Industrivärden's view of sustainability
Industrivärden’s view of sustainability is grounded in the Company’s business mission to conduct long-term value-creating asset management through active ownership. From an overarching perspective, Industrivärden has the greatest sustainability influence through its role as an active owner in its portfolio companies. In addition, Industrivärden conducts sustainability work in its own operations, where focus is on being a responsible employer.
The active ownership role entails a long-term investment perspective and involves a natural involvement in the portfolio companies’ strategic development. By helping to develop long-term competitive companies, Industrivärden enables growth in value over time and sustainable development, which benefits the communities in which the portfolio companies are active.
Industrivärden’s operations are conducted in accordance with Company’s Code of Conduct and policies. Through active ownership Industrivärden works to ensure that its values and ethical guidelines will also permeate the companies in which it is an active owner. Industrivärden’s Code of Conduct has been adopted by the Board of Directors and is revised yearly. In short, it stipulates that;
- good business ethics and clear corporate governance with a genuine sustainability perspective contribute to long-term value creation and sustainable development in society,
- the workplace shall be distinguished by openness, receptiveness and mutual respect, and
- the Company repudiates all forms of discrimination and believes that diversity in all its forms enhances knowledge, dynamism and the quality of operations.
Industrivärden’s sustainability work is conducted through two focus areas: drive sustainable company development through active ownership, and be a responsible employer. These areas have been identified and concretized with a foundation in the materiality analysis. This analysis is based on Industrivärden’s opportunities to influence through its ownership role, a materiality perspective, and an ongoing stakeholder dialog.
Global initiatives and guidelines
Agenda 2030 and the Sustainable Development Goals
As part of Agenda 2030, the world’s leaders have adopted 17 global Sustainable Development Goals (SDGs) for a better world. In 15 years’ time the goals will contribute to social, environmental and economically sustainable development in all countries, and the business sector plays a decisive role in achieving these goals. With a base in Industrivärden’s business, its influence opportunities in the portfolio companies and a previously performed materiality analysis, the following goals are in focus. From an influence perspective, SDGs 8, 9, and 12 apply for Industrivärden’s portfolio companies within the framework of active ownership. SDGs 5 and 13 pertain mainly to Industrivärden’s own operations. You can find more information about these goals in the right column.
During 2017 a fundamental materiality analysis was performed, which serves as the foundation of priorities in Industrivärden’s sustainability work. The analysis is based on a dialog we have conducted with our stakeholders. Based on this analysis, our primary task – in our capacity of a long-term asset manager and active owner – is to contribute to sustainable economic growth in our investments.
We are interested in and receptive to expectations that people in our general operating environment have on our operations. Accordingly, we are engaged in an ongoing dialog with our stakeholders in order to gain insight into their perspectives and learn from each other. This dialog helps us to develop our sustainability work and plays a crucial role for us in realizing our business concept to conduct long-term value-creating asset management through active ownership. Our primary stakeholder groups are made up of counterparts who we influence and who are highly relevant for our operations:
- Shareholders and potential investors
- Other major owners of portfolio companies
- The portfolio companies
- Industrivärden’s employees
- Authorities, legislative bodies and nongovernmental organizations (NGOs)
Aspects that have been conveyed by most stakeholder groups include that Industrivärden should be a responsible, long-term active owner and a sustainable investment that generates a competitive return. There is an expectation on us to have strategic and integrated sustainability work and to increase transparency about how we conduct this work. Other issues expressed by our portfolio companies, authorities, legislative bodies and NGOs – among others – include that we take a clear position on matters related to anti-corruption, taxes, diversity and carbon footprint. Our employees believe that the opportunity for competence and career development as well as diversity in the workplace are urgent matters. NGOs want to see a transparent and long-term perspective in our sustainability work, such as our contribution to Agenda 2030.
In an effort to strengthen our priorities, we have matched our stakeholders’ expectations with the issues that we believe have the greatest strategic importance for our own operations. These prioritized sustainability issues form the foundation of our sustainability work. The outcome of this analysis is laid out in the figure.
The capital market has undergone major changes during the past two decades. Diversity has increased with respect to investment strategies and investment horizons. At the same time, polarization has also increased, where active owners have intensified their activity level at the same time that the share of passive investing, such as through algorithm and index trading, has increased significantly. This development has further highlighted the need for responsible and long-term owners.
