SRI Charter

SRI Charter
Principles adopted by Ircantec
1
September 2013
Contents
Presentation of Ircantec
p. 1
A socially responsible investment approach: general principles p. 2
Shares and corporate bonds
p. 4
Sovereign bonds
p. 6
Real estate
p. 6
Shareholder engagement
p. 7
Appendices
p. 8
Presentation of Ircantec
Identity
Ircantec is a complementary pension scheme for nontenured State and Territorial Authority workers. Its mandate is to pay pensions to its members and manage the
scheme’s reserves.
A complementary «pay-as-you-go» pension fund, the system was created by a Decree dated 23 December 1970
as amended by the Decree dated 23 September 2008. It
provides supplementary pension coverage for non-tenured workers of the State, territorial authorities, hospitals
and associated public institutions, the Banque de France,
the electricity and gas industries, as well as other major
publicly-funded public interest organisations. It is also the
pension scheme for local elected officials.
It is a points-based system financed by contributions from
employees and employers. In 2011, 2.8 million people
contributed to the scheme and 1.9 million pensioners
received their allowance1; 14.65 million people have entitlements to the scheme, or about one in three workers.
The scheme has statutory reserves managed in the
medium and long term to guarantee the payment of pensions. The Board of Directors has decided to invest these
assets mainly in shares, bonds and monetary securities
and property assets.
General investment policy
Ircantec defines its investment policy by three major
concerns without any one of them taking precedence
over the others:
• acting in the best long-term interests of its beneficiaries,
• optimising the performance of its investments over the
long term within risk limits accepted by the Institution.
Financial performance is not the only objective,
• maintaining the consistency of the investment policy –
while upholding its own collective values.
Values of the Institution
Ircantec’s identity shapes its values: the pay-as-you-go
system binds together generations in a spirit of solidarity
and equity.
To ensure fairness between generations, Ircantec has
identified its priority as maintaining long-term capital
which will contribute to the quality of life of future pensioners: financial capital for the payment of pensions, as well
as the environmental capital2 and social capital3,
The importance given by the Institution to intergenerational solidarity gives meaning to its responsible investment
approach which must meet three requirements:
• guarantee payment of pensions to current and future
pensioners,
• contribute to preserving the natural environment for current and future pensioners,
• participate in social progress for current and future
pensioners.
The value of intergenerational solidarity is also evident in
the work of the Social Fund and the scheme’s patronage
policy.
1 Ircantec, 2012 statistical directory
2 Also called natural capital
3 Also called human capital
1
A socially responsible investment approach:
general principles
Principle of the approach
Aware of its responsibilities to its members and society,
on 18 December 2008, the Ircantec Board of Directors
decided to adopt an SRI (Socially Responsible Investment)
approach for its portfolio of assets.
The Board took its inspiration from the preamble to the six
Principles for Responsible Investment (PRI1) of the United
Nations (UN):
«As institutional investors, we have a duty to act in the best
long-term interests of our beneficiaries. In this fiduciary
role, we believe that environmental, social and corporate
governance (ESG) issues can affect the performance of
investment portfolios (to varying degrees across companies, sectors, regions, asset classes and through time).
We also recognise that applying these Principles may better align investors with broader objectives of society».
Ircantec voluntarily intends to apply the UN’s PRI and
uphold the ten principles of the United Nations’ Global
Compact2. The two principles underlying its action are:
• integrate SRI criteria into portfolio management,
• be an active shareholder.
It thus intends to give value to issuers in accordance with
the principles it has defined and to intervene in the financial community and with like-minded investors taking into
account these principles. Given the importance Ircantec
attaches to these issues, the Institution wishes to pool
its experience with other investors sharing the same
2
concerns in this area. Ircantec will also support initiatives
contributing to their dissemination.
Features of the approach
The Ircantec SRI approach aims to be:
• simple and pragmatic,
• progressive3,
• based on PRI and fundamental international standards (including the International Labour Organisation’s
Fundamental Conventions).
The Board also expressed the hope that this approach will
be sustainable over time and will unify investors sharing
the same issues.
Implementation of SRI principles
The Council’s commitment is not only limited to the formulation of principles; it intends to adapt the UN PRI, in
particular Principle 1: «We will incorporate ESG issues into
investment analysis and decision-making processes».
SRI principles also need to be integrated by all those in
charge of the managing the scheme’s reserves.
