ESG Questionnaire Response - Loomis, Sayles & Company, LP

1. Please provide your ESG-related policies.

For the most up to date version of our ESG Policy, please refer to our website at: https://www.loomissayles.com/website/esg/Environmental-Social-and-Governance.

At Loomis Sayles, our goal is to deliver superior long-term risk-adjusted returns and effective investment solutions to meet our fiduciary duty to our clients. Environmental, social and governance (ESG) considerations contribute to this goal, and are important to the firm’s culture, the global economy, financial markets, and society at large. ESG considerations are inherently part of our investment decision making, as Loomis Sayles generally takes a long-term view in seeking value.

Loomis Sayles’ Approach to ESG Integration 

We do not subscribe to a single investment process. Each investment team considers ESG integration according to its investment philosophy. ESG risks and opportunities stem from factors including an issuer’s management strength and strategy, the use of human and natural resources, as well as regulatory and political considerations. ESG factors can be critical to evaluating the sustainability of an issuer and the expected impact on investment performance. Loomis Sayles’ investment teams determine the materiality of these factors in investment decisions. We only use screen specific sectors, issuers or themes where client or regulatory restrictions apply.

Engagement is at the Core of Loomis Sayles’ Investment Processes 

Engagement is an integral part of our fundamental analysis across all asset classes. ESG criteria are an inextricable part of this analysis. Direct engagement by our fixed income and equity investment professionals allows the assessment of the quality of a company’s management, strategy, and operations. Our sovereign investment professionals also engage with policy makers and regulators. At the firm level, Loomis Sayles seeks to collaborate with various investor and industry groups to foster best investment management practices.

Exercising our proxy voting responsibility is an important component of ESG engagement for our equity strategies. Our investment teams vote in ways that they believe serve the best interests of long-term shareholder value creation. Our Proxy Voting Guidelines are part of this process.

Loomis Sayles is a Signatory to the UN Principles for Responsible Investing (PRI) 

Loomis Sayles has been a PRI signatory since 2015. We believe the PRI provides a robust framework for monitoring the integration of ESG into our investment processes, with the ultimate goal of meeting our clients’ investment objectives. In addition, we continually assess and evaluate other commitments to ESG principles. For example, we are a Tier 1 signatory of the UK Stewardship Code and have adopted the UK LGPS (Local Government Pension Schemes) Code of Transparency.

Corporate ESG Practices at Loomis Sayles 

Governance Practices 

Loomis Sayles views the exercise of proper oversight and the highest standard of conduct to be the underpinnings of good governance. Firm oversight and direction reside with our Board of Directors and our Risk Management Committee, and we support these efforts by enforcing our Code of Ethics. Senior management sets the tone at the top by articulating the organization’s strategy and values, and by maintaining our culture of accountability, transparency and compliance. Specifically with respect to our ESG initiatives, Loomis Sayles named a Head of ESG in early 2018. The Director is responsible for leading the ESG initiatives at the firm, supporting the sustainability efforts as part of the firm's own governance, ensuring the investment teams have access to any additional ESG data and research as needed, and helping to provide ESG solutions for our clients.

Environmental Practices 

In addition, we strive to operate in an environmentally sensitive manner by occupying LEED certified office space, recycling, and offering public transportation incentives. We support flexible work schedules and telecommuting, both for the good of our employees and for their impact on our carbon footprint. The mission of our Green Council, one of our many internal employee resource groups, is to reduce the firm’s environmental footprint utilizing a systematic approach that educates our workforce and seeks to bring about behavioral changes, for a more sustainable and healthier future.

Social Practices 

We feel strongly about the importance of playing a proactive, positive role in the local community. In 2017, Loomis Sayles named Meg Clough the Director of Community Investments. Loomis Sayles has an active community service culture, and a comprehensive charitable giving program. Each year, Loomis Sayles sets aside a portion of our pre-tax income to fund charitable giving targeted at improving the education and health of children and families. Further information is available on our website under Community Partnerships and Nonprofit Partners. Loomis Sayles also encourages our employees' own charitable efforts through firm-sponsored service opportunities and by matching their charitable donations. In addition, we recognize that delivering excellent performance depends on diversity of both people and perspectives. Our firm strives to attract, nurture and retain a dynamic staff that is talented and diverse. To that end, Loomis Sayles has a number of employee resource groups (ERGs), including a women’s network, a gender identity ERG and a multicultural ERG.

2. Are sustainable investing and ESG factors integrated into your investment process and portfolio management decisions? If yes, please provide details.

