Being a Responsible Business

We are a fiduciary with respect to our clients. 

We are committed to transparency and honesty in our positioning. We invest within client-led guidelines and each Investment Franchise is afforded the flexibility to meet its unique clients’ needs.

We do not impose our views of the world on our clients, and, as such, you will not see Victory Capital committing to every ESG initiative.

However, we are cognizant that some clients may want to invest their money with specific views and values considered, whether it be by excluding certain industries, gaining exposure in companies that create impact or by targeting certain environmental goals within their portfolios. As such, we aim to offer a diverse range of solutions with the intention of satisfying an array of investor objectives.

Some clients desire separately managed portfolios that seek to deliver both strong risk-adjusted returns and meet sustainability objectives. Victory Capital manages separate accounts with client-driven restrictions on investments in certain securities or types of securities, such as companies operating in particular countries or industries. Our shared service model and centralized operations allow for us to easily integrate and accommodate client-driven ESG preferences.

Victory Capital labels Responsible Investing intentions into three distinct classifications:

• ESG Integration: The systematic and explicit inclusion of ESG factors as a supplement to the financial analysis traditionally performed by investment managers with the goal(s) of risk mitigation or alpha generation.
• Exclusions: Avoiding companies, sectors, or countries in an exclusionary manner based on ESG controversies or certain standards, values, or norms (e.g., Norms-Based Screening, Faith-Based Investing, etc.).
• Sustainable & Impact: Examples include positive screening (i.e., selecting companies in an inclusionary manner based upon certain ESG criteria); thematic (i.e., investing in companies whose activity is focused on some form of sustainable development, such as diversity and inclusion), and impact investing (i.e., investing with the disclosed intention to generate and measure social and/or environmental benefits, alongside a financial return).

ESG Integration

Each Investment Franchise owns its unique investment process, which involves extensive proprietary research. Through this research each team looks at a wide range of factors, which may include ESG factors if they determine them to be material to the investment risks and opportunities.

Integrating ESG factors does not mean that ESG information is the sole or primary consideration for an investment decision. The relevance of ESG considerations to investment decisions varies across asset classes, strategies, stated client objectives and our Investment Franchises.

For us, the consideration of material ESG factors is not political. Where applicable, the incorporation of these issues into decision-making process represents good corporate governance, potential alpha generation, and prudent risk management consistent with our fiduciary duty.

Victory Capital provides all Investment Franchises with access to ESG data, tools, and training, which they can utilize at their own discretion. Analysts often use this external data to complement internal research when developing an overall assessment of a company.

Exclusions

Victory Capital does not have any firm-wide exclusions in place concerning ESG criteria. Some of our strategies have specific ESG exclusions, and we have technology infrastructure to seamlessly implement client-led mandates, upon request. 

Sustainable & Impact

The majority of strategies that qualify as Sustainable and/or Impact are typically driven by client specific guidelines or restrictions.

Our Investment Franchise New Energy Capital is an alternative asset manager investing across the capital structures of clean energy infrastructure projects and companies.

Engagement

As active investors, direct engagement with company management forms an important part of many of our Investment Franchises’ analysis. Collectively, our Investment Franchises have thousands of meetings with company management every year.

Discussions with company management allow each team to learn about a company's perspectives and approaches, provide feedback, and raise any concerns that have been identified during the team’s investment research process.

Proxy voting

Victory Capital seeks to actively exercise its proxy voting rights and responsibilities on behalf of clients and believes it is an essential part of maximizing shareholder value, ensuring good governance, and delivering investment performance aligned with our clients’ long-term economic interests.

Victory Capital has a Proxy Voting Committee "PVC", which is responsible for creating guidelines that oversee the voting process. The PVC is comprised of Victory Capital employees who represent vital areas within the company and provide a range of diverse knowledge that enhances the PVC’s decision-making capabilities.

To assist the PVC with implementing its proxy voting strategy, Victory Capital retains the services of an independent Proxy Voting Advisor, ISS. ISS’s responsibilities include monitoring company meeting agendas and items to be voted on, evaluating each vote in-line with Victory Capital’s Proxy Voting Policy, the "policy", and providing research and voting recommendations based on the "Policy". It also identifies resolutions that require specific shareholder judgement, which enables Victory Capital to review situations where additional consideration may be needed to determine the proxy vote decision.

Our Proxy Voting dashboard, which is available here, includes additional information, including our Proxy Voting Approach.

UN Principles for Responsible Investment

The United Nations-supported Principles for Responsible Investment "UNPRI" is the world’s leading proponent of responsible investment. It works to understand the investment implications of ESG factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions.