• The Board of Directors:
- defines the general guidelines for the SRI policy; it validates updates and extensions by referring to research
work and exchanges with other investors,
- verifies the implementation of the principles by periodically reviewing their degree of integration into
management processes; it supports its analysis by
non-financial reports provided by a non-financial rating
agency,
- refers to the Technical and Financial Steering Committee
responsible for preparing the work of the Board relating
to the scheme’s investment policy.
• Caisse des Dépôts et Consignations, the Institution’s
management body:
-
assists the Board in developing its SRI policy and
making proposals for its evolution in this context; it
monitors developments in the SRI field,
-
communicates the Institution’s SRI policy to management companies and ensures compliance with the
principles in the performance of their duties,
- periodically reports to the Board of Directors on the
application of SRI principles in investment strategies.
• Asset management companies:
- integrate Ircantec’s principles in their methodology and
investment process,
- invest in line with the strategy and principles defined
by the Board,
- notify how SRI principles are implemented in their management of and warn of any difficulties of application,
- identify and monitor the risks the financial investments
may incur for the image and reputation of the scheme.
Asset management companies are selected by tender in
view of their financial capabilities and their ability to meet
the needs of Ircantec in this area. These companies must
be PRI signatories and those who have not signed up
must be able to explain their position.
1 See Appendix 1: PRI
2 See Appendix 2: the ten principles of the Global Compact, see www.pactemondial.org
3 Phase I: general principles and principles concerning shares (2009); Phase II: principles concerning bonds (2010); Phase III: principles concerning property
investment (2011); Phase IV: principles concerning sovereign bonds (2012)
3
Shares and corporate bonds
Principle of the approach
Long-term investment performance not only depends on
the impact of the financial and extra-financial strategy,
it also depends on the company’s interactions with its
social, economic and financial environment. The inclusion of SRI criteria in portfolio management allows a full
assessment of risks and opportunities of companies in
which Ircantec invests.
The Institution believes that respect of these criteria allows
companies to have a positive impact on their valuation,
improve their social behaviour and reduce the risks to
which they are exposed and to which they expose the
community.
The performance sought through investment of the
Institution’s assets must contribute to the development of
the community.
Approach adopted by Ircantec
• Reference framework
Ircantec will assess companies’ social responsibility in
particular by examining:
- their ratification of the UN Global Compact; those that
have not ratified must be able to explain their position,
- their participation in the economic development of the
regions where they are located,
-
their remuneration policy, which should allow their
employees to enjoy a satisfactory standard of living,
-
measures taken concerning the health and safety
of workers, the promotion of social dialogue and
employee training.
•E
xclusion
In principle, no industry is excluded from the investment
universe.
4
The following companies will be excluded:
- companies that manufacture and market weapons prohibited by international conventions,
- companies that are guilty of failing to abide by the following fundamental principles:
.U
niversal Declaration of Human Rights,
. ILO declaration on Fundamental Principles and Rights
at Work,
. Rio declaration on the environment and development,
.U
N conventions (in particular anti-corruption).
This rule applies in the following areas (non-exhaustive
list):
. forced labour and child labour,
. v iolation of the freedom of association,
. major industrial accidents and environmental pollution
attributable to the company’s negligence,
. corruption, money laundering and support for authoritarian regimes.
•E
nvironmental, Social and Governance (ESG)
selection
The Board requires that management companies adopt
«Best in class» investment processes based on the selection of the top-rated companies in each sector in ESG
areas.
More specifically, Ircantec would like to select companies
that:
- focus on human aspects and foster social progress,
- are concerned with the preservation of the environment
and sustainable local development,
- have exemplary governance.
For the Ircantec Board of Directors, these values are
developed as follows:
Focus on people and promote social progress
To assess the degree of companies’ compliance with
human rights and the measures they take to promote
social progress, Ircantec refers to:
-c
ompanies’ respect for fundamental social principles,
- non-discrimination in all its forms, in particular with respect to the elderly and women,
- freedom of opinion and expression, including the right
to organise,
-h
uman rights at work.
The Institution is also particularly attentive to the issue
of work and employment in its different dimensions and
favours companies that:
- respect the fundamental rules of labour law and social
partners,
-
contribute to the development of employment both
quantitatively and qualitatively (promotion and career
development, male/female gender equality, refusal of
child labour, etc.),
- have pre-emptive employment strategies (lifelong learning, development of acquired experience, retraining,
restructuring support),
- have specific projects that promote the development of
employment (research and development).