Yes, from both a business and investment perspective. Loomis Sayles embraces its duty to act at all times in our clients' best interest, and we believe that ESG issues impact our goal of achieving superior, risk-adjusted returns. We understand that environmental, social, and corporate governance practices may present risks that need to be evaluated, and we analyze these risks as part of our fundamental research process.

We believe the most effective ESG analysis occurs when we integrate the analysis within our very experienced and robust credit and sovereign analyst teams. They are responsible for deciding how ESG factors affect their view of an issuer’s overall quality and expectation for performance. Our experienced analysts are sector specialists, and have developed relationships with the issuers that they cover, which positions them well to assess the material ESG factors. The analysts are also the best prepared to engage with management teams.

Given the wide range of strategies managed by investment teams across different asset classes, we do not have a uniform investment process. However a number of pillars underpin all the strategies at Loomis Sayles, and we have recently added ESG and Sustainability as a Pillar. These pillars are:

1. A sound investment philosophy. Every Loomis Sayles strategy starts with a solid foundation or “alpha thesis.” This alpha thesis seeks to identify market inefficiencies and the investment process necessary to exploit them.

2. A rigorous repeatable approach. Investment processes must take an exacting, consistent approach to idea generation, portfolio construction, reward-to-risk assessment and decision making in any market environment. But discipline should never mean dogma; each team continually evaluates and refines their investment process in line with the core tenets of their strategy.

3. Proprietary research. In this information age, being well informed is no longer a competitive advantage. High-conviction, prudent risk taking requires deep insights that can only be generated through proprietary research. Tailored research, distinct to each alpha thesis, is an inextricable part of the investment process.

4. Disciplined portfolio construction. Though our strategies have different return patterns and time horizons, they all seek strong risk-adjusted returns. Disciplined portfolio construction requires constant assessment of reward-to-risk at the security and portfolio levels. Investment teams look for asymmetric reward-to-risk opportunities and minimize exposure when information is lacking or insufficient.

5. Integrated risk management. Risk management is central to alpha generation, not ancillary. Our integrated risk management capabilities are customized to each investment strategy—an approach we believe optimizes each team’s ability to identify, analyze and utilize risk.

6. Incorporated ESG Factors. Our investment teams each use a tailored approach to incorporate ESG factors and engage with issuers and companies to meet our clients' objectives. We do not view ESG as an overlay to our investment processes. We view it as an integral component throughout.

Generally, the strategies managed by investment teams at Loomis Sayles are high conviction, low turnover strategies. As such, we consider ourselves to be a long-term investor. This informs our stewardship activities, which focus on ensuring that our investee companies can create long-term, sustainable growth.

3.a. Are you a signatory to the UNPRI?

Yes

3.b. If you are signatory to other coalitions, please list them.

Loomis Sayles is a member of the following RI initiatives, collaborations, and commitments: 

• UK Stewardship Code (since 2013)
• Signatory, Principles for Responsible Investment (since 2015)
• Signatory, LGPS Investment Code of Transparency
• Signatory, CDP (Formerly Carbon Disclosure Project) (since 2020)
• Signatory and Investor Participant, Climate Action 100+ (since 2021)

3.c. Indicate any other international standards, industry guidelines, reporting frameworks, or initiatives that guide your responsible investing practices.

Loomis Sayles is a member of the following RI initiatives, collaborations, and commitments:

• Member, Association of Institutional Investors, collaborating with other asset management firms to standardize key language and industry processes (since 2010)
• Member, SASB (since 2019)
• Supporter of the TCFD (since 2020)
• Member, TPI (since 2020)
• Participant, FCLT Global (Focusing Capital on the Long Term) (since 2019)

4. Please describe how ESG oversight and integration responsibilities are structured at your firm, including the process for escalation of key ESG issues. How do you obtain ESG information/data (e.g. public information, third party research, reports and statements from the company, direct engagement with the company)?

At Loomis Sayles, we made the strategic decision to integrate our ESG work throughout the firm, rather than creating a separate, centralized ESG team. The Head of ESG, our ESG initiatives are supported by the following committee structures, which represent a broad cross-section of the firm:

• The ESG Advisory Board, chaired by the Director of ESG, approves major ESG initiatives and meets bi-annually
• The ESG Committee, a subcommittee of the Loomis Sayles board's Risk Management Committee, oversees ESG implementation and stewardship
• The ESG Working Committee acts as a working group for ESG initiatives
• ESG Subcommittees, led by Working Committee members, address specific ESG initiatives, including preparing the annual, UN PRI report, ESG technology, ESG marketing, ESG Best Practices and Climate Change

The purpose of the ESG Advisory Board is to ensure that the key ESG policies, strategies and initiatives are reviewed by a broad group of senior leaders. The Advisory Board includes executives from across the firm as well as portfolio managers from the investment teams.

