Aegon Asset Management

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This site is intended only for non-US professional investors or US-based fiduciaries representing non-US investors eligible to invest in Aegon Asset Management’s (the “Company”) UCITS funds. This site, and the funds described herein, are not suitable for individual investors.

The following information regarding the Company’s funds is for informational purposes only and does not constitute an offer for shares, products or services and should not be interpreted as an offer to sell, an invitation to acquire an investment, or a solicitation of an offer to buy for any persons who are prohibited from receiving such information under their domiciled local laws.

Aegon Asset Management Investment Company (Ireland) Plc is structured as an umbrella type open-ended investment company with variable capital consisting of a number of different sub-funds (“Funds”) and is authorized in Ireland pursuant to European Communities (Undertakings for Collective Investment in Transferable Securities) UCITS Regulations and the Central Bank UCITS Regulations (“UCITS Regulations"). Aegon Asset Management Europe ICAV is structured as an umbrella type open-ended investment ICAV with variable capital consisting of Funds and is authorized in Ireland as a UCITS pursuant to the UCITS Regulations.

These Funds are registered in Ireland and are available only to residents of those jurisdictions where allowed by law. Investors that do not meet these requirements will be denied access by the Company.

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Responsible Investing

Responsible investment (RI) is an umbrella term that covers various tools and approaches to incorporating environmental, social and governance (ESG) considerations into investment decision-making processes. It may include ESG integration and active ownership as well as dedicated, RI-focused capabilities. Related terms may include sustainable or ESG investing.

At Aegon Asset Management, we are active, engaged and responsible investors. By investing responsibly, we aim to minimize risk and explore new opportunities as we seek to generate value for our clients.

_{Important Disclosures: This is a summary of the broader approach to responsible investing across the various Aegon Asset Management affiliates. The activities and processes described herein are not applicable, or not applicable to the same degree, across all affiliates or all strategies. Please refer to the specific strategy books or offering documents as you consider investing with us.}

Our responsible investment guiding principles

Responsible investing is a key element of our investment philosophy and process. Our responsible investment principles guide our approach while allowing us to help our clients navigate the responsible investment landscape.

Responsible investing aligns with clients’ interests

As stewards of our clients' capital, we think it's prudent to consider all relevant and material risks and opportunities, including ESG factors, as part of our comprehensive issuer research. With a focus on long-term results, we use responsible investing practices such as ESG integration and active ownership where applicable to support a holistic understanding of the investments we make on behalf of our clients where applicable.

Responsible investing can contribute to long-term value

A growing body of academic research demonstrates that sound ESG practices can enhance corporate financial performance in the long term. This value can manifest itself in the form of lower cost of and access to capital, better operational performance, reduced reputational risks and, in turn, potentially superior long-term returns.

Environmental and social risks are investment risks

Exogenous risks such as natural disasters and pandemics can disrupt industries and threaten business models. Failure to effectively manage such risks can lead to a range of financial, legal and reputational consequences. A company's ability to mitigate such risks can have a profound effect on their ability to create and sustain long-term value.

Integrating ESG factors can help uncover opportunities

We believe that focusing solely on financial metrics may lead to overlooking opportunities. We find that it is quite challenging to analyze future profitability and creditworthiness without considering ESG factors. By considering these factors in our research process, we strive to deliver better investment outcomes and long-term performance.

Active ownership is a key aspect of active management

Our stewardship ambitions extend beyond today's investment opportunity. By leading engagement efforts and exercising shareholder voting rights, we use our voice to help effect positive change consistent with our clients’ objectives. We collaborate with other investors and stakeholders to engage where possible to maximize our voice.

Our Responsible Investment Approach

Building on our rich heritage of responsible investing stretching over 30 years¹, we’ve built a comprehensive responsible investment approach.

Through our comprehensive responsible investment activities, we aspire to help our clients pursue better long-term outcomes while contributing to sustainable capital markets and impactful economic activities.

¹Aegon AM UK launched first ethical strategy in 1989.

