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Responsible Investment Policy

As an investor in over 2,000 companies worldwide, the National Pensions Reserve Fund Commission believes that environmental, social and governance (ESG) issues impact on long-term investment performance. With this in mind, the Commission is developing and implementing a Responsible Investment policy in a manner to be consistent with the Fund's statutory investment policy as set out in Section 19 of the National Pensions Reserve Fund Act 2000, which is to secure the optimal total financial return provided the level of risk to the moneys held or invested is acceptable to the Commission.

The Commission's policy will also be consistent with the United Nations Principles for Responsible Investment (UNPRI), to which it was a founding signatory in April 2006 along with some of the world's largest institutional investors. The aim of the Principles is to integrate consideration of ESG issues into investment decision-making and into active ownership practices. The Commission commits to being an active signatory by both contributing to and drawing on the resources available to it through the UNPRI.

The Commission believes that sustained and focused dialogue with company management can be an effective way for long-term shareholders to bring about positive change. As a responsible and active investor, the Fund will act primarily through engaging with companies and through exercising its voting rights across as many investee companies and markets as is practicable.

Active ownership is undertaken through a specialist engagement and voting overlay provider, Hermes Equity Ownership Services. International best practice, including that formulated in the Responsible Ownership Principles, forms the basis for the Fund's voting and engagement with companies and the Commission will monitor these with a view to continued customisation for its own specific needs. The Fund works closely with Hermes and oversees its activities through regular monitoring and reporting.

The Commission believes that it is consistent with prudent investment management to incorporate ESG factors into investment research, analysis and decision making. The Fund will encourage its active investment managers to incorporate material ESG factors into their investment process and will require information on these issues as part of its regular review process. The incorporation of ESG factors will become one of the criteria considered when evaluating bidders for new investment management contracts.

The Fund is also a signatory to the Carbon Disclosure Project (CDP), a global mechanism whereby investors encourage companies to disclose their greenhouse gas emissions to investors. In addition to the United Nations Principles for Responsible Investment and the CDP, the Fund will consider participating in other industry-wide collaborative initiatives on ESG issues.

The Commission will report regularly on its developing responsible investment policy and activities, including a quarterly summary of how it has exercised its voting rights. The Fund will also endeavour, wherever possible, to report on its engagement activities while taking into account the importance of confidentiality when trying to bring engagement with companies to a successful conclusion.

The Fund's Responsible Investment policy aspires to best practice and will be regularly reviewed by the Commission. However, active ownership and the incorporation of ESG issues into the Fund's investment and operating framework is a long-term project requiring further refinement and development. The Fund will be taking further actions as its capacity grows and as the wider investment industry develops its understanding and practices relation to ESG issues and opportunities.

Further information on the United Nations Principles is available at www.unpri.org.