The ESG Working Committee consists of individuals from across the organization that work to provide resources for ESG research, to report to the UN PRI, to collaborate with industry organizations, consultants, and clients, and to communicate what is happening in the marketplace and within the firm related to our ESG initiatives. The committee meets bi-weekly, with even greater frequency during the first quarter when we are working to prepare the annual UN PRI Assessment. Indeed, since the COVID-19 related shutdown, the ESG Working Committee has maintained daily check-in meetings to ensure our ESG efforts are well coordinated throughout the firm.

5. What channels do you use to communicate ESG-related information to clients and/or the public? Do you produce thought leadership (written reports and publications)? If so, is the information available to the public? Please provide links, if applicable.

We have a number of standardized reports in our proprietary ESG Center, which are is by investment teams to communicate ESG-related portfolio information to clients. The current reporting includes a number of components. We can show the ESG scores (based on internal or external ratings) of the portfolio holdings versus the appropriate benchmark. We have the ability to report on the top and bottom rated ESG securities in the portfolio, as well as the changes in the ESG ratings over a variety of timeframes. We have the ability to provide carbon footprint reporting for portfolios versus the appropriate benchmark.

In recent years, we have also developed a comprehensive sustainability report for Loomis Sayles, which we publish annually. The report provides details of our approach to ESG and recent initiatives. The 2021 Sustainability Report includes our first firmwide climate disclosure, aligned with the recommendations of the TCFD. We have also published a number of papers on select ESG topics, like stranded assets and videos which show our approach to ESG.

Please find the link below to our published content:

https://www.loomissayles.com/website/esg/Environmental-Social-and-Governance

6. Do you have periodic reviews of your ESG process/approach to assess its effectiveness? What are the results? What would cause you to disregard ESG issues in your investment/analysis decisions?

Yes, we have periodic reviews of our ESG process/approach to assess its effectiveness. Our CIRO, Michael Giles, is responsible for developing and formalizing risk management processes for the independent monitoring of equity and fixed income contributions to risk and return. In this position, he supports our CIO, David Waldman, who oversees fixed income investment teams, select equity teams and centralized resources, including trading, ESG and some research groups. Michael also supports Aziz V. Hamzaogullari, the CIO for the GES Team.

Michael leads our Investment Risk Management team, which works with portfolio managers to improve the investment process. The team performs investment risk reviews on every Loomis Sayles strategy, ensuring that each demonstrates a solid foundation and takes risks that are appropriate to the stated investment objectives. ESG factors and their impact, as well as the client’s objectives, are among the factors that Michael’s team considers when evaluating risks and in discussions with our investment teams. Loomis Sayles continues to incorporate increasingly more ESG-related data into these investment risk reviews. Further detail of these periodic reviews can be found in our most recent Sustainability Report.

The Strategic Alpha team manages a wide variety of portfolios across asset class, geographies, and product structures. We manage money for a diverse set of clients, who have guidelines and regulatory frameworks that in many cases inform or require specific processes and exclusions, related to ESG factors.

Material ESG issues – both ESG risks and opportunities - are fully incorporated into our fundamental analysis, and are weighted in importance based on the materiality of each issue.

Our goal is to deliver superior long-term risk-adjusted returns and effective investment solutions to meet our fiduciary duty to our clients. As part of our bottom-up analysis process, we have always identified companies with deficient Governance, Environmental vulnerabilities and Social issues that could impair our ability to be paid back as lenders, or materially harm the credit quality of the debt issuer. More recently, the formal process of Environmental, Social and Governance (ESG) integration has become part of our investment decision making process. We integrate ESG into our fundamental research, engagement, and valuation analysis, as well as our portfolio construction and portfolio risk management.

We take a long term sectoral view of ESG by investigating Environmental, Social and Governance factors. We focus on the overall effect of the ESG issues on the valuation of the underlying business. ESG is integrated throughout many steps of our investment process including our proprietary fundamental research, effective engagement and robust valuation work. Our investment analysts focus on material ESG factors using internal and external tools to help evaluate these factors. We believe climate change has material implications for investing and we are incorporating new carbon data and climate scenario analysis as part of our efforts to both manage risk and identify carbon transition opportunities.

7. Describe how you identify, assess, and manage climate-related risks.

Our Chairman and CEO added ESG as an agenda item to the Risk Management Committee (a subcommittee of the Loomis Sayles Management Committee) in 2020. Among other ESG metrics, we report on carbon intensity in each of our representative accounts for each strategy, as well as that of the benchmark. In 2021, we added “alignment with the Paris Agreement” as a reporting item, based on data from one of our climate vendors.