Responsible Investment Pillars

Our responsible investment approach consists of three pillars: ESG integration, active ownership and solutions.

ESG Integration

Incorporating financially material ESG factors into the research process to help mitigate risk and potentially uncover opportunities.

Active ownership

Addressing ESG issues by actively engaging with issuers and investee companies and exercising shareholder rights.

Solutions

Providing focused responsible investment strategies such as exclusions, best-in-class ESG, sustainability- themed and impact investments.

_{For illustrative purposes only. The firm's research teams may incorporate ESG-related factors into their analysis as applicable to their asset class and the output may differ as warranted. Exclusionary screening utilizes negative screening to avoid certain sectors, companies or practices based on specific criteria. Best-in-class ESG seeks to outperform by emphasizing positive screening of issuers with better or improving ESG profiles. Sustainability-themed strategies focus on issuers whose activities or practices are aligned with sustainability themes in an effort to generate competitive returns over the long term. Impact investing pursues financial returns alongside, measurable social and/or environmental impact. Engagement will occur with some, but not all, issuers where the manager deems it appropriate. More information is available upon request.}

ESG Integration

We believe responsible investing creates opportunities to generate value and may contribute to long-term outperformance. As a result, ESG factors are systematically integrated into our bottom-up research process for fixed income and equity issuers. By integrating ESG considerations with economic factors, the research teams seek to identify financially material ESG factors and arrive at an independent view of the investment.

	Three key benefits of ESG integration
1. Deepens our knowledge	Bringing new aspects to light, providing a more comprehensive view of the investment
2. Strengthens our conviction	As fundamental, research-driven investors, it can make us more confident in our decisions
3. Promotes a long-term focus	Clearing the short-term noise allows us to focus on long-term and fundamental trends, risks and opportunities

The firm's research teams may incorporate ESG-related factors into their analysis as applicable to their asset class and the output may differ as warranted. The activities and processes described are not applicable, or not applicable to the same degree, across all affiliates or all strategies.

Equities

As active equity investors we believe integrating ESG into our investment decision-making strengthens our investment conviction, supports the management of concentrated portfolios and promotes a long-term focus—an important consideration when the general trend in many markets is more short term.

ESG considerations are part of our fundamental equity research

Rather than taking a broad approach, environmental, social and governance issues are explicitly considered in our fundamental research. We know ESG issues have the potential to materially impact both the financial performance and the valuation of our investee companies. This has been integral to our investment approach.

The heart of our process lies within the teamwork between our managers and our independent responsible investment team. In our traditional equity strategies, i.e., those not classified as responsible investment solutions, it is the responsibility of our managers to form a judgment on ESG issues, ensuring that ESG analysis is comprehensive and robust, and to leverage the responsible investment team for their expertise. Examples of areas we assess include: a company's range of products and their implications for ESG outcomes; climate change policies and impact; carbon emissions; governance structure; management board structure and compensation; social policies; how a company is positioned for the transition to a greener economy; and its resource efficiency.

Three-stage ESG assessment process

To bring this together, our equity team uses a three-stage ESG assessment process to help determine the materiality of the identified ESG factors from a risk and return characteristics perspective.

Stage 1: Identify the most important ESG factor impacts for a given company.

Stage 2: Determine an ESG factor's potential level of significance relative to other considerations. What is the overall impact upon the investment proposition? Is it viewed as a headwind or a tailwind to business performance or valuation?

Stage 3: Finally, we look at the direction of travel for a given ESG factor and a company's overall ESG profile. Is exposure to these ESG risks or opportunities improving or not? We believe this consideration is critical as ESG (similar to other investment considerations) cannot be viewed in a static manner and as a firm we value and support ESG improvement over time.

Our one-team approach

Importantly, all information related to research, company meetings notes and responsible investment team engagement activity is centrally stored to provide easy access to all team members, reflecting our one-team culture. We have a number of examples where the investment team has concluded that ESG considerations were the primary driver behind whether to invest in a stock or not.

