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Strategy, governance and risk management

Structure of the sustainability report

Industrivärden’s sustainability report is integrated in the Company’s business review, where the sustainability perspective makes up part of the descriptions of the Company’s business model and operations.

The sustainability report has been examined by the Company’s auditor in accordance with FAR’s recommendation RevR 12 Auditor’s opinion regarding the statutory sustain­ ability report, and an opinion on the sustainability report has been provided.

Industrivärden has signed the UN Global Compact, and Industrivärden’s Communication on Progress (CoP) report for 2023/2024 are published on the UN Global Compact website (in March/April of the respective years). Industrivärden undertakes to continue to work for the principles of the UN Global Compact during 2024/2025. Industrivärden also reports yearly climate data including the portfolio’s carbon emissions to the CDP as well as its climate exposure (TCFD) in the sustainability report. To address the market’s interest, general sustainability data is also reported to the largest sustainability databases, including S&P Global CSA and Sustainalytics.

Industrivärden’s Code of Conduct and an SASB index for 2023 has been published on Industrivärden’s website.

Industrivärden’s portfolio companies have prepared their own sustainability reports, which can be found on the companies’ respective websites.

Direct and indirect sustainability influence

From an overarching perspective, Industrivärden has the greatest sustainability influence through its role as an active owner of its portfolio companies. Against this backdrop, the sustainability perspective makes up an integral part of Industrivärden’s company analyses and owner agendas.

Particular emphasis is put on ensuring that portfolio companies have clear systems of corporate governance and adhere to good business ethics, a well-integrated sustainability perspective, and that they offer attractive workplaces.

Respective companies’ boards and management teams are responsible for conducting quality and well-integrated sustainability work. In order to evaluate and, exert owner influence in these areas, Industrivärden analyzes sustain-

ability aspects such as governance and leadership, business culture, resource efficiency, climate impact, organization, diversity etc. In doing so, Industrivärden has an indirect sustainability influence in its portfolio companies.

In addition, Industrivärden has a direct sustainability influence through work that is conducted in its own operations in the listed company AB Industrivärden. The organization comprises approximately 15 employees at the office in Stockholm. Sustainability work encompasses all relevant aspects, although is primarily focused on being a responsible employer, striving for diversity and reducing the Company’s own climate impact. Given its active owner role, Industrivärden seeks to serve as a model and to work proactively with a clear sustainability focus in its own operations.

Governance and execution

Sustainability strategy and owner influence

The principles for how Industrivärden is expected to act as a company and responsible owner are set out in the Code of Conduct, which is adopted by the Board of Directors and is revised yearly. Through its active ownership Industrivärden strives to ensure that these approaches will permeate the companies in which it is an active owner. These guidelines stipulate, among other things, that:

  • the overarching goal is to generate sustainable shareholder value while taking into account the stakeholders’ interests as well as the overall economic, environmental, climate and social impact of operations;
  • good business ethics and clear corporate governance with a genuine sustainability perspective contribute to long-term value creation and sustainable development of society;
  • the workplace shall be characterized by openness, responsiveness and mutual respect;
  • the Company shall reject all forms of discrimination because diversity in all forms improves levels of knowledge, dynamism and quality in our operations;
  • the Company shall uphold and integrate the ten principles of the UN Global Compact in the areas of human rights, labor, anti-corruption and the environment.

Industrivärden exercises its ownership influence based on extensive knowledge of the portfolio companies and the sectors in which they are active, mainly through representation on nominating committees and boards as well as in close dialogue with the companies. This work is an integral part of Industrivärden’s overarching model for active ownership, thereby ensuring that Industrivärden’s analysis, exertion of influence and follow-up are of high quality. 

Organization and responsibility

Industrivärden’s board is responsible for the formulation of the Company’s goals and strategy, how active ownership is exercised, and the fundamental sustainability principles.

Sustainability work is evaluated on a continuous basis within the framework of operations as a whole. Follow-up of and decisions on sustainability work in the own operations are conducted yearly at a board meeting and when necessary. The CEO has overarching responsibility for the Company’s direct and indirect sustainability work as well as for integrating sustainability into analysis and ownership processes.

