Case Study

AEGON Asset Management: Considering risks in the livestock sector to protect long-term value

Aegon Asset Management is a global active investment manager, part of the Aegon Group – a leading provider of life insurance, Aegon Group has been a constituent of the Dow Jones Sustainability World Index since 1999, and is a member of the UN-backed initiatives the Principles for Sustainable Insurance (PSI) and Principles for Responsible investment (PRI). Aegon is also an active member of the FAIRR network and has supported FAIRR’s collaborative engagements on both antibiotics risk and sustainable protein supply chains.

Investments that look to the long term

Aegon’s responsible investment policy is integrated into all its investment decisions with analysts from every team drawing on the ESG team’s sustainability research to guide investment decisions. The policy sets out an aim to invest in businesses that offer positive environmental and social benefits, rather than deploying negative screens and a commitment to be an active manager, engaging with portfolio companies to ensure ESG risks and opportunities are appropriately addressed at management level.

“Methane emissions, are often associated with the Oil & Gas industry, but when you look at the research you find that methane emissions are actually driven by the agricultural sector, particularly livestock. Signing up to FAIRR ‘s engagement on sustainable protein allowed us to look at these issues in much greater detail than we otherwise would have been able to, and this was our main motivation for joining.”– Heike Cosse, Engagement Manager at Aegon

Aegon Group’s position as an insurance provider also guides its approach, ensuring that the long-term risk horizon is considered and making ESG risks such as climate change an important fiduciary concern. According to Heike Cosse, Engagement Manager at Aegon, the firm sees their sustainability strategy as a key part of their responsibility both as an insurer and investor. She explains, “Our clients take out life insurance over a span of 30 to 50 years, and we have responsibility to ensure that they can enjoy our products also in the future.”

The commitment to the long term is what led Aegon to back FAIRR’s sustainable protein engagement, as it provided the firm with a critical tool to further explore environmental issues linked to livestock production.

Antibiotic resistance as an emerging public-health risk

Recently Aegon’s sustainability strategy has focused on issues of health and wealth, which the theme of antibiotic resistance naturally lends itself to. Cosse explains, “Antibiotic resistance presents similar risk characteristics as climate change. We can see it coming, and we recognise that it will present a very serious public health risk. We believe we have a responsibility from a stewardship standpoint: we know the risk is there and we have capabilities as a financial institution that we can lend to address it. However as with climate change, addressing the risk of antibiotic resistance will require the capabilities of many different kinds of organisations including policymakers, business and investors. It requires more coordination on a global level.”

Cosse believes FAIRR’s antibiotics engagement is an important development as it helps to align positions on what constructive policy change looks like for the private sector, and thus those positions can then be advocated for on a national, regional or global level. She continues, “What FAIRR is doing is advocating for transparent supply chain policies within the food sector, and that is what needs to happen. We need to get clear on the goals and how the private sector and investors can work together to affect meaningful, productive change. And transparent supply chain policies will have a big impact.”

Pushing agriculture up the agenda

Aegon believes it is important to ensure that the risks and opportunities associated with livestock production are pushed further up the ESG agenda. From an investor’s viewpoint, there is already sustained dialogue with traditional sectors such as Oil & Gas and the extractives. However, as Cosse notes, “When you’re talking about livestock production, there can be quite significant environmental and social risks. Organisations like FAIRR will ensure that there will be more dialogue with these sectors going forward, making a significant contribution.”

More information:
aegonassetmanagement.com