The responsible investment team's engagement is well-suited to advancing broad themes such as diversity and inclusion which, we believe in aggregate, are key to the functioning of the financial system. Engaging with companies on climate change risk is another example of the team's activity. On the other hand, the fundamental equity analysts' focus is more specifically upon the strategy of the company to pursue sustainable long-term returns to shareholders. Our analysts directly engage with management to better understand the risks, opportunities and potential materiality of ESG factors, and how companies are adapting their strategies to manage those issues.

Aegon Asset Management entities deliver services to, and share resources with, one another pursuant to applicable law as well as both global and local, policies, monitoring, and supervision. Personnel employed by a foreign Aegon Asset Management entity engaged in activity for, or through, a local Aegon Asset Management entity are subject to that local entity's applicable requirements and oversight. This may include the use of delegation arrangements and/or a participating affiliate arrangement (as this term is used by the U.S. Securities and Exchange Commission (SEC).

Corporate and Sovereign Credits

The concept of analyzing non-ﬁnancial risks such as environmental threats, labor disputes and governance quality, has been a longstanding part of our fundamental credit research process. Although ESG factors are identiﬁed and assessed individually, the ﬁrm takes a holistic approach to integrating ESG factors along with credit analysis to better understand the overall credit proﬁle and how it could affect the investment.

From corporate bonds to sovereign debt, our ESG integration process seeks to evaluate the potential effects on economics and valuations. Analysts also identify opportunities for corporate engagement.

Our ESG integration process seeks to answer three key questions:

Evaluate economic impact and creditworthiness: What is the potential economic impact and the associated effect on the issuer’s creditworthiness?
Assess impact on valuation: Are ESG risks and opportunities accurately reﬂected in credit spreads?
Identify engagement opportunities: Could engagement be beneﬁcial to generate long-term economic value?

Internal insights combined with external data

At Aegon AM, we view third-party ESG research ﬁrms in the same way that we view other external or “sell-side” research. That is, they provide a helpful starting point, but they do not replace our own view. We believe it’s critical to form our own view of the issuer’s ESG proﬁle.

As a result, the bottom-up, fundamental credit research process combines external ESG data with our own internal ESG assessment within the context of a broader traditional ﬁnancial analysis framework. We rely heavily on the industry, company and country expertise of our research team.

ESG integration in practice

Integration of ESG factors into the investment process ﬁrst occurs as part of the fundamental credit research analysis for issuers. The ﬁrm’s research analysts integrate ESG information into their analysis by evaluating data from various third-party sources in combination with internal research. The analysis incorporates qualitative and quantitative elements. Focus is given to the potential economic impact ESG issues may have on the issuer’s ability and willingness to meet debt obligations.

By integrating ESG matters with more traditional economic variables and analytical methodologies, the research team arrives at an independent view of a credit’s overall fundamentals. ESG integration typically includes four key steps:

Our ESG integration process

Identification: Research analysts identify important ESG factors specific to the security, company, industry or country.
Assessment: Research analysts assess if each factor materially affects the issuer’s fundamentals. Issuers or securities are assigned into one of five ESG categories based on the analyst’s determination of the materiality of ESG factors.
Incorporation: Research analysts incorporate the fundamental impact from ESG factors into the overall credit assessment and their credit recommendation to support a discussion with portfolio managers.
Integration: Portfolio managers consider analyst’s recommendations in the portfolio construction process as applicable to the client’s mandate.

Our proprietary ESG assessment

Limitations with third-party ESG research led us to develop our own standardized process to categorize ESG-related opportunities and risks. Through the ESG integration process, credit research analysts form an independent view of the issuer’s ESG proﬁle and assign credits to a proprietary ESG category based on increasing magnitude of ESG risk. The resulting ESG assessment serves as additional information that may guide decision-making.

Additionally, the ﬁve-category ESG output can be used to construct ESG-focused portfolios which utilize a best-in-class ESG approach.