Another trend is that many companies today are facing rapid changes in their external business environments along with revolutionary megatrends such as urbanization, digitalization and sustainability challenges. This has put higher demands on speed and flexibility among companies, but also a need for knowledgeable and engaged owners that can contribute and set clear demands. For investors that have the ability to successfully exercise responsibility and value creation in their ownership role, these development trends present potential business opportunities with distinct societal benefits.
As an active owner Industrivärden therefore contributes to the development of responsible companies that capitalize on sustainability-related opportunities. This creates competitive companies, enables growth in value and benefits sustainable societal development.
Against this background Industrivärden puts strong emphasis on ensuring that its portfolio companies have a sustainable approach to all aspects of their operations. Particular emphasis is put on material risks and opportunities – from influence and risk perspectives – since the companies are active in widely diverse industries and therefore face different challenges and opportunities. From an overall perspective it is Industrivärden’s expectation that they:
- view sustainability as a key strategic issue;
- integrate sustainability aspects in their business models, business cultures, strategies, processes and product offerings;
- comply with applicable laws, rules and generally accepted principles for sustainable business;
- continuously improve their sustainability work with support of relevant guidelines and measurable goals; and
- communicate their sustainability work and the way in which they contribute to long-term sustainable development in the communities in which they work.
Active ownership is exercised primarily through representation on companies’ nominating committees and boards, and by engaging in an ongoing dialog with the portfolio companies. Through extensive knowledge about the portfolio companies, their industries and important factors in their operating environments, Industrivärden has a good understanding of the portfolio companies’ sustainability work, to the benefit of its active ownership. The analysis process is conducted from an overarching ownership perspective and is built upon Industrivärden’s sustainability analysis framework, which encompasses the portfolio companies’ organizations, structures, risk management, utilization of value-creating opportunities and communication. Industrivärden’s portfolio companies shall have the boards, management, organizations and resources needed to integrate sustainable business and thereby long-term value creation in their business models, processes and product offerings. Industrivärden shall be a well-informed and demanding owner with a clear sustainability perspective that contributes to sustainable development of its portfolio companies.
Strong startingpoint för sustainable value creation
Industrivärden’s portfolio companies have generally made great progress in capitalizing on the value created by longterm sustainable business and measure up well in various comparisons with their industry peers. Following are a few examples of sustainability work currently being conducted by the portfolio companies.
In conjunction with the World Economic Forum 2018, for the first time Sandvik was included on the list of the 100 most sustainable companies and was ranked 65th overall. Among other initiatives, Sandvik is working together with Goldcorp to convert the Borden Lake project in Ontario, Canada, to the world’s first fully electric mine by developing battery operated vehicles. Production is planned to start in 2019.
Handelsbanken is included in the analysis company RobecoSAM’s “Sustainability Yearbook 2018” as a “Sustainability Yearbook Member”. As such, Handelsbanken is among the top 15% of the world’s banks in sustainability. During 2018 a framework was launched for projects that meet special sustainability criteria, and in June Handelsbanken issued its first green bond according to the set criteria.
In 2018 Volvo Trucks unveiled several electric transport solutions. In May the FL Electric truck was launched, which can be driven in indoor terminals and in the most demanding environmental zones. The truck is virtually noise-free, which makes it suitable to drive in cities even at night. In September Vera was presented, a future transport system with self-driving electric vehicles that are monitored via a control center.
In May 2018, Essity, together with WSSCC, published a report with the goal to further promote the global dialog on hygiene and health issues, increase cooperation between organizations, industries and countries, and promote solutions for some of the challenges we face. In January 2018, Essity was named as one of the world’s most sustainable companies by Corporate Knights.
Ericsson has halved its carbon emissions and during 2018 continued its ambitious work on reducing its carbon footprint. In September 2018 the “Exponential Climate Action Roadmap” report was presented at the Global Climate Action Summit in California by, among others, Ericsson, Professor Johan Rockström, Stockholm Resilience Center, Future Earth and WWF. The report lays out 33 solutions for reducing carbon emissions by 50% in a number of industries through strong industry collaboration and partnership.
For 2017 SCA’s Ortviken paper mill reported the lowest fossil fuel emissions ever. This was made possible by a new combustion plant that has allowed the mill to replace oil and gasol with wood fiber. SCA’s goal is to be entirely fossil-free over time.
