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, is critical to helping our clients to preserve and create sustainable wealth that has positive real world impact and economic returns.

Kempen wide approach to responsible investment

We are committed to create sustainable alpha. The four pillars of our ESG-policy are:

• 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 behaviour on specific ESG issues and achieve positive change

• Positive impact: Investing with an objective to achieve positive real world outcomes and impact, such as contributing to the UN Sustainable Development Goals.

�

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.

�

Through collaboration with other investors and industry think tanks we contribute to the development of principles and standards of corporate responsibility both at sector levels, as well as investee company level.

�

Our full voting records are available here.

Our fund approach to responsible investment

Kempen’s ESG policy is fully implemented in our fund’s investment process across the three relevant pillars of: Exclusion, ESG integration and Active ownership

�

ESG is fully integrated into the investment process of the Kempen (Lux) Income Fund, with analysis undertaken both pre-investment and as part of our portfolio monitoring activities. Portfolio managers perform an in-depth analysis of ESG data, and ESG risks and opportunities are taken into account when selecting and monitoring governments, government related issuers and corporates.

�

1. Exclusion

In line with the general Kempen policy, the Kempen (Lux) Income Fund excludes all countries and companies of the KCM exclusion- or avoidance list. Companies or countries on these lists are either involved in the production of controversial weapons, derive a significant portion of their revenues from the production or distribution of tobacco, or have been involved in serious controversies.

�

2. ESG integration

We flag “low” performing countries and companies. The portfolio managers of the Kempen (Lux) Income Fund and the underlying funds, assesses the materiality of the ESG issue and its implications for the credit profile of the company or country. If an issue is deemed material, our first objective is to engage on the issue. If we can conclude from the engagement that the ESG concerns are not structural and if the company is willing to improve, we make an adjustment in the determination of the relative value of the company’s securities. In severe cases where we do not see any prospect of improvement we forego investment in the country or company.

�

The fund performs a quarterly screening using the database MSCI ESG research. The Responsible Investment team conducts the screening, and a review of the ESG ratings of bonds in the portfolio along with discussions on ESG rating developments are conducted by the team.�

�

The following items are discussed on a quarterly basis:

• A review of the ESG ratings of bonds in the portfolio;

• A discussion on any developments / changes in the ESG ratings;

• Screening for controversies using MSCI ESG research;

• Excluding countries and companies based on UN Global Compact criteria;

• Excluding controversial weapon producers.

�

Finally, the Kempen (Lux) Income Fund prefers Green bonds rather than a ‘normal bond’ if two bonds have the same risk/return characteristics. We are an active player in the market of green bonds and we have a green bond policy which outlines the guidelines we adhere to defining a green bond.

�

3. Active ownership

Where relevant our fund will attempt to use its ownership stakes to engage with investees on ESG issues. For example, in 2018 the fund was part of an engagement with Bayer, following their acquisition of Monsanto. Through the acquisition, Bayer inherited several significant controversies in the field of genetically modified organisms (GMOs). The goal of the engagement is to get a formal and written statement from the company which states that they will not sue small holder farmers for the unintended use of Bayer licensed GMO crops. It also asks the company to set a target for the number of farmers that receive education on their crop protection products.

�

In addition the fund has ongoing engagement cases with Volkswagen on its company culture, Cez on the use of thermal coal, Glencore on climate action and Huntsman on ESG disclosure.

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

• Prospectus
• Outlook 2020
• Asset Allocatie Outlook

