NAPF STEWARDSHIP ACCOUNTABILITY FORUM STEWARDSHIP AT AVIVA INVESTORS November 2014 This document is for Professional Clients only. It is not to be viewed by or used with retail clients. ABOUT US OUR STEWARDSHIP HERITAGE 1970s Active member of ABI (now IMA) investment committee shaping UK governance practice 1994 1996 Aviva Investors among first asset managers to publish Corporate Governance Voting Policy. Founding member of the Corporate Governance Forum. Joined International Corporate Governance Network (ICGN) & previously on Board of Governors 1999 2000 2001 2005 2006 2010 2011 2012 Joined Shareholder Voting Working Group to improve the voting process Founding member of GIGN (Global Investors Governance Network) Aviva Investors first asset manager to integrate corporate responsibility into voting policy Active member of NAPF Stewardship Advisory Committee Aviva Investors is founding signatory of the Principles for Responsible Investment Aviva Investors signed up to UK Stewardship Code Founding member of 2020 Investor Stewardship Working Party. Aviva Life signed Stewardship Code Aviva Investors founded Corporate Sustainability Reporting Coalition at Rio+20 Conference At the forefront of shaping the industry ABOUT US GOVERNANCE IN ACTION Long-term, engaged, active investors Source: Aviva Investors, November 2014 INTEGRATING ESG – OUR RIO NETWORK PRINCIPLE 1 Developing our resources and building a Responsible Investment Officers (RIO) Network Source: Aviva Investors, July 2014 INTEGRATING ESG – ESG DATA PROVIDERS PRINCIPLE 1 Sourcing the best environmental, social & governance research Data as at 15/01/2014 INTEGRATING ESG – ESG LAUNCHPAD IN BLOOMBERG PRINCIPLE 1 Based on in-house ESG heatmap which allows us to monitor fund & index ESG risk External sources: - Sustainability profile - Negative newsflow - Corporate Governance profile Internal sources: - Overview of engagement activities - Voting record Source: Aviva Investors, in-house Bloomberg ESG Launchpad, July 2014 Input for investment decisions The information provided is for illustrative purposes only and the Information about specific securities should not be construed as a recommendation to buy or sell any securities. VOTING - SCALE PRINCIPLE 6 Total 22% Remuneration 6% 32% 72% 4% 65% Against Abstention Director re-election 24% Audit report 19% 0% 11% 1% 20% Support 65% 80% 40% 60% 80% 100% Voting at over 4000 companies on over 44,000 resolutions annually Source: Aviva Investors Jan-Dec 2013 data ENGAGEMENT – CHANGING CORPORATE BEHAVIOUR PRINCIPLES 3&4 FTSE250 oil & gas company agreed to withdraw from World Heritage Site, Virunga National Park in the DRC and not to operate in any World Heritage Sites in the future protecting sensitive habitats & species FTSE100 mining company appointed Chief Sustainability Officer and developed comprehensive policies to address environmental, human rights and stakeholder issues – to better manage risks and regain license to operate Catalysed Board overhaul including new CEO and remuneration structure – ensuring better Board governance and leadership and a rebound in share price Driving more sustainable companies – enhancing value & mitigating risk Source: Aviva Investors, November 2014 COLLABORATION PRINCIPLE 5 Industry leadership and collaboration Source: Aviva Investors, November 2014 COLLABORATION - ENGAGEMENT PRINCIPLE 5 Using collaborative forums, informal networks & developing new models of engagement Source: Aviva Investors, November 2014 POLICY ACTIVITIES MARKET REFORM Aviva hosted the United Nations Principles of Sustainable Insurance event on 27 June 2014. Aviva Group CEO, Mark Wilson, addressed an audience of insurers, investors, regulators and UN agencies, giving his views on how and why insurers should strive to be sustainable and unveiling a new report from Aviva Investors. www.aviva.com/roadmap Reforming capital markets EXTERNAL RECOGNITION AWARDS Founder of the Sustainable Stock Exchanges Initiative which was named by Forbes magazine as one of the “World’s Best Sustainability Ideas” and Finalist for the 2011 & 2013 Katerva Sustainability Award “These are difficult times for the financial services sector, and the temptation for many institutions is to batten down the hatches and ride out the public relations storm. Yet Aviva dared to think big, to raise their head above the parapet and demonstrate true leadership in gathering like minded institutions into the Corporate Sustainability Reporting Coalition - an international programme with the potential to transform the way sustainability is considered by large businesses.” Simon Mills, City of London February 2013 Aviva Investors has won a Global CSR Excellence & Leadership Award in the category of Most Innovative CSR Disclosure Policy at this year’s World Corporate Social Responsibility Congress held in Mumbai Recognised and respected by key influencers and stakeholders Q&A ANNEX ABOUT US OUR COMMITMENTS – Founding signatories of the UN Principles for Responsible Investment (PRI): we believe that companies conducting their business in a sustainable and responsible manner are more likely to succeed over time. Our Global Responsible Investment (GRI) team works with fund managers and analysts globally and across all asset classes to integrate ESG issues into investment decision-making. – Over twenty years focus on governance: our Corporate Governance and Corporate Responsibility Voting Policy has evolved from over twenty years of active ownership. We are committed to the principles of the UK Stewardship Code and International Corporate Governance Network (ICGN) Global Corporate Governance