Restriction criteria
For us, creating a more sustainable future begins with defining broad parameters to pinpoint areas that are ineligible for investment due to controversial activities or conduct. We do this by applying norms-based responsible investing criteria. These criteria reflect our investment beliefs, the organization’s values, relevant laws, and internationally recognized standards from the United Nations Global Compact and the OECD Guidelines for Multinational Enterprises.

Additional restriction criteria for our Sustainable and Impact strategies
In addition to our firm-wide exclusion criteria, we apply more stringent criteria in our Sustainable and Impact strategies. In these strategies, we strive for financial performance while maintaining a strong focus on contributing to sustainable development. This means avoiding investments that are not in line with the “do no harm” principle. As a result, we apply additional restrictions on certain activities, which run counter to sustainable development and may diminish the ability to reach sustainability objectives.

Engagement and voting

Engagement approach
We engage on behalf of our clients to put their money to work to create a better world and maximize the value of their investments, as we believe sustainable corporate behaviour also enhances risk-adjusted returns. We select ESG-related engagement themes on relevant and material topics that offer us scope to positively influence corporate behaviour. As share- and debt-holders, we are fully aware of our potential to drive change for the better. We work with international organizations and other institutional investors to strengthen the impact of our efforts.

We use internationally accepted standards of corporate behaviour as the starting point for our engagement. These are the guidelines and principles developed by the United Nations, the International Corporate Governance Network and the Organisation for Economic Cooperation and Development (OECD). We engage on specific ESG targets using a controversy and thematic engagement approach. And our analysts and portfolio managers maintain regular bottom-up dialogues with investee companies on ESG subjects we believe have a significant impact on their value.

• Controversy engagement focuses on severe and structural breaches of our norms-based criteria in the areas of governance, human rights, labour rights, environment, and bribery and corruption.
• Thematic engagement focuses on themes that have a material impact on society, and where we believe our engagement efforts can create positive change. These themes share objectives and risks as defined by the SDGs and World Economic Forum.

Voting
The annual general meeting (AGM) is one of the most important events in the annual corporate calendar. It gives us a unique opportunity to effectively hold management accountable and represent our clients.

As a responsible investor, we have a role to play in ensuring there are checks and balances on the activities and conduct of our investee companies. Exercising voting rights is one of the most effective ways of doing this. In 2020, our voting activities focused on three key topics: board elections, aligning executive remuneration with company strategy and sustainability shareholder resolutions. We believe that ongoing engagement on ESG issues with companies does not impede ambitious voting behaviour. Rather, we see voting as an additional mechanism to voice our concerns and expectations and further build on our engagement efforts.

We report on our engagement and voting activities in our annual RI Report, outlining focus themes and the progress we have made. Greenlightcapitaltrading's voting activities are also publicly disclosed and regularly updated. This ensures a continuous feedback loop on how we implement our voting policy and represent clients.

ESG integration
Integrating environmental, social and governance factors is not a simple box-ticking exercise. It requires nuanced analysis, a critical approach to data and a deep understanding of the material factors that drive returns or could have an adverse impact. We are committed to this because true ESG integration enhances our decision-making and helps us navigate an uncertain future.

We strive to integrate sustainability concerns throughout our investment process, from idea generation to analysis, portfolio construction, active ownership, voting and client reporting. We now integrate ESG factors into 75% of our assets under management, up from 68% in 2019, and we aim to increase this figure to 80% by 2023. This covers the assets we manage in our ESG-integrated, Sustainable and Impact strategies.

ESG integration means different things to different asset managers. We follow a stringent definition: for each investment, we demonstrably and consistently integrate all three ESG components wherever applicable throughout the investment process. We do this because we truly believe in the value of ESG integration – for investors and for the global community.

“Blind” ESG integration, using data from external providers without in-house analysis, can lead to less accurate risk analysis and lower returns. We therefore follow a clear three-step process:
1. Identify
2. Assess
3. Integrate

Transparent reporting
Reporting is a crucial part of our responsible investing approach, both for our clients and for us. For an asset manager, reporting is probably the most concrete way of demonstrating a commitment to responsible investing. It closes the circle as it can be both the starting point and the end of the responsible investing process. This is also why we place such emphasis on giving a transparent overview of our activities and why, every year, we raise the bar. These reports cover topics such as exposure to potential controversies, climate emissions figures and other ESG performance metrics. We promote transparency by sharing as much available ESG-related information as possible with clients.