Active ownership is the main way we communicate with the companies we invest in. We exercise our right to influence the company, through attending or voting at the companies’ annual general meetings. We might even put forward shareholder resolutions at the meetings.
Our activities at the annual general meetings can be seen on the Voting Portal.
When we want to improve a company’s management of its ESG risks we start an engagement process with the company. During the process we clearly communicate our engagement goal to the company. We set milestones and review the company’s progress periodically with visits or conference calls. The timeframe of the engagement process can vary depending on the complexity of the engagement goal.
The following is a selection of our engagement cases. Under Engagement updates, more detailed information is provided about current initiatives in terms of engagements.
Climate Action 100+
Nordea is a member of Climate Action 100+ which requires investors to sign on to the Climate Action 100+ Sign-on Statement that sets out the investor signatories’ commitment and expectations of the companies on the initiative’s focus list. To date, it has been signed by 342 investors from across dozens of countries, who collectively manage more than USD $33.6 trillion in assets under management. View the full statement and list of signatories.
Corporate Human Rights Benchmark
Nordea is a funding member and a member of the Advisory Council of the Corporate Human Rights Benchmark (CHRB). The benchmark measures, on an annual basis, the human rights performance of a number of the world’s largest publicly listed companies in industry sectors with high exposure to human rights risk. The benchmark looks at the policies, processes and practices the companies have in place to address their human rights efforts, and how they respond to serious allegations of human rights violations.
In 2017 and 2018 the CHRB assesses 101 companies from the Agricultural Products, Apparel, and Extractives industries that were chosen on the basis of their size (market capitalisation) and revenues. We integrate the results of the Corporate Human Rights Benchmark (CHRB) assessments into our ESG analysis and ownership activities. Following the first benchmark assessment in 2017, an engagement with the assessed companies was initiated by the CHRB investors - Nordea, APG Asset Management and Aviva- together with 85 other asset owners and managers with more than USD 5.3tn in AuM supporting the UN Guiding Principles Reporting Framework. The investor coalition has communicated its expectations on human rights, see below, and is now following-up on the 2018 and 2019 assessment results.
Companies are expected to:
- Publicly acknowledge their responsibility to respect human rights and formally incorporate this into publicly available statements of policy.
- Use the UN Guiding Principles Reporting Framework as guidance for their reporting on human rights issues.
- Include oversight of human rights-related risk as part of the Board’s responsibility
- Embed human rights policy commitments in management systems, business operations and stakeholder engagements
Community Impact Benchmark
Building on our norms-based screening process Nordea has developed its own Community Impact Benchmark to help us identify companies exposed to community impact risks and encourage improved risk management by companies with operations that have high environmental and social impacts on local communities. Companies from the Energy, Utilities and Materials sectors, with four confirmed controversies identified in our norms-based screening process, of which at least one with negative community impact are included in the benchmark. Indicators include human rights and environmental management and impact assessment on company and project level, FPIC process and stakeholder consultation, Severity, Responsiveness to controversies, and Remediation.
Failure to adequately manage community relationships erodes value, through for example increased financial, operational and regulatory risks. Poor management of community issues also conflict with the long-term, shared interest in promoting responsible and sustainable development in communities where companies operate. Our ownership activities, including engagement, with companies aims at promoting sustained profitability and risk management in portfolio companies in order to protect shareholder value and enhance long-term returns.
Based on the two reports Nordea commissioned on water discharge from the pharmaceutical industry in India, we have continued to engage with the pharmaceutical industry regarding supply chain management. Water pollution resulting from pharmaceutical manufacturing drives antimicrobial resistance. Last year, we went to New York to meet several US-based pharmaceutical companies and engage on their supply chain management.
The right to health and clean water are human rights. They are also among the largest global risks we are facing. Nordea has a long-term engagement with the pharma companies in which we are invested, as well as with the industry-led Pharmaceutical Supply Chain Initiative (PSCI) on these issues, and we have clearly communicated our expectations on water pollution related to pharmaceutical manufacturing. To address the expectations, the pharmaceutical industry developed an action plan. Several activities have been implemented already, and we meet regularly with the companies to discuss progress. We have also commissioned two independent on-the-ground investigations about pharmaceutical manufacturing in India and published reports on the results.
Antimcrobial Resistance Benchmark
To further promote better business practices in this area, we work with the Access to Medicine Foundation in two areas. Nordea sits on the Expert Committee of The Antimcrobial Resistance Benchmark, which tracks how 30 large pharmaceutical companies are responding to the increase in drug resistance. The first assessment report was launched at the World Economic Forum in Davos in January 2018. We also work with The Access to Medicine Index, which analyses the top 20 researchbased pharmaceutical companies on how they make medicines, vaccines and diagnostics more accessible in low- and middle-income countries.
Engagement summary 2018
In 2018, Nordea held a total of 145 meetings. Around 83% were connected to our ESG analysis (see Stars funds for more information on the analysis). By meeting the majority of the companies that we analyse, we ensure that we get to know them as well as possible. This is of high importance on e.g. emerging markets where companies generally do not yet report as thoroughly as European companies. The map shows a high concentration around Europe and Asia, which is line with the Stars holdings. The sector division is also a reflection of some sectors (consumer discretionary, financials and healthcare) constituting a considerable portion of the Stars funds.
The incident and norms engagements account for approximately 17% of our meetings. This is a result of Nordea ensuring an appropriate course of action when companies in which we have holdings are associated with breaches of international conventions and norms.
Meetings around the world
North America 27%
South America 2%
Nordea Funds believes that active ownership is paramount in creating returns with responsibility. As we are a major owner in many companies, both in the Nordics and globally, we vote at annual general meetings according to our corporate governance principles. We strive for transparency and this voting portal demonstrates our voting, both at the AGMs we physically attend and our proxy voting.
The portal is updated continuously and contains our historical voting since the 2016 season.
Besides voting, Nordea Funds also demonstrates stewardship and active ownership through representation on nomination committees and through dialogue and engagement activities with companies.
To see how we are voting, visit our Voting Portal.
All question related to voting or this portal can be directed to:
Erik Durhan, Head of Corporate Governance – email@example.com