Principles. – Public commitment to international standards: We are signatories to the UN Global Compact and formally recognise international standards such as the OECD Guidelines for Multinational Enterprises, the Universal Declaration of Human Rights and the International Labour Organisation core labour standards. – Ethical principles: Aviva fully supports the Convention on Cluster Munitions. Aviva Group has a policy not to hold securities linked to companies involved in the manufacture of cluster munitions or anti-personnel mines in shareholder funds and are working to exclude these from policyholder funds. ABOUT US GRI ADVISORY COMMITTEE Professor Bob Eccles Harvard Business School Chairman of the Sustainability Accounting Standards Board (SASB) Steering Committee of the International Integrated Reporting Committee Professor Tim Jackson University of Surrey Professor of Sustainable Development David Pitt-Watson Jonathon Porritt Sophia Tickell London Business School Forum for the Future Meteos Co-chair of UNEP Finance Initiative Treasurer of Oxfam Director of the Sustainable Lifestyles Research Group Previously UK Sustainable Development Commission Previously Director of Hermes Co-Director of the Prince of Wales’s Business & Sustainability Programme Previously Chair of UK Sustainable Development Commission External advisor to GSK CR committee Founder of the PharmaFutures dialogues Previously Chair of the Board at SustainAbility Respected expert advisors in the field of sustainability and governance Source Aviva Investors PUBLIC TRANSPARENCY PRINCIPLES 1 & 7 1. Corporate Governance & Corporate Responsibility Voting Policy: exercise voting rights in companies in which Aviva Investors invests 2. Active stewardship: our Stewardship Statement is audited by PwC 3. Integration: over 80% AUM have tailored responsible investment policies in line with PRI 4. Transparent disclosure: Policies and voting record publicly available. Quarterly client reporting. Enhancing and protecting value through promoting good management and processes INTEGRATING ESG – ESG PEER ANALYSIS TRACKER PRINCIPLE 1 In-house Bloomberg ESG Peer Analysis Tracker • Highlights ESG performance and the potential financial implications relative to peers: Embedded within Aviva Investors Global Research Platform, Aladdin Source: Aviva Investors Developing tailor-made solutions for fund managers The information provided is for illustrative purposes only and the Information about specific securities should not be construed as a recommendation to buy or sell any securities. INTEGRATING ESG – BESPOKE RESEARCH PRINCIPLE 1 Advancing RI Integration in each asset class by developing tailored mainstream ESG research projects – Collaborating with other investors where we have shared interests – Engaging with market participants – Sponsoring thought leading ESG research We published a joint report in July 2014 with Standard & Poor’s and Carbon Tracker: Carbon Constraints cast a shadow over the future of the coal industry. • Source: Standard & Poor’s and Aviva Investors, July 23rd 2014 INTEGRATING ESG PRINCIPLE 1 It is about fitting with the existing investment process gaining better insight on the risks and opportunities of an investment, educating both analysts and portfolio managers in helping make better informed investment decisions demonstrating appropriate stewardship and oversight of the investments we make on behalf of our clients. It is not about × restricting the investment universe by applying systematic passive or negative ethical screens (we can apply such policies upon client requests) × taking investment decisions based only on companies’ corporate responsibility strategy without taking into account its financial performance and attractiveness. This stems from our belief that companies which actively consider ESG factors in their strategy will outperform their peers over MANAGING CONFLICTS PRINCIPLE 2 Comprehensive policy, robust process Source: Aviva Investors VOTING – MEASURING EFFECTIVENESS PRINCIPLE 6 Director (re)election Remuneration Corporate responsibility 0 50 100 150 200 250 300 Improvements (Against to Abstain or Support and Abstain to Support) Escalation or deterioration (Support to Against or Abstain and Abstain to Against) Robust voting but driving improvements Source: Aviva Investors Jan-Dec 2013 data POLICY ACTIVITIES MARKET REFORM Founded Corporate Sustainability Reporting Coalition representing investors with US$ 2 trillion AUM, as well as financial institutions, professional bodies, NGO and other relevant stakeholders. Achieved Paragraph 47 in the official UN Conference outcome document Founder of the Sustainable Stock Exchanges Initiative which was named by Forbes magazine as one of the “World’s Best Sustainability Ideas” and Finalist for the 2011 & 2013 Katerva Sustainability Award Influencing EU policy to ensure better investor disclosure and drive more sustainable companies Improving the integrity of financial markets DISCLAIMER Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (“Aviva Investors”) as at 20 November 2014. Unless stated otherwise any opinions expressed are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested. Issued By Aviva Investors Global Services Limited, registered in England No. 1151805. Registered Office: No. 1 Poultry, London EC2R 8EJ. Authorised and regulated by the Financial Conduct Authority and a member of the Investment Management Association. Contact us at Aviva Investors Global Services Limited, No. 1 Poultry, London EC2R 8EJ. Telephone calls to Aviva Investors may be recorded for training or monitoring purposes.