05-04-2022 11:58

What is active ownership?

Active ownership is when shareholders engage in a company they have invested in to influence the company’s strategy and actions. It is a method often used in responsible investing to directly influence a company’s decisions and when working with corporate social responsibility.

  • The terminology active ownership is often used when shareholders use their influence to push companies towards more sustainable business conduct and ESG goals.
  • However, active ownership can also mean that you use your influence to reach other goals, such as increasing a company’s profitability.
  • Active ownership for the purpose of responsible investing has an embedded dilemma: Is it better to invest in a company to influence it towards more sustainable business conduct, or should investors simply stay away from a company if it does not yet conduct business in a sustainable manner?
Active ownership can generally be divided into two streams – engagement and voting – both equally important and interdependent on one another.

How to be an active owner

There are three main ways to conduct active ownership when working with responsible investments:

  • Engagement: When shareholders directly approach the management of companies to influence the way in which the companies are run. 
     
  • Voting: As an owner, you can use your influence to vote for or against proposals at the company’s annual general meeting or bring forward your own proposals. 
     
  • Collaborating with other investors: Investors can decide to team up to gain more influence on a specific topic/issue. This is a common method when working with active ownership and ESG. The bigger collective ownership of the company, the bigger the influence.

Does active ownership work?

Yes.  There are many examples in Nordea where we – often together with other investors – have succeeded in influencing companies towards more sustainable business conduct. Below are some examples.

However, there are also cases where our efforts are not successful. If a company fails to deliver the necessary change, we might decide that exclusion is the only option and we will no longer invest in the company.

Active ownership