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Human rights

In line with Aegon's Responsible Investment Policy and our commitment to the Principles for Responsible Investment (PRI), we have taken action with a number of companies that failed to meet our standards.

Through our engagement we obtaining a better understanding of the human rights issues that companies face; how they deal with these challenging issues through policies, risk management and compliance; and how they report on human rights related issues.

The importance of this theme in 2013 is also a reflection of the increased awareness of companies' obligations not to violate human rights in the course of their activities, and to provide redress when infringements occur, as outlined in the UN "Protect, Respect and Remedy" Framework developed by professor John Ruggie.

AAM had a number of positive outcomes from its engagement activities regarding human rights. A number of these cases and the progress made are outlined below.

Protecting human rights

Aegon Asset Management (AAM) initiated a fruitful dialogue with a large telecommunications company that has been linked to concerns about its complicity in human rights abuses by controversial regimes, including Iran and Syria.

AAM requested that the company strengthen its human rights due diligence procedures, enhance disclosure on initiatives to protect human rights in its sphere of influence and in high risk countries, and to improve its public reporting on human rights risks faced, by country of operation.

Over the course of 2013, the company took several steps to reduce its exposure to human rights related risks, including the establishment of a board-level Social and Ethics Committee. It was also working on a new human rights policy, for which it has studied the UN Guiding Principles on Business and Human Rights (UNGP).

The company has conducted research into what human rights mean for its operations, given its exposure to high risk countries. It has also committed to addressing industry-specific issues, including the freedom of expression, privacy, and security. The company's progress with respect to these initiatives will be assessed in 2014.

Controls on the use of human tissue

TKP Investments, an Aegon Asset Management Company, initiated engagement with a company in the healthcare sector that is specialized in processing human musculoskeletal and other tissue.

The company was selected for engagement due to its exposure to human rights related risks, and concerns about the provenance and processing of the human tissue.

TKPI requested that the company disclose what due diligence checks it has incorporated into its supply chain risk management system to ensure the procurement of healthy human tissue, and to ensure the consent of donors. TKPI also asked the company to commit to regularly auditing of its supply chain for ethical compliance.

The company was responsive and provided TKPI with strong evidence of quality and safety controls to ensure that human tissue they provide to patients is safe and disease-free.

The company is certified under the ISO 13485 Standard, which is focused on product quality and safety and requires supplier auditing. Concerns about tissue health were adequately addressed. However, the company could do more to disclose how it audits suppliers on ethical aspects, such as donor consent.

Protecting health and safety of employees

TKP Investments (TKPI), an Aegon Asset Management company,  initiated engagement dialogue with a large steel company on account of its exposure to human rights related risks in the area of health and safety.

The company had a long history of safety incidents that stand out in the sector in terms of their frequency, impact, and the recurrence of regulatory actions.

TKPI asked the company to commit to human rights due diligence, continual improvement of its health and safety management systems across the Group's sites, OSHAS 18001 certification, and to a remediation system to provide redress for human rights violations occurring at its sites.

The company reported that it has taken a more thorough approach to investigating incidents and performing corrective action, in order to prevent a recurrence of health and safety incidents.

Based on statistics collected, the company is now implementing several programs aimed at improving safety that relate directly to existing causes of injuries or fatalities. It has also implemented a training program on safety issues which was attended by more than 2,000 operations managers in 2013. In addition, the company reported that it has set some statistics and targets, aiming for a zero fatality rate in 2014 and a 20% reduction in long-term injury frequency rates in comparison to 2013 figures.

The company did not commit to expanding its OSHAS 18001 certification, which it stated would give a false sense of security if awareness of hazards and risk management are not first improved internally.

The company also reported on its compensation programs in place for injuries or fatalities, which it stated vary by country so as to comply with national legislation in its different locations of operation.

Enhancing ethics standards

TKP Investments (TKPI), and Aegon Asset Management company, initiated dialogue with an international engineering and construction company exposed to corruption and bribery-related risks.

The company is facing allegations in multiple countries, involving staff with high levels of responsibilities including sales agents, business account managers and executives.

TKPI requested that the company implement effective accounting and financial reporting procedures to reflect its transactions and dealings, disclose to what extent it addresses business ethics issues in its standard due diligence procedures, and perform and publicly report on periodic audits to ensure compliance with its anti-corruption policies.

The company responded by expressing its willingness to engage in dialogue over ESG related issues and the availability of its senior staff, including its Compliance Officer, for future discussions with its shareholders.

It disclosed evidence of significant improvements to its anti-corruption policies, including adopting a new agent review policy requiring due diligence to be conducted for all business partners. Although the company has not provided evidence of new accounting/financial reporting procedures, it stated that an external auditor concluded that effective internal control was maintained in all material respects.

The company has committed to compliance assessments, and reported that an independent corporate monitor had been appointed to review its ethics and compliance program.

Addressing risks related to bribery and corruption

TKP Investments (TKPI), an Aegon Asset Management company, initiated engagement with a global energy company exposed to bribery and corruption related risks.