We monitor companies ranking most highly for owned emissions and carbon intensity, as well as re- cent engagements with those companies for context. We track portfolio Paris-alignment and temperature score, along with historical change. We do the same analysis for products seeking Article 8 registration and for these portfolios we also track carbon footprints compared to their benchmarks. We track total firm-level AUM exposure to companies with the highest Scope 1+2 intensity and changes from the prior quarter. We have added exposure to fossil fuel and percent revenue from thermal coal as we adjust our risk management practices and metrics to follow TCFD recommendations.

We created a Climate Change Subcommittee under the ESG Working Committee in 2020, made up of participants from across the firm and led by members of the ESG Working Committee. The goal of this subcommittee is to identify areas of support for the organization broadly with climate change, including coordinating continued education for our investors, enhancements to our climate data sources and other Loomis Sayles initiatives. We also assess climate-related industry organizations and initiatives to ascertain which ones are best suited for Loomis Sayles’ participation. One such initiative that this subcommittee reviewed in 2021 was Climate Action 100+, an investor-led initiative engaging with the world’s largest corporate greenhouse gas emitters to ensure they take necessary action on climate change. After the subcommittee’s thorough assessment, Loomis Sayles determined this would be a productive initiative and we are pleased to have become a signatory.

As with ESG matters broadly, each investment team weighs climate-related risks and opportunities according to its investment philosophy and the relevance of climate change in the sectors in which the team invests. Where climate risk is a material factor, it is assessed prior to an investment decision. Investment risk (including ESG- and climate-related issues) is regularly monitored by the investment teams and by our CIO, who is responsible for oversight of the active investment strategies offered by Loomis Sayles. Our CIRO, who reports to the CIO, incorporates ESG metrics in his investment team reviews.

We have the ability to measure the carbon footprint of our portfolios and compare it to relevant benchmarks, using our ESG Center, an internal hub for data and information.

Using third-party data, we built an easy-to-use dashboard on our ESG Center that applies the TCFD recommendations for calculating emissions metrics for each vendor. The system is built to provide emissions exposure using the portfolio’s market value or default dollar amounts that would be appropriate for a potential institutional investor or retail investor. We also have other climate-related metrics from MSCI, Sustainalytics and ISS. These provide our investment professionals with a number of transition risk and physical risk metrics they can use to analyze their portfolios.

Metrics

Some of the GHG Emission metrics available to our investment professionals include:

• Absolute and benchmark relative measurement of portfolio emissions exposure, weighted average carbon intensity and carbon risk rating. These metrics enable comparison of the portfolio’s carbon risk compared to the benchmark.
• Companies reporting emissions and the quality of the reported emissions.
• Comparison of company-level emissions intensity to peer groups.

Some of the Transition Risk metrics available include:

• Portfolio exposure to coal, oil and gas-reserve-owning assets and exposure to controversial business practices that may pose transition and reputational risks
• Portfolio exposure to current sources of power generation (green and brown) and what that ratio needs to be by 2030 and 2050 to meet the IEA’s Paris-aligned scenario
• Carbon risk rating for each issuer and the portfolio overall; the percentage of top and bottom climate performers in the portfolio and in the benchmark
• Percentage of the portfolio value that has Paris-aligned climate targets or no publicly available target
• Paris-aligned overshoot/undershoot by sector
• Portfolio level scenario alignment trajectory

Some of the Physical Risk metrics available include:

• Value at Risk (VaR), representing financial impact from physical risk, is shown at the portfolio (benchmark) and sector levels under baseline in 2021 and under a worst-case (RCP 8.5) and most likely (RCP 4.5) scenarios in 2050
• Physical risk score per hazard
• Physical risk management scores of portfolio holdings, indicating the level of preparedness to risks from physical hazards

In our view, risk metrics and tools are useful but have some limitations. Company-specific data are not perfectly accurate and are historical in nature. As active investment managers, part of the value we bring to our clients is being forward-looking.

While these tools can serve as a guide for engagement with company management, they are not the only source for understanding how a company is managing climate risks.

Engagement with companies and issuers on material climate-related factors allows our teams to better understand how companies and issuers are managing these risks. This helps inform our decisions about whether the assets are reasonable investments for our clients. Engagement objectives are set by the individual investment teams based on their own processes and client needs. Our ESG engagement database tracks the engagement of each of our analysts and includes the material ESG factors they have identified, including climate where relevant.

