Criteria

A number of business activities are excluded from investment based on criteria determined by Triodos Bank. These are activities that we consider essentially impede the construction of a sustainable society in the long term. The criteria have been developed with respect to products and services and business activities.

The following are considered:

• Exclusionary criteria for products and services
• Exclusionary criteria for business processes
• Sustainable products and services
• Comparative criteria

Exclusionary criteria for products and services
Companies are excluded from investment by Triodos Bank if they:

• have annual sales relating to the production or the sale of products that are considered to be unsustainable that are greater that a pre-determined threshold, or
• control more than a predetermined percentage of the market of the following unsustainable products: 
  - Fur: companies that hunt or keep animals for their skin/fur, that render services in this industry, or that sell fur products are excluded. The threshold is set at 5% of revenues for this criterion.
  - Games of chance: companies that design produce or sell games of chance or that render financial services linked to games of chance are excluded. The threshold is set at 5% of revenues for this criterion.
  - Nuclear energy: companies that produce or distribute nuclear energy, nuclear power plants and specific components to generate nuclear energy and companies that are involved in transport or storage of used radioactive fuel are excluded. The threshold is set at 0% of revenues for this criterion.
  - Environmentally hazardous chemicals: companies that produce or sell chemicals that threaten humans and/or the environment are excluded. The threshold is set at 0% of revenues for this criterion. An exception is made for companies that produce chemicals for essential and legally permitted use.
  - Pornography: companies that produce, sell, market, show and/or actively distribute pornography and/or pornographic operations are excluded. The threshold is set at 5% of revenues for this criterion.
  - Tobacco: companies that produce or sell tobacco products or related smoking materials are excluded. The threshold is set at 5% of revenues for this criterion.
  - Weapons: companies that produce and sell weapons or weapon-related services are excluded. This includes both conventional weapons, such as pistols and rockets, and non-conventional weapons, such as nuclear, chemical and biological weapons and integral weapon systems. The threshold is set at 0% of revenues for this criterion.
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Exclusionary criteria for business processes
Companies are excluded from investment if they are seriously and/or are frequently involved in certain controversial activities. Companies operating in industries that are considered to be high-risk are expected to have a proactive policy to prevent controversies.

Controversial processes and/or activities include:

• Industrial farming: companies that sell animal products from industrial farming are expected to meet minimum requirements for animal welfare or offer consumers an eco-certified alternative.
• Corruption: companies are excluded if they have been sentenced by the court for frequent and serious corruption, bribery and/or money-laundering or they have violated structural codes or treaties in the past three years.
• Animal testing: companies that sell products that have been tested on animals are excluded if the tests are not legally required or the company has no proactive policy.
• Genetic engineering: companies that sell genetically modified products are excluded if they do not have a proactive policy, do not offer the consumer alternatives or do not label their products clearly.
• Violation of legislation, codes or conventions: companies that have frequently and/or seriously violated legislation, codes or conventions. The following criteria are assessed:
  - Violation of environmental legislation.
  - Violation of labour law and/or rights based on the fundamental conventions of the International Labour Organisation and the OECD guidelines (for example, child labour, forced labour and discrimination), as well as other business regulations.
  - Violation of international codes or conventions – for example a number of companies are expected to endorse and observe sector-specific codes such as the World Commission on Dams guidelines, certificates for the origin of wood (Forest Stewardship Council), and the World Health Organisation (code for marketing of baby-milk substitutes).
  - Violation of other legislation – for example, product liability, marketing, anti-trust.
  - Damage to environment and ecosystems – companies are expected to only carry out activities that have been demonstrated to have a socially acceptable small level of risk of environmental harm or impact on ecosystems.
  - Human rights – companies are expected not to directly or significantly contribute to, or profit from, structural and gross violations of human rights by governments or other parties.

It is possible that some products, services or business processes do not fall within one of the above criteria, and do not comply with our investment strategy, for example, unsustainable fishing or types of agriculture and tourism that cause adverse effects for humans and nature. These products and processes are regularly reviewed and when necessary, the criteria are updated.
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Sustainable products and services
Companies that are not excluded according to the procedure as described above and that generate more than 50% of their turnover in one or more of the following activities or products, are considered by Triodos Bank to be operating in a sustainable industry, and as such are eligible for investment:

• Organic farming: companies that are active in the cultivation, processing and trade of agricultural products have significantly less negative effects on ecosystems and animal well-being. These products must have an independent, recognised certificate of organic farming.
• Renewable energy: companies that are active in the design, production and sale of windmills, solar panels and biomass technology, and companies that generate energy from the sun, wind or biomass. However companies engaged in energy generation from large-scale hydropower plants are excluded.
• Bicycles: companies that produce or sell bicycles or bicycle parts.
• Homeopathic medicines: companies that produce traditional medicines that are based on natural ingredients.
• Medical instruments: companies that produce or sell diagnostic instruments, medical equipment and/or implants.
• Environmental technology: companies that create products and services that make a significant positive contribution to the environment. This could include water purification systems, filters, cleaning technologies, methods for preventing pollution and services for waste management.

In addition to the above sustainable activities, in specific situations or as part of new developments, other sustainable activities may also be considered. This could include activities that are not yet relevant for investment purposes such as small-scale hydropower plants, geothermal energy, and hydrogen production and storage technology.
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Comparative criteria
Companies that are not excluded according Triodos Bank’s exclusionary criteria could be considered eligible for investment even though they may not supply the sustainable specific products or services listed above. In such cases, companies are compared within their own sector or industry. The top 50% of best performing companies within their own sector or industry are considered as eligible.

Throughout the study, companies are screened on the basis of more than 100 different social and environmental indicators that can be divided into three key themes:

• Social – analysis of policy, management systems and performance of the company in relation to its stakeholders, such as employees, customers and suppliers.
• Environment – analysis of policy, management system and performance of the company in relation to the environment. The analysis of strengths and weaknesses with regard to the environment pertains both to the products and services and to the production process and the company’s own suppliers.
• Transparency and external relations – analysis of the company’s corporate governance, communication and external reportingy, its involvement in society, and its relationship with its stakeholders.
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