In April 2018 ICA launched “My climate target,” a tool that enables customers to see the carbon footprint of their purchases with the help of modern technology and scientific calculations. In September ICA was the first grocery retailer in Sweden to have its climate targets approved by the Science Based Targets Initiative, based on a scientific method that ensures that ICA’s targets are in line with the Paris agreement.
It is Skanska’s ambition to be an industry leader in sustainability; as an example, the company has made green building an integral and commercially successful part of operations. During 2018 the company’s new, so-called circular asphalt was sold in the first projects.
Sustainabilities goals and activities: Active ownership
Industrivärden shall serve as a model and work with a clear sustainability focus both in its own operations and in the portfolio companies.
Proactive sustainability work shall be an integral part of the daily activities that are conducted by slightly less than 20 employees at the head offices in Stockholm. The CEO has overarching responsibility for Industrivärden’s sustainability work, and the Head of Sustainability has functional responsibility for internal collaboration and external communication on sustainability issues. Team managers are responsible for the integrated sustainability analyses in the respective portfolio companies.
Industrivärden shall be a workplace in which the employees enjoy their work, feel good and can develop. Toward this end, evaluations are continuously conducted of performance and development opportunities for all employees. In addition, a continuous dialog is conducted on matters related to the workplace, ways of working and personal development. Industrivärden believes that better results are achieved at a workplace characterized by gender equality and diversity.
Environmental and carbon footprinting work
Even though Industrivärden’s organization is small, the Company shall serve as a good example by minimizing its own environmental impact and carbon footprint. This is being achieved, for example, by prioritizing environment-friendly travel alternatives, using renewable energy in offices, and by continuously evaluating purchases from a sustainability perspective. Industrivärden has an ambition to reduce its own footprint over time and compensates for its actual greenhouse gas emissions through offsets. To be able to monitor and compare the Company’s carbon footprint, Industrivärden has been conducting carbon footprint reporting since 2010 within the CDP framework. Current greenhouse gas emissions for 2018 have been calculated using the market-based method of the GHG Protocol (Greenhouse Gas Protocol).
Favorable financial performance and financial strength are necessary prerequisites for Industrivärden to be able to create long-term value for its shareholders and pursue its strategy of supporting the portfolio companies over time. During the last three-, five- and ten-year periods, Industrivärden’s stock has generated a higher total return than the Stockholm Stock Exchange. During 2018 Industrivärden’s net asset value decreased from SEK 96.3 billion to SEK 85.2 billion at year-end. Industrivärden’s Class A and C shares generated total returns including reinvested dividend of –11% and –9%, respectively. A dividend of SEK 5.50 per share was paid to the shareholders, for SEK 2.4 billion in total. Industrivärden has a stable financial position with good credit ratings, and at year-end the debt-equities ratio was 7%.
Development of sustainability work 2018
Integration of strengthened sustainability analysis
In 2016 a development work was initiated to build up knowledge and strengthen analysis and the Company’s ability to influence sustainability-related matters. This resulted in a new sustainability analysis framework, which was further developed in 2017 and fully integrated in Industrivärden’s operational activities in 2018. Today Industrivärden has a solid foundation for value-creating sustainability analysis. The framework and work processes are being continuously developed as an integral part of Industrivärden’s business model.
Clearer coupling to Agenda 2030
In 2018 work was conducted to more clearly explain how Industrivärden’s prioritized sustainability issues are coupled to the global Sustainable Development Goals (SDGs) set out by the Agenda 2030 framework. This clarifies how Industrivärden is contributing to achievement of the global SDGs.
More in-depth stakeholder dialogs
Industrivärden is interested in and receptive to expectations on its operations by actors in its operating environment. Against this background a continuous dialog is conducted with the Company’s stakeholders to learn about their perspectives and share knowledge.The stakeholder dialog provides important support in the development of sustainability work, and in 2018 it was broadened with respect to target groups and levels. Further, Industrivärden participates in various public forums and presentations conducted under the sustainability theme – in part to emphasize the importance of active owners for sustainable societal development and in part to further conduct a dialog, gather views and learn from others.
Sustainabilities goals and activities: Own operations
Practical implementation of values
With a foundation in Industrivärden’s refined sustainability work, all employees have received training in the Company’s view of value creation and how the set goals are to be implemented. This includes adopted policies for the environment and carbon footprinting, diversity and gender equality, anti-corruption and the Code of Conduct. Industrivärden makes a concerted effort to ensure that all employees feel involved in its operations.