As an engaged long-term owner, Industrivärden’s largest carbon footprint is derived from its ownership of the portfolio companies. Greenhouse gas emissions (CO2e) from its own operations and from the equities portfolio have been measured since 2010, when Industrivärden also began reporting its carbon footprint to the CDP (formerly Carbon Disclosure Project).
Emissions from equities portfolio
The largest share of Industrivärden’s emissions are indirect CO2e emissions within framework of the Company’s ownership in the portfolio companies (Industrivärden’s Scope 3 emissions). The chart below shows the equities portfolio’s yearly emissions over a five-year period. Data has been obtained from the portfolio companies’ own disclosures of greenhouse gas emissions (GHG Protocol, market-based method), in proportion to Industrivärden’s share of ownership (equity share approach). This development illustrates the portfolio companies’ concerted efforts to steadily reduce their carbon emissions as well as Industrivärden’s divestment of its holding in the steel company SSAB in 2020/2021. The portfolio’s emissions are reported in Industrivärden’s Scope 3 emissions and reflect the portfolio companies’ Scope 1 and 2 emissions, based on Industrivärden’s share of ownership (share of votes, which in Industrivärden’s case corresponds to higher emissions owing to larger shares of votes than equity in several portfolio companies).
Industrivärden’s own emissions
Industrivärden has calculated the carbon footprint from its own operations during the last ten years. Emissions come mainly from electricity and district heating consumption in the Company’s office building and from business travel. During 2021 travel-related emissions remained low due to the Covid-19 pandemic. To reduce greenhouse gas emissions, environmentally certified electricity from wind and hydro power is purchased, and the remainder is compensated through offsets. Carbon offsetting is done through the Gold Standard–certified project SKG Sangha Biodigester PoA in the State of Karnataka in India, where biogas digesters are being installed to produce clean and sustainable energy.
TCFD – Task Force on Climate-related Financial Disclosures
The Task Force on Climate-related Financial Disclosures (TCFD) was launched in 2017, which provides guidance to companies on how to better identify and report climate-related financial risks and opportunities. Industrivärden has reported climate-related information to the CDP since 2010. Today the TCFD’s recommendations are integrated in the CDP’s questionnaire on climate change. Industrivärden began implementing the TCFD’s recommendations on reporting climate-related risks and opportunities in 2020.
The Board’s decisions on major investments continually take into consideration developments in the portfolio companies, and the Board decides on matters related to the exercise of active ownership in the portfolio companies. Individual directors on Industrivärden’s board are represented on the portfolio companies’ boards and also actively participate in the portfolio companies’ nomination processes.
The Executive Management is responsible for the Company’s day-to-day administration, which includes strategic, organizational and finance matters, control and follow-up as well as equity transactions, among other things. Members of the Executive Management participate actively in evaluations of the Company’s assets as well as in active ownership measures and have depth of knowledge about the portfolio companies’ challenges, opportunities and current owner agendas.
Industrivärden’s company teams are responsible for the continuous monitoring of their respective portfolio companies, which among other things includes material sustainability issues, such as climate risks. The teams also update Industrivärdens’s owner agendas for the exercise of active ownership.
Directors on Industrivärden’s board and members of the Executive Management, who also serve as AGMelected directors on portfolio company boards, are to have a current and accurate understanding of value-creating measures that have been identified in the respective portfolio companies. Against this background, Industrivärden’s owner agendas for the portfolio companies are continuously discussed by Industrivärden’s board.
Industrivärden’s business mission is to contribute to the portfolio companies’ long-term development and value creation through active ownership. Operations are grounded in Industrivärden’s relative strengths, including a long-term investment perspective, strong positions of influence, a well-developed ownership model, depth of industrial knowledge and experience, financial strength and an extensive network.
The long-term investment horizon entails that adherence to sustainability principles in the portfolio companies is crucial for Industrivärden’s opportunities to benefit from enduring growth in value. Industrivärden is therefore an owner that sets requirements and has high ambitions to contribute to sustainable businesses that generate long-term value and benefit the communities in which they operate.
With a foundation in Industrivärden’s fundamental analyses of the respective portfolio companies, continuous updates are made of the owner agendas for value creation, which summarize the strategic value drivers that Industrivärden believes are most important for value creation during the coming three to five years.
Several of the portfolio companies conduct climate scenario analyses to identify their climate-related risks and opportunities. Industrivärden’s sustainability analysis encompasses these descriptions as well as the measures being taken by the companies. Climate risks identified in the equities portfolio are reported in the sustainability report’s overarching risk analysis.
Industrivärden’s largest climate risk stems from the aggregate climate risk in the equities portfolio, based on Industrivärden’s share of ownership in the respective companies. Through its active ownership Industrivärden monitors the respective companies’ identification, analysis and measures pertaining to climate risks. Where needed, influence is exercised in accordance with Industrivärden’s ownership model. Ensuring that each portfolio company minimizes climate-related risks and takes advantage of the related opportunities is entirely central to the work on safeguarding and, over time, growing Industrivärden’s net asset value.
Identifying and assessing climate-related risks and opportunities in the individual portfolio companies are done in Industrivärden’s sustainability analysis, which is part of the respective portfolio companies’ fundamental analyses. The risk analysis includes both transition risks and physical risks (effects of climate change) based on various scenarios and time perspectives. In the event Industrivärden determines that there is a need to influence matters regarding a climate risk of a strategic nature, this is defined in the owner agenda for the portfolio company.
Objective Achieving a reduced climate impact mitigates transition risks and promotes long-term value development. It is therefore essential for achieving good growth in net asset value in accordance with Industrivärden’s strategy. Moreover, from a broader perspective it is a precondition for a healthy planet. The portfolio companies are therefore to have prominent positions with respect to minimizing carbon emissions in their own production and value chains.
The goal is that the portfolio companies will have science-based targets for reducing their carbon emissions (Scope 1 and 2). They are also to have clear targets for reducing emissions along their value chains (Scope 3). This goal is followed up yearly and is reported in the sustainability report.