8. Describe the climate-related risks and opportunities you have identified over the short, medium, and long term.

The Strategic Alpha Team believes climate change has material implications for investing and we are incorporating new carbon data and climate scenario analysis as part of our efforts to both manage physical and transition risk, as well as to identify carbon transition opportunities.

As a firm Loomis Sayles, we firmly believe that climate change is one of the most important global issues of our time. We are happy to see that governments, businesses and civilians around the world are mobilizing to change course and address climate change. This response has, and will continue to, impact global financial markets.

We understand that our clients are looking to us and their other asset managers for perspectives on this issue as they address climate change in the context of their own investment policies.

While at Loomis Sayles each of our investment teams has unique philosophies and investment processes, we have developed a set of shared principles that will guide the investment approach taken toward climate change going forward. These principles are:

We agree with the overwhelming scientific data that human activity is contributing to climate change and we see the need for bold action on a global scale. Governments, corporations and individuals must respond to this growing threat. The need to meet the real and serious challenge inherent in climate change presents critical risks and investment opportunities across all asset classes. At this point in history, we anticipate a time of sweeping change.

Material climate change considerations are inherently part of our investment decision-making. Each investment team considers climate change integration according to its investment philosophy. To support our investment teams, we are committed to providing education on a growing set of climate data and transition scenario analysis tools.

Direct engagement is an integral part of our fundamental analysis across all asset classes. As a fiduciary and a good steward of our clients’ capital, we are unequivocally focused on all investment risks and opportunities, including climate. This means that we must regularly engage with issuers to assess their climate impact, policies and risks.

9. Describe the resilience of your investment strategy, taking into consideration different climate-related scenarios.

The Strategic Alpha team has the flexibility to invest in opportunities across a wide range of asset classes and markets enabling them to respond tactically to shifting economic environments and market events, including different climate-related scenarios as they arise in the investment process. We believe this structural flexibility benefits us in a rapidly changing climate environment and market, where both physical and transition risks may increasingly reflected.

10. Do you track the carbon footprint of portfolio holdings?

Yes

If yes, please describe the methodology and metrics used, and whether you have a set target for reducing the portfolio's footprint.

We have the ability to measure the carbon footprint of our portfolios, and compare it to relevant benchmarks, using our MSCI calculator. We also utilize average carbon intensity and our proprietary ESG Center, which was created in 2018 to consolidate ESG data from our external ESG data vendors in combination with internally derived ESG analysis.

11. What are your firm's emissions? Please demonstrate how/whether you are taking steps to reduce these emissions.

As a firm we gather emissions data associated with our travel and entertainment activities, which are the largest component of our firm’s emissions. We have made efforts to reduce these emissions by encouraging distribution teams to utilize virtual meeting technology whenever appropriate, rather than hosting in person meetings where travel would be required.

The mission of our Green Council, one of our many internal employee resource groups, is to reduce the firm’s environmental footprint utilizing a systematic approach that educates our workforce and seeks to bring about behavioral changes, for a more sustainable and healthier future.

12. For the mandate you manage for Queen’s, what percentage of equity holdings (if applicable) have credible net zero commitments?

The team uses the Climate Greenhouse Gas (GHG) Reduction target from ISS, which returns the status of a holding based on the existence and quality of its GHG reduction targets with specific consideration of SBTs (science based targets). Based on this calculation, as of 6/30/22 there was 2.76% in common stock/ADRs (~76% of common stock & ADR total in the account) that had either an Approved, Committed or Ambitious target for GHG reduction as defined by ISS.

13. How do you assess the credibility of a company’s emission reduction targets?

Loomis Sayles has the ability to measure the carbon emissions in its investment portfolios. Where we view the risk as material, carbon emissions are considered as part of the team’s investment decision-making process on the issuer level.

Some of the greenhouse gas (GHG) emission metrics available to our investment professionals include:

• Absolute and benchmark relative measurement of portfolio emissions exposure, weighted average carbon intensity, and carbon risk rating. These metrics enable comparison of the portfolio’s carbon risk compared to the benchmark.
• Companies reporting emissions and the quality of the reported emissions.
• Comparison of company-level emissions intensity to peer groups.

Some of the transition risk metrics available include:

• Portfolio exposure to coal, oil and gas-reserve-owning assets and exposure to controversial business practices that may pose transition and reputational risks.
• Portfolio exposure to current sources of power generation (green and brown), and what that ratio needs to be by 2030 and 2050 to meet the IEA’s Paris-aligned scenario.
• Carbon risk rating for each issuer and the portfolio overall; the percentage of top and bottom climate performers in the portfolio and in the benchmark.
• Percentage of the portfolio value that has Paris-aligned climate targets, or no publicly available target.
• Paris-aligned overshoot/undershoot by sector.
• Portfolio level scenario alignment trajectory.