The Head of Sustainability is responsible for Industrivärden’s direct sustainability work, external communication on sustainability matters, and internal collaboration in certain sustainability matters within the framework of the active ownership. Team managers are responsible for integrated sustainability analysis in respective portfolio companies. 

Sustainability analysis

To be able to conduct a qualitative analysis of portfolio companies’ sustainability work – and exercise influence when needed – Industrivärden needs to have a depth of knowledge about the respective companies’ operations and sustainability-related matters. The sustainability analysis is therefore an integral part of company analysis performed by respective portfolio companies. In this way, material sustainability aspects are evaluated from a holistic perspective, with a base in the portfolio companies’ respective operations, geographies and stages of development. This means that the sustainability perspective is included in evaluations of the portfolio companies’ boards and management teams, strategic issues and financial performance. The sustainability analysis also constitutes a more in-depth evaluation of sustainability issues and encompasses the portfolio companies’ organizations, structures, risk management, utilization of value-creating opportunities and communication.

The analysis is materiality-oriented and ranks the issues that Industrivärden intends to study further as well as matters over which it wants to exercise influence. Important areas of assessment include climate and environmental impact, social conditions, anti-corruption, and prevention of human rights violations. Portfolio companies should have the boards, leadership, organizations and resources needed to integrate sustainable business practices and thereby long-term value creation in their business models, processes and offerings.

The sustainability due diligence that is required of all listed companies thus makes up an integral part of Industrivärden’s continuing sustainability analysis.

The main focus of the analysis is on sustainability-related risks and opportunities to create value. The analysis is conducted with a double materiality perspective and looks both at the portfolio companies’ external sustainability influence and how they are affected themselves from a sustainability perspective – financially and operationally. In cases where Industrivärden identifies strategic conditions, risks or value creation opportunities in which it wants to exercise influence, these are defined in Industrivärden’s respective owner agendas, which form the foundation for Industrivärden’s work. The owner agendas are revised at regular intervals and are set by Industrivärden’s executive management.

Industrivärden exercises influence through representation in the portfolio companies’ nominating committees and boards. The individuals who represent or have ties to Industrivärden are to have a current and pertinent understanding of the value creation measures identified for respective portfolio companies. Against this background, Industrivärden’s owner agendas are continuously presented and evaluated by Industrivärden’s board. This allows Industrivärden to have an influence on strategic sustain- ability issues over time. 

Risk management

Industrivärden’s material sustainability risks and value creation opportunities exist in the portfolio companies, which are responsible for managing these within the framework of their respective operations. Industrivärden’s risk analysis aims to identify conditions that deviate from the Company’s understanding of an optimal approach in respective portfolio companies. The analysis encompasses material sustainability risks in the respective companies based on Industrivärden’s prioritized focus areas. Climate- related financial risks are one example, where the analysis includes transition risks and physical risks (effects of a changed climate) in various scenarios and time perspectives. Portfolio companies’ combined sustainability risks make up part of Industrivärden’s share price risk.

The overall outcome of Industrivärden’s risk analysis for its prioritized areas is shown below. Where necessary,

Industrivärden exercises its owner influence. Its active ownership thereby contributes to a long-term reduction of risk levels and to increasing value creation. 

Guidelines and rules

Industrivärden’s sustainability strategy forms the foundation of the Company’s sustainability work both within the Company and within the framework of its active ownership. The sustainability strategy, which is described above, is defined in Industrivärden’s Code of Conduct. In addition, there are a number of guidelines and rules that apply for Industrivärden’s approximately 15 employees. All guidelines and rules are updated at regular intervals, and Industrivärden’s employees receive training in regulatory matters on a regular basis. See table on page 84. Handling suspected violations of the Code of Conduct Industrivärden has a routine that is set out in the Code of Conduct for handling suspected violations of the Code of Conduct. 

Cooperation and frameworks

Cooperation is necessary to address sustainability challenges. Industrivärden has therefore signed the UN Global Compact and has been working to comply with its ten principles since 2015. The Company regularly conducts various types of cooperation in the sustainability area.

Industrivärden also adheres to global initiatives such as the OECD’s Guidelines for Multinational Enterprises, the ILO’s eight fundamental conventions, and the UN Guiding Principles on Business and Human Rights. 