ESG catergories for corporate credit
Category	Description
Leader	The fundamentals are positively affected by effective ESG practices
Minimal Risk	Fundamentally low exposure to ESG risks or presence of factors that mitigate ESG risks
Event Risk	ESG risk exposures could negatively affect fundamentals, but the effect is not measuarble and timing is uncertain
Fundamental Risk	ESG risks are resulting in negative pressure on fundamentals, however limited impact on credit rating
Rating Risk	ESG factors have resulted in a material negative effect on fundamentals, that may or may not be currently reglected in its credit rating

Aegon Asset Management maintains sovereign research reports for many, but not necessarily all, of the issuers it invests in.

Multi-manager

Responsible investing is an integral part of our investment process within Aegon AM's multi-manager solutions. We believe it is imperative for external managers to have high standards and values when it comes to responsible investing. As a result, ESG criteria are a critical component of our disciplined multi-manager selection process.

Our ESG framework consists of two parts. The first part is a standard questionnaire which investment managers at Aegon AM answer internally on the basis of their conversations with external managers. For each section and question of this framework, we provide an explanation and a summary assessment as an answer. The questionnaire covers the following:

Culture of the firm: Whether the firm has a clear commitment to ESG Integration, which can be signaled by memberships of various organizations, the reporting framework and the availability and clarity of information about ESG concerns.
Culture of the team: How knowledgeable the investment team is with ESG topics relevant to the portfolio, the extent to which it is discussed internally and externally by the team and the team's philosophy on ESG Integration.
Organization: Quality of the organizational structure around ESG, for instance access to external ESG information and presence of dedicated ESG analysts within the team or in a separate department.
Process: Quality and integrity of the process around ESG integration, as signaled by the actual implementation of ESG integration, the standardization of ESG as a component of the investment decision, the periodical review of portfolios on this basis, and the scope, intensity and transparency of engagement with investee companies.
Outcomes: The demonstrable impact that ESG integration has on the investment portfolio's ESG performance, as evidenced by comparison with a benchmark and by the availability of ESG reports.

Next to this standardized section, we also leave room to capture the particular approach of each manager to ESG integration and, more broadly, responsible investment. As formal ESG and RI practices are relatively recent developments globally, a one-size-fits-all approach is not sufficient to fully capture managers' thinking and practices. Thus, in order to make fully informed decisions on the approval of external managers, we rely on this additional section.

Together, these two parts form the basis for our assessment of managers' ESG practices. This is applied across our multi- management fund range, regardless of asset class—though the framework is slightly adapted to reflect different market standards and expectations depending on the asset class.

Each manager we assess then goes through the External Manager Approval Committee, in which an expert from our Responsible Investment team participates to provide a second opinion on the appropriateness of the manager's ESG practices and commitment. This supports our intention that no manager can be approved if there are ESG-related concerns since we operate by consensus.

After initial manager selection, we continue to monitor asset managers' ESG practices and stewardship activities as we seek to ensure that our clients' assets are being invested responsibly. We also engage with these managers at least on a quarterly basis in an effort to improve outcomes. Together, we seek to deliver better long-term outcomes for our clients.

Responsible investing is qualitative and subjective by nature, and there is no guarantee that the criteria utilized, or judgement exercised, by any company of Aegon Asset Management will reflect the beliefs or values of any one particular investor. Responsible norms differ by region. There is no assurance that the responsible investing assessment, strategy or techniques employed will be successful. Investors should consult their investment professional prior to making an investment decision.

Securitized Credit

A proprietary ESG assessment is a key part of our structured credit research framework and investment decision-making process. In our holistic approach, we seek to identify financially material ESG factors in combination with traditional financial criteria.

By systematically integrating ESG factors into our structured research process, we aim to uncover risks and potential mitigants that could impact collateral, structure and/or issuer performance. In addition to risk mitigation, ESG integration can also identify opportunities.

Although ESG factors are identified and assessed individually, we take a holistic approach to integrating ESG-specific factors along with more traditional securitized analysis to understand the overall credit profile and how it could affect the investment opportunity as a whole. After determining the potential economic impact, the research team considers various outcomes to help understand the potential impact on economics, creditworthiness and valuations. The process includes quantitative and qualitative factors.

