09-07-2024 09:04

Tesla is one of our long-term engagements

In our work as active owners, we use our influence as shareholders to improve the practices of the companies we invest in.  Tesla is a one of them. It is an interesting and challenging company from an ESG engagement perspective and some of the issues we have raised with Tesla range from labour rights, to the size of Tesla CEOs pay package. 


Magdalena Kettis, our member of the Investment Stewardship team comments: 

“Electric vehicles are a critical technology supporting the transition to a carbon-free economy – a transition Nordea supports and wants to push – but electric vehicles supply chains also present environmental and human rights concerns.

Tesla has for many years failed to respect union rights in the United States.  On 27 October 2023 Tesla workers in Sweden went on strike because the company would not sign a collective agreement for its workers – the typical labour market model in Sweden. Around 90 per cent of the Swedish labour market is covered by collective agreements. The strike has escalated to other unions and Nordic countries and now June 2024 the strike is still ongoing. 

In December 2023 Nordea and 15 other Nordic institutional investors wrote to Tesla’s board saying that we are “deeply concerned” about Tesla’s attitude to worker rights in Sweden and demanded that the car maker accept collective bargaining agreements for its staff”. This action received a lot of attention from international media,1 but not from Tesla.

So investors decided to take the issue to Tesla’s annual meeting, and filed a shareholder proposal asking the board to adopt a policy that would commit to “noninterference and good faith bargaining in accordance with internationally recognised human rights standards with respect to freedom of association and collective bargaining.” To demonstrate Nordea’s support for the proposal ahead of the annual meeting in June 2024 we pre-declared our voting intentions for the shareholder proposal on a public investor voting platform. Even though the proposal did not receive enough votes to pass, it is still an important step in our engagement with Tesla. To file shareholder proposals can help bring attention to important issues such as this.

Another human rights related issue we’ve discussed with Tesla, and where the company has been more responsive,  is cobalt mining in DR Congo.   

Key to the electric vehicle technology is the battery, containing a number of different minerals, including cobalt. The demand for these minerals will increase dramatically and so will the environmental and human rights challenges. To improve our understanding of some of these, we commissioned a field study on industrial cobalt mining in DRC from UK based RAID (Rights and Accountability in Development). The research was published in 2021: The Road to Ruin? Electric vehicles and workers’ rights abuses at DR Congo’s industrial cobalt mines

The report describes the widespread exploitation of workers at many of the DRC’s industrial mines. The research also traced cobalt from the industrial cobalt mines to electric vehicle makers that purchase and use the batteries made from cobalt. One of the identified companies was Tesla. As part of the study RAID reached out to the companies in the report and Tesla was very responsive. You can read their response here. 

Following the publication of the RAID report, Nordea also had a meeting with Tesla to express our concerns and to understand how they responded to and were addressing the findings of the report. The company’s responsible sourcing team had just returned from a trip to the DRC and had some helpful information and updates to share. Tesla says it commits to international standards on business and human rights and says that sourcing from industrial mines is a means to remove human rights issues and child labour in artisanal mining in the DRC from their supply chain.

We also acted together with other investors and expressed these concerns in a letter to Tesla in April 2023. At the 2023 AGM CEO Elon Musk suddenly announced that Tesla will conduct third-party audits of its cobalt supply chain to ensure there is no child labor within it. “You know what, we will do a third-party audit…“Even for the small amount of cobalt that we do use we will make sure that no child labor is being exploited”.  It’s a good sign, but we still need to see evidence of this. 

One way we track Tesla’s human rights performance is the Corporate Human Rights Benchmark (CHRB). This is an initiative that Nordea has been involved in since 2017.  We have seen some improvements since 2020, when the car manufacturing sector, including Tesla, were assessed for the first time. For the next assessment later this year we expect that their overall performance on human rights has improved.”

Active management blog: Where we delve deeper into our work with asset management

Active management is a broad term. It concerns both generating the best possible return for our unitholders, but also taking responsibility for the investments that we make and being active owners. As the largest fund manager in the Nordics, we can influence our investee companies. Being an active owner is central to us achieving our mission of superior long-term risk-adjusted returns because it allows us to work with companies to address ESG risks and opportunities and help them make progress. This is true across our entire investment universe, as our active ownership activities span across all our products, whether they are dedicated ESG or not. This belief guides our engagement approach.

We believe that active ownership is a powerful way to protect shareholder value, enhance long-term returns and foster positive change. We are convinced that ensuring good ESG practices in our funds’ holdings is an important part of safeguarding the long-term interests of shareholders and society. When we want to improve a company’s management of its ESG risks, we exercise our ownership rights – such as engagement and voting – to support and influence the company. Ultimately, we believe that companies that take responsibility for such issues will also be more profitable.