The company was involved in a corruption scandal relating to its joint venture with an Angolan company, and could face charges under the U.S. Foreign Corrupt Practices Act.

TKPI asked the company to improve its policies on bribery and corruption, to disclose whether it provides training relating to bribery or corruption for key managers dealing with foreign partners, to disclose whether ethics issues are included in its due diligence procedures, and to consider becoming a member of the EITI.

The company responded that it is committed to a strong policy on bribes and other forms of corruption, and has adopted and implemented a comprehensive anti-corruption compliance program that provides clear guidelines on what is and what is not considered acceptable behavior.

Regarding training, the company disclosed that it provides in-depth training on its anti-corruption compliance program and on anti-corruption laws twice yearly, and requires 100% of its staff (including managers and employees who work with foreign partners) to participate in these training sessions.

The company also stated that it is actively evaluating becoming involved with and a member of the EITI, as suggested by TKPI.

These steps are in line with TKPI's engagement goals, and can be considered positive, although the company's disclosure with respect to the contents of its anti-corruption compliance program could be strengthened further.

Concerns related to business ethics and environmental performance

Aegon Asset Management (AAM) initiated dialogue with an international metals and mining company over concerns related to business ethics and environmental performance.

AAM asked the company to publish its anti-corruption policy, and disclose details of company training programs designed to strengthen management of risks related to bribery and corruption.

AAM also asked the company to implement an independent whistle-blower program, allowing employees and third parties to report misconduct anonymously and without fear of retaliation.

On environmental performance, AAM noted that the company already has a relatively strong environmental policy and management system, but asked for additional steps to improve implementation.

These include the pursuit of ISO-14001 certification across the company's operations and a program to reduce significant non-greenhouse gas emissions. AAM also requested disclosure of measures to address problems with water contamination at one of the company's mines in Australia.

In recent years, the company has been involved in a number of environmental controversies, and has faced allegations of fraud, bribery, tax evasion and breaches of international sanctions. AAM has requested a written response and a face-to-face meeting with company representatives, but so far has received no reply.

Accord on Fire and Building Safety in Bangladesh

As news spread of the numerous deaths and injuries related to Bangladesh factory accidents in 2012 and 2013 and concern increased in the investor community related to risks to companies that source products in Bangladesh and other low-cost countries, AAM US joined an investor coalition coordinated by the Interfaith Center on Corporate Responsibility (ICCR) to actively engage apparel brands and retailers.

The coalition was formed to urge these companies to commit to sign the Accord on Fire and Building Safety in Bangladesh ("Accord").

The Accord is intended to make Bangladeshi garment factories safe workplaces and is tailored to the distinctive challenges of the textile industry in Bangladesh. In participating in this engagement, AAM US joined over 200 investors from a larger global coalition representing $3.1 trillion in assets under management from the U.S., Canada, Australia and Europe.

AAM US signed a letter that was sent to 21 apparel brands and retailers that, at that time, had yet to join the Accord.

The companies targeted were US apparel and retail brands and the letter referenced the Accord as the best route to mitigate safety risks to garment workers in Bangladesh.

As of 2014, 150 companies have joined the Accord, including such high-profile brands as Adidas, Esprit, Carrefour, Abercrombie & Fitch, Tesco and Marks & Spencer.

Land grabbing in Brazil

In October 2013, in a television broadcast, food processing company Bunge was linked with land grabbing practices in the Mato Grosso do Sul region, Brazil.

Bunge owns and operates several sugarcane mills in Brazil and sells sugar to companies such as Coca-Cola Company and PepsiCo.

After the broadcast, aid and development charity Oxfam released a report outlining the relationships of several Dutch financial institutions, including Aegon, and 22 food companies exposed to ESG risks, Bunge being one of them.

Bunge has been accused of being complicit in land grabbing practices by entering into contracts to buy sugarcane from farmers/landowners who 'grabbed' the land from the indigenous people.

In the last decade sugar farming in the Mato Grosso do Sul region tripled. Since then indigenous communities have been trying to reclaim land that was taken from them illegally to build these sugar plantations. The rights of the indigenous communities to the land have been confirmed by the national authorities. However, until now the Brazilian authorities have not been successful in demarcating the land adequately and enforcing the law in this area.

The resulting violence between the farmers and their private security personnel on one side, and the indigenous people on the other side, led to dozens of people being killed on both sides in recent years.

This social supply chain controversy was identified by our ESG research providers, but given that Bunge does not own or operate the sugar farms on disputed territory, and considering the company's response and the prevailing problems in Brazil with land rights and governance, the controversy was not assessed to be severe.

After engagement from Dutch institutional investors the company committed to not renew contracts with farmers on disputed land, an outcome that we deemed adequate for now, although we will monitor the company's commitment and will reassess the situation when necessary.

This case illustrates that we, as asset managers, are increasingly asked to monitor not only the activities of the companies we invest in, but also the potential risks they are exposed to along their supply chain. This poses a number of challenges for investors in terms of obtaining the relevant data and research and assessing materiality to our investments.

 

updated July 27, 2015

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