Industrivärden as asset manager and active owner
Long-term value creation requires sustainable solutions and decisions, which is why our asset management decisions and influencing activities are based on a distinct sustainability perspective. As an active owner we contribute to developing responsible companies that capitalize on sustainability-related opportunities. This creates competitive companies and favors long-term sustainable development in the communities in which the portfolio companies operate. Against this background, major emphasis is put on ensuring that our portfolio companies have the boards, leadership, organization and resources needed to integrate corporate social responsibility and thus longterm value creation in their business models, processes and product offerings. Industrivärden strives to be a well informed owner that makes demands and exercises its ownership role primarily through nominating committee and board representation.
Our sustainability principles
Like other strategic matters, sustainability aspects in the portfolio companies are handled within the framework of Industrivärden’s active ownership process. The work is based on our sustainability analysis framework, which covers the portfolio companies’ organization, structure, risk management, utilization of value-creating opportunities and communication. Through this analysis process we obtain a wealth of knowledge about the portfolio companies’ sustainability work, which benefits our active ownership. The portfolio companies operate in widely diverse sectors and thus the preconditions and challenges as well as the opportunities and actions differ from company to company. However, Industrivärden’s overarching ambitions from a sustainable, long-term ownership perspective are the same for all of the companies. As an active owner Industrivärden has an expectation that the portfolio companies
- treat sustainability as a vital strategic opportunity,
- integrate sustainability aspects in their business models, business cultures, strategies, processes and product offerings,
- comply with applicable laws, rules and regulations, and generally accepted principles for corporate social responsibility,
- continuously improve their work with the support of relevant guidelines and measureable goals, and
- communicate their sustainability work, including the ways in which they contribute to long-term sustainable development in the communities they work in.
Our portfolio companies have all made great progress in capitalizing on the values conveyed by long-term corporate social responsibility and stand up well in various sector comparisons. However, the companies face different challenges that we monitor in our capacity as an active owner. Following are a few current examples our portfolio companies’ sustainability work.
Good starting point for sustainable value creation
ESSITY: RECOGNIZED BY CDP AS WORLD LEADER FOR ITS ACTION ON WATER AND FORESTS
Essity has been recognized as a global leader for its action on water and forests and received the highest score from CDP, an international not-for-profit charity that promotes a more sustainable economy. From thousands of participating companies, Essity was one of only four to qualify for CDP’s A-list. This was the case for both CDP Water, for reporting its efforts to promote sustainable water use, as climete work for which Essity received the high score A-.
SSAB: HYBRIT – CO2-FREE STEEL PRODUCTION
In 2017 SSAB, together with LKAB and Vattenfall, formed HYBRIT, a joint venture company for fossilfree steel. The company is working to develop a steel production process that has zero carbon dioxide emissions, replacing them with water emissions. HYBRIT is a very important initiative for SSAB and Sweden’s national goal to be carbon neutral by 2045. If the initiative is successful, HYBRIT will make a major contribution to a carbon free Sweden.
VOLVO: VOLVO TRUCKS SAFETY REPORT 2017 PUTS FOCUS ON VULNERABLE ROAD USERS
Volvo’s vision is that no Volvo trucks will be involved in traffic accidents. The company has long been at the forefront of safety development and has presented new functions that prevent and reduce the risk of traffic-related accidents. In 2017 Volvo Trucks published its second Safety Report, which analyzes and describes why accidents with heavy goods vehicles occur, what the interacting factors are for them, and what should be done to reduce the risk for accidents and their consequences.
Industrivärden’s operations are to be conducted in accordance with our Code of Conduct and policies. Through our active ownership we also advocate for our values and ethical guideline and that they will also permeate the companies in which we are active owners. The Code of Conduct, which has been adopted by the Board of Directors, is revised yearly and is available on Industrivärden’s website. In short, it stipulates that
- we believe that good business ethics and clear corporate governance with a genuine sustainability perspective contribute to long-term value creation and sustainable development in society,
- our workplaces shall be distinguished by openness, responsiveness and mutual respect, and
- we repudiate all forms of discrimination and believe that diversity in all its forms enhances knowledge, experience, dynamism and the quality of our operations.
DEVELOPMENT OF OUR SUSTAINABILITY WORK IN 2017
Strengthened sustainability analysis
In 2016 Industrivärden initiated development work aimed at strengthening analysis and our ability to influence sustainability-related matters. This resulted in the gathering of a large volume of knowledge and in a new sustainability analysis framework, which we further developed in 2017 and which has now been integrated into our operational activities.
Completion of materiality analysis
During the year we performed a materiality analysis, which serves as the foundation of priorities in our 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.
Implementation of Agenda 2030
In September 2015 the UN General Assembly adopted the Sustainable Development Goals (SDGs) as part of Agenda 2030. The goals aim to achieve social, environmental and economically sustainable development in all countries, and the business sector will play a crucial role in achieving them. Based on our own business, our influence opportunities in the portfolio companies and our materiality analysis, we have chosen to focus particularly on the following SDGs: 5 – Gender equality; 8 – Decent work and economic growth; 9 – Industry, innovation and infrastructure; 12 – Responsible consumption and production; and 13 – Climate action. From an influence perspective, SDG 5 and SDG 13 pertain mainly to our own operations, while the other three pertain to our portfolio companies within the framework of our active ownership. How we are contributing to Agenda 2030 in our role as asset manager and active owner is described in the boxes below.