Some of the physical risk metrics available include:

• Value at Risk (VaR), representing financial impact from physical risk, is shown at the portfolio (benchmark) and sector levels under baseline in 2021 and under a worst case (RCP 8.5) and most likely (RCP 4.5) scenarios in 2050.
• Physical risk score per hazard.
• Physical risk management scores of portfolio holdings, indicating the level of preparedness to risks from physical hazards.

In our view, risk metrics and tools are useful but have some limitations. Company-specific data are not perfectly accurate and are historical in nature. As active investment managers, part of the value we bring to our clients is being forward-looking. While these tools can serve as a guide for engagement with company management, they are not the only sources for understanding how a company is managing climate risks.

Engagement with companies and issuers on material climate-related factors allows our teams to better understand how companies and issuers are managing these risks. This helps inform our decisions about whether the assets are reasonable investments for our clients. Engagement objectives are set by the individual investment teams based on their own processes and client needs. Our ESG engagement database tracks the engagement of each of our analysts and includes the material ESG factors they have identified, including climate, where relevant.

Loomis Sayles has undertaken substantive work on climate change, including the use of tools such as climate-related scenario analysis. The firm conducted an in-depth review, and decided to purchase and integrate the ISS Climate Impact Assessment Tool. Additionally, Manifest Climate (formerly known as MANTLE314) was hired for a second series of projects related to climate change, including an assessment of reporting, a review of climate-related regulation, and an initial framework and data collection to help create the framework for the firm’s Corporate Sustainability Report.

14. What forward-looking metrics do you use to assess an investment’s alignment with global temperature goals?

Loomis Sayles uses several ESG vendors to access comprehensive climate risk analytics to evaluate potential future impacts and financial costs to client portfolios from both physical and transition scenarios. Evaluating potential risk from future impacts of climate change enable asset managers to judge to resiliency of investment products and strategies, including whether a portfolio is aligned with the goals of net zero or the Paris Agreement objectives.

Our transition scenario analysis is based on the current IEA 2021 Scenarios:

1. Stated Policy Scenario (STEPS) “Current country commitment to Paris Agreement'” (1.8-2.1C by 2050), (2.4-2.8C by 2100)
2. Announced Pledges Scenarios (APS) “Reflects mid 2021 global commitments'” (1.7-2.0C by 2050), (1.9-2.3C by 2100)
3. Sustainable Development Scenario (SDS) “Paris Aligned Scenario'” (1.5-1.8C by 2050), (1.4-1.47C by2100) where Developed Markets reach net zero in 2050, China in 2060 and other nations by 2070
4. Net Zero Emissions (NZE) “Net zero scenario'” (1.4-1.7C by 2050), (1.3-1.5C by 2100). The IEA SDS Scenario satisfies not just the 2-degree C temperature target set by the Paris Agreement, but the policies it uses as a means to reduce emissions are also in line with sustainable development and efforts to eradicate poverty.

The tool allows an assessment of a portfolio’s alignment versus the scenarios above, as well as the alignment of a benchmark. The scenario analysis compares the projected annual carbon emissions of holdings in portfolios with the budgets allotted by each scenario through the 2050 time period. The methodology takes company emissions reduction targets into account where they are aggressive and robust enough to be Paris Aligned. It provides an implied temperature score at both the company and portfolio level.

15. Please provide the composition of your senior leadership team and board of directors, including women and visible minorities. How do you encourage diversity of perspectives and experience?

As of 03/30/22, 34.10% of the management committee was female. Please refer to the attachment EEO Q1 2022for more information regarding diversity at the firm level.

Loomis Sayles has a multi-pronged strategy to address Diversity, Equity and Inclusion (DEI) at the firm and in the communities in which we live.

At Loomis Sayles, we believe in a workplace culture that acknowledges, supports, and invests in the diversity of all its members. This is critical in order to fulfill the investment needs of our clients worldwide, manage the complexity of our dynamic and global business and build a community where all employees have an equal opportunity to expand on their potential. We define diversity as spanning all dimensions of identity, including but not limited to race, ethnicity, nationality, gender identity & expression, physical & mental ability, military status, sexual identity & orientation, marital status, religion, socioeconomic background and age.

We recognize the path toward diversity, equity and inclusion of all persons across all levels of our organization, and in the financial services industry, will be an ongoing and extensive process. Despite these challenges, we are committed to fostering an environment where all employees are represented, respected, valued and empowered to apply all of the dimensions of their identities to enrich Loomis Sayles as a whole.

