To motivate and stimulate change at companies that are included in the Triodos Sustainable Investment Universe, the fund votes at companies’ Annual General Shareholders’ Meetings (AGM). Voting advice is obtained from PIRC Services. Triodos SICAV I then applies its own voting guidelines and reviews each recommendation before voting. The fund did not follow PIRC’s standard voting recommendations for 7% of all agenda items. In 2014, the fund voted at 125 of the 129 shareholder meetings at which the fund could have voted. The fund voted in line with company management with respect to 63% of the agenda items. As in previous years, our main areas of concern were remuneration policies and practices and the independence of directors and auditors.

In 2014, 44 shareholder resolutions were brought forward. Ericsson faced as many as six shareholder resolutions. The fund voted in favour of only one of them. This resolution related to equitable voting rights. For all other shareholder resolutions the fund abstained due to insufficient information to judge the resolutions. At the meeting of Google five interesting shareholder resolutions were brought forward. These resolutions concerned equal shareholder voting, reporting of lobbying activities, majority voting, tax policy principles and the independence of the chairman of the policy board. Unfortunately, none of the resolutions were accepted. At Comcast Corporation, it was proposed to implement obligatory reporting on lobbying activities. We supported this resolution, as it enhances transparency and provides shareholders insight in these activities.

At the Extraordinary General Meeting of Pentair, the fund voted against the proposed move of the company from Switzerland to Ireland. The company does not agree with the recent introduction of a national referendum about proposals aimed at increasing shareholder rights in the country and therefore proposed to change its place of incorporation to Ireland. The fund is of the opinion that avoidance of regulations that are beneficial for shareholders is not a good reason for moving a company’s registered office.

This year, we were able to inform most companies in advance about how we intended to vote at their AGM. It is interesting to note that companies are more inclined to respond to our voting feedback prior to the meeting rather than afterwards. Thirty companies replied to our feedback letter and in several cases this led to additional contact. As a result of additional dialogue with the company, the fund changed its vote at the shareholder meetings of Hain Celestial Group, Inditex, Sound Global and Volkswagen.

Also this year, Triodos SICAV I sent a letter to 132 investee companies prior to their AGM, explaining its main voting principles and asking attention for the topics of tax transparency and remuneration concerns. 39 companies responded to this letter. Although we brought the topic of tax transparency forward for the third year in a row, we noticed that only little progress has been made by companies. The companies that we have identified as leaders with respect to this issue include Smith & Nephew, Volkswagen, Svenska Handelsbanken and Novo Nordisk. Svenska Handelsbanken informed us that questions from investors such as Triodos have inspired the company to develop country-by-country reporting.

Fortunately, countries are taking steps to solve the issue of tax avoidance, but progress remains slow. In 2014, Triodos Investment Management joined an investor initiative lobbying for the tightening of rules on corporate tax avoidance. The investors have called upon the G20 leaders to support the OECD’s action plan on ‘base erosion and profit shifting’ (BEPS), that is aimed at more transparency and disclosure on cross-border financial arrangements by multinationals. The investor letter also calls on multinational corporations to recognize that many existing financial practices around secrecy and taxation are not sustainable and no longer meet institutional investor governance expectations, nor reflect growing civil society views on responsible, transparent, corporate behaviour. The wording is significant because many multinationals justify their complex and controversial tax management structures as part of their legal obligation to shareholders.

In 2015 we will consider developing minimum investment standards with respect to tax issues. In the meantime, we exclude companies for investment if they are involved in unsustainable tax practices. In 2014 the fund excluded Swiss Crédit Suisse for such involvement. This company has been involved in a number of cases regarding tax evasion, including one in the Netherlands, where a claim of the tax authority was upheld by the Dutch court. Even though formally no legislation was violated, the company’s tax practices do indicate weak ethical standards.

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