RobecoSAM | Peter van der Werf

Zurich, 14 November 2013

Engaging with corporates to tackle water risks

What? •  Engagement is an active dialogue between investor(s) and a company

•  Goal of the dialogue is to improve the Environmental, Social and Governance (ESG) behaviour of the company

Why? •  Improved ESG behaviour contributes to better risk return profile of the securities and

long term performance of the company

How? •  We use an integrated approach combining a clear investor perspective with knowledge

from our corporate sustainability assessment to assess which topics are material to start an active dialogue

For whom? •  We conduct engagement for funds managed by the Robeco group and for funds

managed by external managers of clients who use our engagement overlay service

Engagement in a nutshell

Preparation of engagement -> Screening of material themes

Define SMART objectives with (external) research provider

Analyze case -> establish contact with company

Ongoing dialogue -> measure objectives Closed successful

Closed unsuccessful

Focused engagement process

Feedback to portfolio managers & clients

Water risks are material in textile and food & beverage sector

•  Companies need to create resilient and competitive supply chains

•  Carefully balance commercial imperatives with social considerations

•  Crucial elements are sound business practices and an effective water strategy

•  Reputational damage is a huge risk to textile and food & beverage sector companies

•  Water management is an important factor in brand management to safeguard shareholder value

Textile product supply chain water use

•  Example of textile product supply chain

•  Indicates main impact upstream in the supply chain

•  Cotton production and wet processing are largest water users

What do we aim for with our engagement?

During our dialogue with companies in these sectors we:

•  Aim to increase awareness of materiality of water risks

•  Call for water impact analysis by companies

•  Urge companies to develop and implement a comprehensive water policy

•  Improve their reporting to stakeholders in the public domain on water management

•  Ask companies to structurally embed water management in the governance structure of the company

Why?

•  Improved ESG behaviour contributes to better risk return profile of the securities and long term performance of the company

Mondelez makes good steps in mitigating water risks

RobecoSAM’s Governance & Active Ownership team has been in dialogue with Mondelez since 2010 on water management

Issues identified at start of dialogue:

•  Awareness of water dependency not addressed in CSR report

•  Targets to reduce water usages not set

•  Governance of water management on executive level not clear for stakeholders

Still ample room for improvement in transparency

Topics addressed during our dialogue:

•  Focus on water management in their largest supply chains cashew, cacao and coffee

•  Repeatedly urged the company to report on water to the CDP Water questionnaire and after several years of discussions the company has made its first CDP Water disclosure in 2013

Next steps for remainder of dialogue:

•  Discuss upcoming sustainability report with the company to assess if they have made the requested progress in terms of disclosure to stakeholders

•  Discuss current Oxfam Novib campaign Behind the Brands with the company to explore where the company can score better based on their improved water disclosure through CDP Water

Source: http://www.mondelezinternational.com/home/index.aspx

Water management as risk for H&M

RobecoSAM’s Governance & Active Ownership team has been in dialogue with H&M since 2010

Issues identified at start of dialogue:

•  H&M did not perform a water impact analysis

•  H&M did not publish a water policy on their website

Topics addressed during our dialogue:

•  Requested H&M to increase it’s transparency in the public domain on water management, especially with regards to the supply chain

•  Discussed with H&M their steps towards the launch of their New Water Strategy early 2013 in partnership with WWF

•  During our last meeting at the World Water Week in 2013 in Stockholm we have discussed how water management is embedded in the core business of H&M

Source: http://about.hm.com/en/About/Sustainability/Commitments/Use-Resources-Responsibly/Water.html

Turned into a business opportunity

Conscious collection embeds water stewardship in core business

Examples of some of the measures taken by H&M are:

•  A global sustainability e-learning tool will teach all 104,000 employees why water is important

•  H&M designers and buyers will receive training in the water impact of raw material production as well as wet processes to promote more sustainable choices

Next steps after closing of dialogue:

•  Published best practice article on H&M in our sustainability magazine Advance

•  Use best practice example of H&M in our dialogues with peers in the textile sector which have not developed such water management strategy

Source: http://about.hm.com/en/About/Sustainability.html

What?

•  We identified water management as a material issue for the textile and food & beverage sector

•  We engage with companies on water-related issues in our portfolio or our engagement clients portfolio’s

•  Goal of the dialogue is to improve the Environmental, Social and Governance (ESG) behaviour of the company

Results?

•  We see clear improvements in transparency, disclosure through CDP Water or sustainability reports. This ultimately leads to embedding water stewardship in core business of companies in both sectors

Engagement for water management becomes a dialogue on water stewardship

Disclaimer

“RobecoSAM” is a registered trade mark and trade name of Robeco Groep N.V. (The Netherlands) and hereinafter referred to as the “RobecoSAM-Brand”. The RobecoSAM-Brand is allowedly being used by Robeco Institutional Asset Management B.V. (The Netherlands) as well as by RobecoSAM AG (Switzerland). Both legal entities are responsible for their own activities or publications related to the RobecoSAM-Brand. For the sake of clarity we would like to state that the team members of RobecoSAM AG’s “Governance & Active Ownership” department are based in the Netherlands and employed directly by Robeco Institutional Asset Management B.V.

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