Kempen Capital Management is an asset manager that believes in stewardship and investment focusing on the long-term for the benefit of all stakeholders. Value creation is at the heart of the services we provide to our clients. We believe that being an engaged shareholder on environmental, social and governance (ESG) issues and retaining a long-term focus are critical to helping our clients to preserve and create sustainable wealth that yields both positive real-world impact and economic returns.

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KEMPEN-WIDE APPROACH TO RESPONSIBLE INVESTMENT

We are committed to creating sustainable alpha. The four pillars of our ESG policy are:Â

• ESG integration: ensuring sustainability risks and opportunities are adequately considered in our investment analysis and processes;

• Exclusion & avoidance: not investing in companies involved in controversial activities or conduct;

• Active ownership: being responsible stewards of our clients’ capital and using our influence through engagement and voting to improve corporate conduct on specific ESG issues and achieve positive change;

• Positive impact: investing with the objective of achieving positive real-world outcomes and impact, such as contributing to the UN Sustainable Development Goals (SDGs).

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To put our mission and vision into practice we engage with our investee companies on a wide array of strategic, financial and ESG topics. As an active owner we use our influence to improve our investee companies’ ESG performance. This helps us address some of the most pressing and important sustainability issues facing business and the world. Our focus themes for engagement are: human rights, labour rights, climate change and governance.Â

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Through collaboration with other investors we contribute to the development of principles and standards of corporate responsibility at both sector and investee company level.Â

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Our full voting records are available here.

Climate change

As a long-term investor, we believe climate change represents a systemic risk facing the economy, society and environment. We want to consider the risks and opportunities this presents to our investments in the coming decades. We have therefore set a long-term commitment (2050), a mid-term ambition (2030) and short-term objectives (2025).

• 2050 commitment: Net-zero investor.  Â
• 2030 ambition: To align with a Paris Agreement pathway (listed and non-listed investments) and Dutch Klimaatakkoord.  Â
• 2025 objectives: To align with a pathway towards achieving the Paris Agreement (listed investments) and Dutch Klimaatakkoord goals.^[1]

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The Kempen climate change policy can be found here (under climate change policy).

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_{[1]We use carbon intensity as a metric to come to the pathway of net-zero emissions. As we care about the direction of travel and reduction of carbon emissions in the economy, it might be that the actual reducing trend may deviate from the suggested average trend line. The pathway is derived from the pathway of the EU Benchmarks.}

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OUR FUND APPROACH TO RESPONSIBLE INVESTMENT

The investment objective of Kempen Sustainable Global High Dividend Fund is to offer investors the opportunity to invest in an actively and professionally managed long-term portfolio of companies from around the world that pay above-average dividend yields, while at the same time complying with strict exclusion and sustainability criteria.

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We aim to align with a pathway towards achieving the Paris Agreement and Dutch Klimaatakkoord goals for our portfolio, as well as the EU Climate Transition Benchmark^[2].

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_{[2] The EU Benchmarks consists of two climate benchmarks, Climate Transition Benchmark and Paris Aligned Benchmark, which have the aim to reach net-zero emissions by 2050 - in line with the 1.5?C scenarios from the IPCC. As we care about the direction of travel and reduction of carbon emissions in the economy, it might be that the actual reducing trend may deviate from the average pathway. We use carbon intensity (based on Revenues) as the forward looking climate metric.}

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Kempen’s ESG policy is incorporated into our fund’s investment process via the following pillars: exclusion, integration and active ownership.

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Exclusion & avoidance

In line with Kempen’s general policy, the Sustainable Global High Dividend Fund excludes all companies on Kempen’s Exclusion and Avoidance lists.

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Companies that ‘Fail’ marked against the criteria of the UN Global Compact or are on the Watchlist are also excluded.

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The fund also excludes companies involved in serious controversies and uses data provider Sustainalytics to this end. It rates the controversies on a scale of 1 to 5, with 5 being the highest or ‘severe’ category. Those companies that receive a Sustainalytics rating of category 4 or 5 are excluded from the Sustainable Global High Dividend Fund.

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More information on our exclusion criteria and thresholds can be found here.

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The Sustainable Global High Dividend Fund also excludes companies based on additional sustainability criteria as listed in the table below.

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ESG integration

ESG criteria are an integral part of the investment process at Kempen. The goal is to include ESG factors in the same way as other factors. This means that the portfolio managers conduct a thorough strategic analysis of the companies that incorporates material ESG risks and opportunities. This analysis yields assumptions that form the input for the valuation model used within the fund.

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Depending on their impact, ESG factors may be included in the valuation model in a variety of ways. For instance, a company’s profitability or growth may be adjusted and identified as an ESG value. This compels the portfolio manager to consider how the ESG factor affects the company’s value, while at the same time providing transparency on the ESG value of each company.

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Active ownership: engagement

As active investors we conduct comprehensive engagement processes with the companies in our portfolio with the objective of unlocking value and reducing risk.Â

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Our engagement process defines clear objectives, with the progress and results being tracked and well documented. If at any stage the company refuses to cooperate, divestment will be considered.

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In 2020, engagement with companies focused on aspects such as the energy transition and the related reduction in carbon emissions.

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Active ownership: voting

Exercising our voting rights is also an essential part of our sustainable investment philosophy. ISS provides us with voting recommendations based on our own voting and governance policies. Agenda items are dealt with on a case-by-case basis.

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We often inform the company of our voting intention ahead of the meeting and, where there is a recommendation to vote against management, ask the company to clarify its stance. After careful analysis, we form our own opinion and vote accordingly.

For more information about the mid and long term risks associated with the investments:

• Prospectus
• Outlook 2020
• Asset Allocatie Outlook

_{^{Although Kempen Capital Management N.V.’s information providers, including without limitation, MSCI ESG Research LLC and its affiliates (the “ESG Parties”), obtain information from sources they consider reliable, none of the ESG Parties warrants or guarantees the originality, accuracy and/or completeness of any data herein. None of the ESG Parties makes any express or implied warranties of any kind, and the ESG Parties hereby expressly disclaim all warranties of merchantability and fitness for a particular purpose, with respect to any data herein. None of the ESG Parties shall have any liability for any errors or omissions in connection with any data herein. Further, without limiting any of the foregoing, in no event shall any of the ESG Parties have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.}}