16. What proportion of the time do you vote with or against management on shareholder resolutions, board appointments, and auditor appointments? What proportion of the time do you vote with or against management on ESG issues? How does this break down for climate, diversity, and remuneration issues?

Proxy Voting Generally

Loomis Sayles has adopted and implemented proxy voting policies and procedures (“Proxy Voting Procedures”) to ensure that, where it has voting authority, proxy matters are handled in the best interests of clients, in accordance with Loomis Sayles’ fiduciary duty, and all applicable law and regulations. The Proxy Voting Procedures, as implemented by the Loomis Sayles Proxy Committee, are intended to support good corporate governance, including those corporate practices that address environmental and social issues (“ESG Matters”), in all cases with the objective of protecting shareholder interests and maximizing shareholder value.

Loomis Sayles uses the services of third parties (each a “Proxy Voting Service” and collectively the “Proxy Voting Services”), to provide research, analysis and voting recommendations and to administer the process of voting proxies for those clients for which Loomis Sayles has voting authority. Loomis Sayles will generally follow its express policy with input from the Proxy Voting Service that provides research, analysis and voting recommendations to Loomis Sayles unless the Proxy Committee determines that the client’s best interests are served by voting otherwise.

Loomis Sayles believes that issuers have a fundamental obligation to protect the rights of their shareholders. Pursuant to its fiduciary duty to vote shares in the best interests of its clients, Loomis Sayles considers proposals relating to shareholder rights based on whether and how they affect and protect those rights. Loomis Sayles has established certain specific guidelines intended to achieve the objective of the Proxy Voting Procedures.

Board appointments: Loomis Sayles generally supports proposals involving routine matters such as election of directors, provided that at least two-thirds of the directors would be independent, as determined by the Proxy Voting Service, and affiliated or inside nominees do not serve on any key board committee, defined as the Audit, Compensation, Nominating and/or Governance Committees.

Auditor appointments: Loomis Sayles generally supports proposals for the selection or ratification of independent auditors, subject to consideration of various factors such as independence and reasonableness of fees.

ESG Issues

To protect its clients’ best interests, Loomis Sayles has integrated the consideration of ESG Matters into its investment process. The Proxy Voting Procedures are intended to reflect the impact of these factors in cases where they are material to the growth and sustainability of an issuer. Loomis Sayles has established its Proxy Voting Procedures to assist it in making its proxy voting decisions with a view toward enhancing the value of its clients’ interests in an issuer over the period during which it expects its clients to hold their investments. Loomis Sayles will vote against proposals that it believes could adversely impact the current or future market value of the issuer’s securities during the expected holding period. Loomis Sayles also believes that protecting the best interests of clients seeking the greatest risk adjusted long term returns requires the consideration of potential material impacts of proxy proposals associated with ESG Matters in applying the Proxy Voting Procedures.

Loomis Sayles believes good corporate governance, including those practices that address ESG Matters, is essential to the effective management of a company’s financial, litigation and reputation risk, the maximization of its long-term economic performance and sustainability, and the protection of its shareholders’ best interests, including the maximization of shareholder value.

Proposals on environmental and social matters cover a wide range of issues, including environmental and energy practices and their impacts, labor matters, diversity and human rights. These proposals may be voted as recommended by the Proxy Voting Service or may, in the determination of the Proxy Committee, be reviewed on a case-by-case basis if the Proxy Committee believes that a particular proposal (i) could have a material impact on an industry or the growth and sustainability of an issuer; (ii) is appropriate for the issuer and the cost to implement would not be excessive; (iii) is appropriate for the issuer in light of various factors such as reputational damage or litigation risk; or (iv) is otherwise appropriate for the issuer.

Loomis Sayles will consider whether such proposals are likely to enhance the value of the client’s investments after taking into account the costs involved, pursuant to its fiduciary duty to its clients.

Climate Reporting: Loomis Sayles generally votes for proposals requesting the issuer produce a report, at reasonable expense, on the issuer’s climate policies. A recommendation against such proposals by the Proxy Voting Service will be considered by the Proxy Committee.

Workplace Diversity Reporting: Loomis Sayles generally votes for proposals requesting the issuer produce a report, at reasonable expense, on the issuer’s workforce diversity or equity policies and/or performance. A recommendation against such proposals by the Proxy Voting Service will be considered by the Proxy Committee.

Compensation: Proposals with respect to compensation plans generally will be voted as recommended by the Proxy Voting Service. Vote proposals relating to director compensation, that are required by and comply with applicable laws (domestic or foreign) or listing requirements governing the issuer, as recommended by the Proxy Voting Service.