ESG integration typically includes four key steps:

1. Identification

Research analysts/PMs identify important ESG and non-ESG factors specific to the issuer, the industry in which they operate, the collateral type and securitization structure.

2. Assessment. Research analysts/PMs assess if each factor materially affects the issuer’s fundamentals. Similar to our corporate credit ESG framework, structured securities are assigned into one of five categories based on identified ESG elements and their potential impact on the credit outlook.

The categorization process focuses on the ESG factors related to the collateral, structure, originator and country, where relevant. The ESG category is a weighted average of four pillars:

Collateral: ESG factors embedded in the collateral, such as physical environmental risks or social considerations, etc.
Originator: ESG factors at the originator level, stemming from origination practices, lending standards, etc.
Structure: ESG factors arising from alignment of interests between parties to the deal, control rights, etc.
Country: ESG factors at country level stemming from policy, legal and regulatory framework, etc.

For illustrative purposes. Not an all-inclusive list. ESG considerations may vary across securities and investment strategies.

Category	Description
Leader	The fundamentals are positively affected by effective ESG practices.
Minimal Risk	Fundamentally low exposure to ESG risks or presence of factors that mitigate most of the ESG risks
Event Risk	ESG risk exposures could negatively fundamentals, but the effect is not measurable and timing is uncertain.
Fundamental Risk	ESG risks are resulting in negative pressure on fundamentals, however limited impact on credit rating.
Rating Risk	ESG factors have resulted in a material negative effect on fundamentals, that may or may not be currently reflected in its credit rating.

3. Incorporation. Research analysts/PMs incorporate ESG considerations’ fundamental impact into the credit assessment and their credit recommendations.

4. Integration. PMs integrate analysts’ recommendations, including ESG factors, into the portfolio construction process as appropriate to the client’s mandate.

By integrating ESG matters with more traditional economic variables and analytical methodologies, the research team arrives at an independent overall fundamental credit outlook. Analysts’ fundamental assessments are discussed with portfolio managers during the portfolio construction process. Portfolio managers then decide how the analyst’s recommendation, including the effect of ESG considerations, fit within our client’s investment objective and overall portfolio.

ESG Factors

Environmental, social and governance considerations vary by collateral type, structure and issuer. Examples include:

	Environmental	Social	Governance
Collateral	Catastrophe risk Insurance coverage Climate change exposure	Product design regulation Origination standards Servicing standards Customer utility and satisfaction	Investor reporting quality Servicing standards Representations and warranties Borrower privacy protection
Structure	Insurance requirements and proceeds waterfall Representations and warranties	Representations and warranties Incentive structures Lender liability	Waterfall Credit enhancement Control provisions Servicing standards Representations and warranties
Issuer	Climate change sensitivity Business operational exposure Regulatory considerations Business continuity plans	Customer satisfaction Product liability Business mix Labor relations Staffing and turnover	Public vs. private ownership Alignment of interest Management and owner track record Cybersecurity risk management Management communications quality

Sample for illustrative purposes only.

Active management, active ownership

We believe taking responsibility as an investor also means being a truly active owner, not just as a shareholder but as a financier more broadly.

With a long-term focus, we have built a robust active ownership program that includes exercising shareholder voting rights focused on the best interest of our clients and engaging with issuers in an effort to mitigate ESG risk, to help better understand the opportunities that companies face and encourage more sustainable practices. Our dedicated global Responsible Investment team leads the firm’s active ownership program alongside our portfolio managers.

Active Ownership Policy >>

Active Ownership is not applicable to all asset classes or affiliates

Capabilities

Exclusions

Best-in-class ESG

Sustainability-themed

Impact investing

Climate Change

Climate change is one of the most urgent risks facing the sustainability of our planet, prompting a shift toward zero-carbon, sustainable energy sources. This energy transition has profound implications for investors.

Find out more

Documents

All documents

Responsible Investment Framework

(3.18MB) PDF

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Active Ownership Policy

(697KB) PDF

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