (cf. the composition of the Board of Directors* and its Part II – Voting right exercise). In order to do so, committees, succession plans, the role and LYXOR uses its influence before general meetings functions of the Lead Independent Director, to initiate a constructive dialogue with companies changes in the remuneration policy, etc. and enrich the analytical work carried out internally by LYXOR. 2020 Activity Engagement prior to general meetings is a bilateral dialogue where LYXOR presents its voting principles and the issuer presents the various points to be discussed at the general meeting. These discussions allow us to discuss the content of the proposed resolutions on the agenda of the general meetings, to ensure that they are aligned with shareholder interests and that they comply with our governance principles. The issuer, which will have discussed