How we are contributing to SDGs 8, 9 and 12 in Agenda 2030
|Sustainable economic growth is a linchpin in our work on contributing to the development of responsible and successful companies.|
|Promotion of sustainable industrialization and innovation is in focus in our portfolio companies and is encouraged in our role as active owner.|
|All of our portfolio companies conduct strategic sustainability work that is integrated in their business models and communicated externally. The companies offer long-term sustainable and efficiently produced products and services that contribute to sustainable production and consumption.|
Participation in partnership projects
Industrivärden is a participant in SISD (Swedish Investors for Sustainable Development), a project sponsored by Sida (the Swedish International Development Cooperation Agency). The aim is to gain knowledge and share experience with other project participants. Within the framework of this project we are part of a work group focusing on anti-corruption, which is an important issue in SDG 16 – Peace, justice and strong institutions. Among other achievements, the group has drawn up a set of indicators to support the project participants’ own analyses and as a contribution to the Global Reporting Initiative (GRI).
New policy documents
In 2017 we adopted an environment and climate policy and a diversity and equal opportunity policy, which define our approach to these issues in our own operations.
Reporting in accordance with the GRI
We have chosen to begin reporting in accordance with the GRI in order to enable our stakeholders to learn about and evaluate the development of our sustainability work over time. The sustainability report summarizes priority issues within the framework of our sustainability work. For more in-depth information, see the GRI index.
GOALS AND STRATEGIES
Our stakeholders’ views of our sustainability work
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.
The materiality analysis defines our prioritized sustainability issues
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.
Our sustainability goals
With a foundation in prioritized sustainability issues we have set suitable goals and actions for the coming year. See the table.
|SUSTAINABILITY ISSUE||ACTION||GOALS 2018|
Be an active, responsible owner that contributes to successful companies and to sustainable development in society
Continued analysis and follow-up in accordance with our sustainability analysis framework
Analyze and follow up all portfolio companies in accordance with our sustainability analysis
Be a long-term, sustainable investment that generates a competitive return
Contribute to the development of valuecreating, responsible and sustainable companies, which supports long-term sustainable development in the communities the companies work in
Competitive shareholder value through a total return which, over time, is higher than the average for the Stockholm Stock Exchange (Nasdaq Stockholm)
Be an attractive employer with focus on competence development, openness and diversity
Yearly performance reviews
Conduct employee performance reviews with special attention paid to the work environment and competence development
Further develop strategic sustainability work with a clear set of goals going forward that contribute to Agenda 2030
Develop sustainability strategy
Further develop and formalize strategic sustainability work in a sustainability strategy
Reduce and report our carbon footprint
Annual reporting of carbon footprint to CDP
Continue annual reporting of carbon footprint to CDP
Industrivärden's own operations
Industrivärden should serve as a model and work with a clear sustainability focus in its own operations as well as in its portfolio companies. Proactive sustainability work is to be an integral part of the day-to-day operations, which are conducted by some 20 employees at the Group’s 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 aspires to offer a work environment in which the employees enjoy their work, feel good and can develop. Toward this end we continuously evaluate performance as well as development opportunities for all employees. We encourage a continuous dialog on matters related to the workplace, forms of cooperation and personal development. We believe better results are achieved in a workplace characterized by gender equality and diversity, and toward this end we are working to increase diversity over time. During 2017 the Executive Management was expanded with one woman and one man executive, after which it includes two women and three men.
How we are contributing to Sustainable Development Goal 5 in Agenda 2030
|Diversity and gender equality are a priority issue both in our own operations as well as in our portfolio companies.|
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 2017 Industrivärden’s net asset value increased from SEK 82.8 billion to SEK 96.3 billion at the end of the year. Industrivärden’s Class A and Class C shares generated a total return including reinvested dividend of 20% and 22%, respectively. The dividend paid to the shareholders was SEK 5.25 per share, or SEK 2.3 billion in total. Industrivärden has a stable financial situation with a good credit rating, and at year-end the debt-equities ratio was 10%.
Our work with the environment and climate
We want to set a good example by minimizing our own environmental impact and carbon footprint even though Industrivärden, in terms of the organization’s size, is a small company. We are doing this, for example, by prioritizing environment-friendly travel alternatives, using renewable energy in our offices, and by continuously evaluating our purchases.
We are committed to reducing our own impact over time, and we compensate for our actual greenhouse gas emissions through offsets. To be able to monitor and compare our impact, for the seventh year in a row we have disclosed our climate change mitigation efforts to CDP. Our greenhouse gas emissions have been calculated in accordance with the GHG protocol and are shown in the GRI Index.
How we are contributing to Sustainable Development Goal 13 in Agenda 2030
|High ambitions to combat climate change are crucial for our own operations as well as for our portfolio companies’.|
Even though our own operations are a natural starting point for our sustainability work, our main focus is on the processes in which we have the greatest influence – our investment decisions and active ownership.