LifeSight believes in the importance of sustainable investing; it is one of LifeSight’s investment beliefs.
We would like to explain this belief and the impact it has on our investments.
Sustainable investing is an important part of LifeSight’s investment approach.
The European regulations on sustainable investing (Sustainable Finance Disclosure Regulation or SFDR) require LifeSight:
- to publish information on the integration of sustainability risks in investment decisions; and
- to indicate whether adverse impacts of investment decisions on sustainability factors are taken into account; and
- to disclose whether a financial product promotes environmental, social and governance (ESG) characteristics or whether it aims for sustainable investment.
According to the SFDR, a “sustainable investment” is:
- an investment in an economic activity that contributes to an environmental objective, as measured by, for example, key resource efficiency indicators for the use of energy, renewable energy, raw materials, water and land, for the production of waste, and greenhouse gas emissions, and for the impact on biodiversity and the circular economy; or
- an investment in an economic activity that contributes to the achievement of a social objective, in particular an investment that contributes to tackling inequality, or that promotes social cohesion, social inclusion and employment relations; or
- an investment in human capital or in economically or socially disadvantaged communities, provided that such investments do not seriously undermine those objectives and that the companies in which is invested follow good governance practices, in particular good management structures, relations with their employees, remuneration of the personnel involved and tax compliance.
“Sustainability risks” are defined as environmental, social or governance events or conditions which, if they occur, could cause an actual or potential material negative impact on the value of the investment.
“Sustainability factors” are environmental, social and employment issues, respect for human rights, and the fight against corruption and bribery.
LifeSight views sustainable investing as a long-term financial strategy that integrates environmental, social and governance factors and effective stewardship. We believe this reflects good risk management.
LifeSight has a formal process for integrating sustainability risks into our assesment on fund managers. This is tailored to the most relevant and appropriate asset class and strategy in question. Our assessment on sustainable investing of a fund manager’s practices and implementation, in the context of individual strategies and products, feeds into our overall assessment of a fund manager’s ability to achieve a competitive advantage. Therefore, the overall rating that LifeSight assigns to a strategy reflects our view of the sustainable investment capabilities of the rated strategy.
Selection of fund managers
Our portfolio composition process is aimed at maximizing the quality of the portfolio, assessed through several points of view, including sustainability. An important part of our framework is the assessment of sustainability through two dimensions:
- the resilience of the portfolio. That is the exposure of the portfolio to sustainability risks; and
- administrator integration. That is the extent to which sustainability risks are integrated into the decisions of the portfolio managers.
In other words, when selecting the underlying fund manager, LifeSight assesses, among other relevant selection considerations, how the fund manager takes into account sustainability risks. Sustainability risks are environmental, social or governance events or conditions which, if they occur, could cause an actual or potential material negative impact on the value of the investment.
LifeSight has full discretion in weighing all these considerations, such as sustainability risks, return, costs, risks, liquidity and diversification when allocating assets or rebalancing assets in the portfolio. LifeSight currently has no minimum standard for fund manager selection when it comes to sustainability risks. In addition, LifeSight has not independently integrated sustainability risks in its investment decisions in a binding manner (either at entity or product level). As a result, the underlying investments of the financial products offered do not take into account the EU criteria for environmentally sustainable economic activities.
LifeSight does not take negative effects of investment decisions into account
LifeSight does not take into account the adverse impacts of investment decisions on sustainability factors at entity or product level. LifeSight aims to do this from 1 January 2025. We expect that a solid market practice will have developed by then regarding how the required disclosure should be made. And that then more reliable quantitative and qualitative information will be available to adequately reflect on. The ESG information chain is currently still developing as a result of which early disclosure could result in additional costs and regulatory non-compliance risk. LifeSight has consequently decided to await market practices to develop before integrating the EU criteria for environmentally sustainable economic activities.
The contents, charts and visuals in the ESG dashboard on MijnLifeSight are for illustrative purposes only and only relate to a part of the investment portfolio. With this we create an initial insight and awareness for participants in the pension schemes executed by LifeSight. We have the ambition to further develop the ESG dashboard. The ESG dashboard does not provide information on alignment of the investments of the financial products with Regulation (EU) 2020/852 (Taxonomy Regulation); the underlying investments of the financial products offered do not take into account the EU criteria for environmentally sustainable economic activities.
LifeSight is under no obligation to only make investments that (a) promote environmental or social characteristics or (b) have sustainable investing as an objective, or (c) are committed to good governance. Also, none of the products offered by LifeSight target such elements in a legally binding manner.
Sustainability risks are not part of the remuneration policy of LifeSight
In LifeSight’s remuneration policy, sustainability risks or their integration are not considered relevant for determining the remuneration of our board members or other employees.
LifeSight expects the companies and governments in which is invested to actively pursue a sustainable society now and in the near future.
As a shareholder, it is possible to encourage companies to become more sustainable. This can be done, for example, by voting at shareholders’ meetings. Another example is to enter into a dialogue with companies with the aim of changing behavior. We refer to this as ‘engagement’.
It can occur that companies that do not deal well with sustainability risks or decline a dialogue and/or do not take sufficient steps to become more sustainable. In that case, the decision may be taken to no longer invest in these companies. We refer to this as ‘exclusion’.
Exclusions (negative selection)
LifeSight chooses to exclude investments that violate international standards and human rights of the United Nations (the UNPRI principles and UN Global Compact principles), or when exclusions are required by law (for example due to sanctions legislation). Furthermore, investments are not made in companies that derive their turnover largely from the production of controversial weapons, tobacco or thermal coal.
We believe that effective stewardship is a critical aspect of sustainable investing and sustainability risk management, and is important for a well-functioning investment industry. We seek to exercise our stewardship responsibilities, either directly or through third parties, through a range of activities, such as asset manager involvement, safety-level involvement, as well as through voting and public policy advocacy and collaboration.
Currently, LifeSight has outsourced its stewardship policy to BlackRock, Northern Trust, Actiam, LGIM, BNY Mellon and Triodos. A description of and insight into the policy and their implementation by these asset managers can be found on the websites of these managers:
LifeSight aims to be fully accountable and transparent on the sustainable investment policy and its implementation. We provide insight into this in the form of a sustainability report. This report can be downloaded below.