Shareholder Proposals to Limit Executive and Director Pay (“Say on Pay”): Loomis Sayles generally (a) votes for shareholder proposals that seek additional disclosure of executive and director pay information; (b) votes against proposals to link all executive or director variable compensation to performance goals; (c) votes for an annual review of executive compensation; (d) votes non-binding advisory votes on executive compensation as recommended by the Proxy Voting Service.

17. What proportion of all independent ESG shareholder resolutions do you support?

Proposals on environmental and social matters cover a wide range of issues, including environmental and energy practices and their impacts, labor matters, diversity and human rights. These proposals may be voted as recommended by the Proxy Voting Service or may, in the determination of the Proxy Committee, be reviewed on a case-by-case basis if the Proxy Committee believes that a particular proposal (i) could have a material impact on an industry or the growth and sustainability of an issuer; (ii) is appropriate for the issuer and the cost to implement would not be excessive; (iii) is appropriate for the issuer in light of various factors such as reputational damage or litigation risk; or (iv) is otherwise appropriate for the issuer.

Loomis Sayles will consider whether such proposals are likely to enhance the value of the client’s investments after taking into account the costs involved, pursuant to its fiduciary duty to its clients.

Climate Reporting: Loomis Sayles generally votes for proposals requesting the issuer produce a report, at reasonable expense, on the issuer’s climate policies. A recommendation against such proposals by the Proxy Voting Service will be considered by the Proxy Committee.

Workplace Diversity Reporting: Loomis Sayles generally votes for proposals requesting the issuer produce a report, at reasonable expense, on the issuer’s workforce diversity or equity policies and/or performance. A recommendation against such proposals by the Proxy Voting Service will be considered by the Proxy Committee.

18. What proportion of remuneration packages do you vote in favour of? In your view, is the current level of executive remuneration too high, too low, or about right? How is this view reflected in your voting record on remuneration?

Proposals with respect to compensation plans generally will be voted as recommended by the Proxy Voting Service.

19. Have you ever co-filed an ESG-related shareholder resolution? If so, how many and with what frequency?

No.

20. Have you ever voted against a director for explicitly ESG-related reasons? If so, why? If not, would you consider doing so in the future?

No. 

21. How many companies do you engage with? What proportion of your engagements focus on environmental and social issues? What are your engagement goals? Are these goals outcome/action-based (e.g. decreases in emissions or increases in number of women on the board) or means-based (reporting on emissions or number of women on the board)?

In 2021 we engaged with 1,006 issuers. 63% of our total engagements were focused on environmental and social issues.

As part of our due diligence meetings with an issuer’s management, we openly engage in dialogue on strategy, performance and the management of the issuer’s risks. ESG issues can directly impact the long-term prospects of the issuers we consider for our clients’ accounts. Where we believe that an environmental, social or governance issue presents a key risk, we will actively discuss the issue with management.

Our initiatives for 2022 focus on:

• Engagement;
• Enhancements to technology

With respect to our first focus area, engagement, we will be looking at best practices for engagement with corporate issuers. Our credit research department in coordination with the ESG Working Committee will seek to develop guidelines for analysts’ engagement with company management on ESG topics that will be helpful to portfolio teams in meeting client requirements. We will also consider thematic engagement activities, and how to Loomis Sayles can undertake engagement on themes like climate change disclosure in a way that is consistent with our focus on materiality. We will also explore participation in the CDP’s coordinated engagement campaign; requesting climate disclosure from U.S. and Canadian cities, counties, states, provinces, crown corporations, and public authorities.

We will be making enhancements to technology tools and data that will better support ESG needs of analysts, portfolio managers and client service personnel. Our fixed income analysts’ proprietary materiality maps will be integrated into portfolio management systems to make the information more seamlessly available to our investment teams. We will also work with each investment team to ensure the indicators they are following to promote environmental and social characteristics in their investments are reported to investors, consistent with the requirements of The SFDR.

22. What is your policy around the escalation of engagement; how and why might this happen and what is the ultimate tool you might use (e.g. voting against board re-election, etc.)?

Loomis Sayles' research analysts across all asset classes are responsible for identifying and reporting on incidents that occur within portfolio companies as part of their coverage of those companies. We consistently monitor analysts' views relative to outcome.

Issues that are more likely to prompt escalation are lack of transparency, or a change in the level of transparency, and questionable or objectionable governance practices. For equity analysts, we may escalate our concerns by, for example, voting against a management proposal, supporting a shareholder proposal, or by conducting additional face-to-face meetings with company management.