While we can trace Investment Franchise membership back to 2016, Victory Capital became an enterprise-wide signatory to the UNPRI in 2020. As a signatory, we commit to the following six principles:

• We will incorporate ESG issues into investment analysis and decision-making processes.
• We will be active owners and incorporate ESG issues into our ownership policies and practices.
• We will seek appropriate disclosure on ESG issues by the entities in which we invest.
• We will promote acceptance and implementation of the Principles within the investment industry.
• We will work together to enhance our effectiveness in implementing the Principles.
• We will each report on our activities and progress towards implementing the Principles.

Victory Capital reported to the UNPRI for the first time in 2023. Victory Capital’s public Transparency report is available on the UNPRI data portal.

Within our operations, we consider Responsible Business principles in two pillars: first, the impact we have on the communities in which we live and work. We refer to this as Corporate Social Responsibility "CSR". Second, we consider the key ESG risks and opportunities we face as an asset manager.

Corporate Social Responsibility

Our role as an asset manager uniquely positions us to positively impact the well-being of our clients, our employees, our shareholders, and our communities in many ways.

Our approach to diversity, equity and inclusion "DEI"

We aspire to be the firm of choice for talented people and to provide an environment where they can prosper. Our workplace is focused on creating opportunity and is grounded in a culture of trust, respect, and honesty. As a result, Victory Capital is committed to advancing diversity and inclusion in our workplace. Our goal is to cultivate environments in which diverse perspectives and experiences are welcomed and respected and employees feel encouraged to discuss diversity and inclusion.

Victory Capital's Diversity, Inclusion, Cohesion, and Engagement "DICE" Committee coordinates diversity and inclusion initiatives across the firm. The Committee is chaired by our Director of Responsible Business and includes representatives from various business functions and the chairs of our Employee Resource Groups "ERG's" discussed below.

Victory Capital is proud to have a strategic alliance with Xavier University of Louisiana, America′s only historically Black Roman Catholic university. This relationship was designed to advance diversity in the asset management industry. We have delivered on our strategic alliance by providing $50,000 initial seed capital to fund the school’s first student-managed investment club and have funded $150,000 in gap scholarships to dozens of students to help pay expenses not covered by existing grants or awards.

We have five ERGs which represent Asian-American, Black, Hispanic, Women & Military affiliated employees. ERGs provide a platform for employees with shared backgrounds, characteristics, or experiences to come together, celebrate their affiliation, share their perspectives, and advocate for their interests.

Community engagement

Giving back to the communities in which we live and work is also core to our culture. We promote employee involvement through financial contributions and volunteer work, by providing each employee with annual matching gift allowances and two days of paid time for qualifying volunteer work. Our ERGs support these efforts and have an integral part in the impact we deliver annually.

ESG Risks and Opportunities

We also consider the risks and opportunities that ESG themes have on the business. We utilize the Sustainability Accounting Standards Board "SASB" standards and Materiality Map®, to monitor the material ESG factors that impact our business.

The material sustainability disclosure topics that SASB has identified for Victory Capital include:

• Transparent Information & Fair Advice for Customers
• Employee Diversity & Inclusion
• Incorporation of ESG Factors in Investment Management & Advisory
• Financed Emissions
• Business Ethics

We continue to report on our progress for advancing these themes in our Annual Responsible Business Report.

ESG Ratings

We engage with ESG rating agencies and regularly participate in ESG surveys and assessments. While we review and respond to all incoming queries, we are most actively engaged with the following agencies:

Above reflects ESG ratings as of December 31, 2023

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ESG Oversight and Governance

Our ESG Council is responsible for the oversight of governance, systems, and controls of each Investment Franchise’s approach to ESG investing. It aims to support Victory Capital in robustly and transparently managing regulatory risks associated with Responsible Investment and ESG-related approaches.

The Council is chaired by our Director of Responsible Business and comprised of senior professionals from various departments involved in Responsible Investment oversight. The Council’s mandate includes:

• Overseeing the documentation, implementation, and effectiveness of Responsible Investment processes and procedures at each Investment Franchise.
• Ensuring all marketing material and disclosure documents (including client reports, factsheets, and RFP database) are aligned with documented Responsible Investment processes and procedures.
• Reviewing and sign off on firm-wide external reporting, including the annual Responsible Business report and reporting to third-party organizations on our Responsible Investment activities, including the UNPRI.
• The ongoing categorization of ESG AUM across the firm.
• Supporting the development of new investment strategies that include new Responsible Investment approaches as part of investment processes.
• At least annual compliance monitoring of Responsible Investment related aspects of a selection of investment strategies, specifically those that formally integrate ESG factors, and/or have social/environmental impact objectives, and/or have specific ESG client led guidelines.