Triodos SICAV I applies some of the strictest criteria in the market. We believe that companies that successfully balance care for the environment, society and their business will deliver maximum value to all stakeholders, including their shareholders.
The insights in sustainable corporate behaviour evolve over time with increased knowledge and insight. The fund’s criteria therefore evolve too. Triodos SICAV I regularly reconsiders its criteria to reflect the latest insights in sustainability within Triodos Bank and in society. Triodos SICAV I thus fully participates in the public debate on sustainability.
The aim of the fund is to invest in companies that outperform other companies in their sector on sustainability and that drive the sustainability agenda of this sector forward. By investing in such companies, which are an example for others in their sector, the fund wants to encourage them to maintain their position as frontrunners in the sector. The general approach is that companies from all sectors are considered for investment by the fund. In 2014, the fund concluded that for the oil and gas industry the best-in-class approach is no longer appropriate. Despite our research efforts, it is increasingly difficult to find a fossil fuel company that fits our investment philosophy. We are witnessing that the industry is moving increasingly towards so-called ‘unconventional oil and gas extraction’. This includes, for example, oil extraction from oil sands, the extraction of shale oil and gas and drilling in fragile regions such as the Arctic. The gap between the fossil fuel industry and renewable energy companies in terms of environmental impact is widening. Although the fund repeatedly engaged in a dialogue with investee companies, the industry has not shown sufficient positive change to contribute to a more sustainable society. Therefore, the fund has decided to introduce a threshold for companies’ involvement in the oil and gas industry. Companies that derive more than 5% of their revenues from oil and gas extraction or related services are excluded for investment. With this threshold, the fund further aligns its investment philosophy with Triodos Bank’s vision on energy. The fund will exclusively focus its efforts on selecting renewable energy companies for the Triodos Sustainable Investment Universe. As a result of this change, three companies that were part of the Triodos Sustainable Investment Universe are now excluded for investment. These are Dong Energy from Denmark and Gasunie and Vopak from the Netherlands. Dong Energy derives about 15% of its revenues from the extraction of oil and gas. Gasunie and Vopak are excluded because they focus on gas and oil transportation and storage.
In 2014, the fund also reconsidered its position on a number of other minimum standards.
- We have added fresh water scarcity under environmental damage. Access to fresh water is becoming an important sustainability issue. Companies with water-intensive production processes need to safeguard access to fresh water for their own business purposes. However, they also have a responsibility in this respect towards the local communities in which they operate. We require these companies to actively show awareness through their policies and programmes.
- We have placed the topic of scarce commodities under the precautionary principle. Companies that are involved in the extraction of scarce commodities through mining activities are required to take measures to prevent the depletion of resources. The fund will consider innovations in mining processes, waste recycling and cradle to cradle concepts. In 2014, we excluded Norwegian fertilizer company Yara for lack of awareness of this topic.
- We have made the basic labour rights standard stricter. The precautionary principle for safeguarding basic labour rights of employees and suppliers’ employees from now on applies worldwide, not just to what are considered high-risk countries. Experience has shown that violations of basic labour rights occur everywhere.
- The human rights situation in Myanmar is improving, although still fragile. For that reason, the European Union has lifted and the United States has eased its economic sanctions. These sanctions, plus the plea of the people of Myanmar to boycott the regime, were what made the situation in Myanmar unique compared to other countries with repressive regimes and were a reason not to invest in companies present in that country. Today, the people of Myanmar welcome Western companies with good ethical standards, as their presence contributes to democracy and brings economic development and jobs. The fund will no longer exclude companies active in Myanmar for that reason alone.
A full overview of the fund’s sustainability criteria is available on www.triodos.com.