Preserving the environment and sustainably local
development
Ircantec will assess the environmental responsibilities
of companies by taking into account the environmental
impact of their activities and their production process,
including the following aspects:
- the fight against climate change and the control of CO2
emissions,
- energy efficiency,
- prevention of industrial accidents,
- management of water resources and waste treatment,
- the development of «green jobs»1.
Establishing exemplary governance
Ircantec intends to determine its choices by evaluating
companies with respect to several major themes:
-
the existence and respect of rights of the various
control bodies,
- independence and competence of directors,
- transparency of executive compensation,
-
internal control and conflict prevention mechanism,
the fight against corruption and laundering, business
ethics,
- transparency concerning the activity, financial and nonfinancial situation as well as development strategy.
1 green Jobs : Towards decent work in a sustainable low carbon world - survey published in September 2008. This survey published by the International
Labour Organisation (ILO), the UN Environment Programme (UNEP), the International Trade Union Confederation (ITUC) and the International Organisation
of Employers (IOE) analyses the emergence of «the green economy». It shows in particular that adaptation to climate change could disrupt many economic
and industrial sectors. The reduction of greenhouse gas emissions, the fight against global warming and limitation of energy consumption could create
millions of jobs.
5
Sovereign bonds
Real Estate
Principle of the SRI approach
The identity and values of the Institution tend to lead it
towards supporting public policies that plan over the long
term to ensure resources for future generations and place
public interest at the centre of their ambition.
SRI principles on property investments are applied in the
two following domains:
• social – by investing in Ehpad1 or nursing homes as
well as in student halls of residence (in particular in
the form of «Club Deals» or open funds, depending on
opportunities),
Approach adopted by Ircantec
The Ircantec Board of Directors has decided to focus on
States that:
• promote social progress
Ircantec will assess the social dimension of a State especially with reference to the following aspects:
- education,
- health.
• implement environment-friendly policies
The Institution is particularly sensitive to the following
environmental aspects:
- protection of natural resources,
- the fight against global warming,
- protection of biodiversity.
• have exemplary governance
Ircantec pays particular attention to the actions implemented by States in terms of:
- fighting corruption,
- freedom of expression,
- solidarity between countries.
• have ratified international treaties and conventions (including prohibited weapons).
6
• environmental – through:
-
contracts to improve office buildings or residential
buildings,
- the scheme’s sustainable development policy, for existing assets, aims to improve the environmental quality
of buildings and the quality of life for tenants.
1
Ehpad: Établissement d’hébergement pour personnes âgées dépendantes - Accommodation for elderly dependent persons
Shareholder engagement
• Ircantec intends to adopt an active voting policy at general
meetings to help improve governance of companies of
which it is a shareholder.
• The main themes in which Ircantec intends to exercise
its voting rights are corporate governance, executive
compensation, shareholders’ rights, approval of
accounts and management, allocation of profits and
equity management.
The scheme’s voting policy is currently being defined.
7
Appendix 1: Principles for Responsible Investment (PRI)
N°1
We will incorporate ESG issues into investment analysis and decision-making processes.
N°2
We will be active owners and incorporate ESG issues into our ownership policies and practices.
N°3
We will seek appropriate disclosure on ESG issues by the entities in which we invest.
N°4
We will promote acceptance and implementation of the Principles within the investment industry.
N°5
We will work together to enhance our effectiveness in implementing the Principles.
N°6
We will each report on our activities and progress towards implementing the Principles.
Source: UN PRI
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Appendix 2: The ten principles of the UN Global Compact
HUMAN RIGHTS
Principles 1: Businesses should support and respect the protection of internationally proclaimed human rights.
Principles 2: Businesses should make sure that they are not complicit in human rights abuses.
LABOUR
Principles 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining.
Principles 4: Businesses should contribute to the elimination of all forms of forced or compulsory labour.
Principles 5: Businesses should contribute to the effective abolition of child labour.
Principles 6: Businesses should contribute to the elimination of discrimination in respect of employment and occupation.
ENVIRONMENT
Principles 7: Companies should apply the precautionary approach to the problems related to the environment.
Principles 8: Businesses should undertake initiatives to promote greater environmental responsibility.
Principles 9: Businesses should encourage the development and diffusion of environmentally friendly technologies.
ANTI-CORRUPTION
Principles 10: Businesses should work against corruption in all its forms, including extortion and bribery.
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