Generated economic value

Good economic performance and financial strength are necessary for Industrivärden to create long-term value for its shareholders and support the portfolio companies over time. In this way, Industrivärden can contribute to good development of the portfolio companies’ corporate governance as well as social and environmental development. 

Materiality analysis

Industrivärden’s sustainability-related focus areas have been identified and concretized using in a materiality analysis. This analysis draws from Industrivärden’s stakeholder dialogues, its abilities to influence through its ownership, and a materiality perspective. 

Stakeholder dialogues

In its capacity as a holding company, Industrivärden has a financial, social and environmental influence on the world around it and on various stakeholder groups. Industrivärden therefore maintains a continuous dialogue with its stake- holders, which increases knowledge about important changes in the business environment and highlights prioritized issues for the Company’s stakeholders.

Stakeholder dialogues are an integral part of the continuous contacts maintained with the Company’s stakeholders and take the form of regular talks and meetings, annual reports, interim reports, Annual General Meetings, performance reviews with employees, memberships in various organizations, etc. Key stakeholders include shareholders, employees, other market actors, equity analysts, representatives of the portfolio companies, business partners and nongovernmental organizations (NGOs). In addition to continuous stakeholder dialogue, a formalized dialogue with a selection of relevant stakeholders was conducted in 2023. The materiality analysis did not change to any material extent. However, clarifications were made regarding the importance of sustainability-related opportunities in the portfolio companies and the importance of the sustainability dimension in the portfolio companies’ value chains. 

Significant issues

The following significant issues have been identified based on respective stakeholder groups’ priorities and Industrivärden’s influence.

  • Attractive returns at balanced risk
    By owning quality companies with proven business models, to which Industrivärden contributes through engaged ownership, opportunities for long-term value creation increase while risk decreases. It is thus important that portfolio companies are able to minimize risks and capitalize on value creation opportunities within the framework of their own sustainability influence and external sustainability factors.
  • Owner influence to drive integration of sustainability in portfolio companies
    Industrivärden’s opportunities to exercise active ownership require formal and trustbased influence in the port- folio companies. It is therefore vital that Industrivärden has financial opportunities as well as trust capital to maintain its influence.
  • Good corporate governance and business ethics
    Both Industrivärden’s and the portfolio companies’ corporate governance and business ethics are of major importance for sustainable value creation. In its capacity as a sizable owner, Industrivärden has great opportunities to influence corporate governance. The portfolio companies themselves are to integrate good business ethics in all parts of their operations, which is crucial for upholding the trust of their stakeholders and long-term value creation.
  • Greater diversity
    The portfolio companies are required to strive for greater diversity from a double materiality perspective. Taking advantage of various perspectives is important for port- folio companies’ long-term ability to create value and for the sustainable development of society.
  • Reduced climate and environmental impact
    The portfolio companies are required to strive for reduced climate and environmental impact from a double materiality perspective. Reduced impact creates opportunities for value creation at the same time that a slow pace of transition may entail direct as well as indirect risks and costs.
  • Responsible employers
    The portfolio companies are to be responsible employers from a double materiality perspective. Attracting and retaining relevant expertise is crucial to be able to generate enduring value creation in the portfolio companies.

 

Stakeholders’ priorities may differ somewhat between various groups. However, there is a strong consensus that Industrivärden’s most important duty is to contribute to enduring shareholder value in its portfolio companies. Given Industrivärden’s business model, particular emphasis should be put on ensuring well-integrated and structured sustain- ability work within the portfolio companies. The same applies for more owner-related matters such as corporate governance and diversity as well as the globally urgent climate issue. Overall it can be noted that more strategically oriented sustainability issues are given higher priority than more operationally oriented matters. 

Focus areas

Industrivärden shall be an engaged and responsible owner that contributes to well-managed companies for the sustainable development of society. In doing so it is able to offer long-term attractive shareholder value at balanced risk.

Industrivärden’s portfolio companies are active in various sectors and geographies, and thus the material sustainability issues differ from company to company. However, from a materiality perspective, certain more general, relevant matters can be identified. Moreover, given Industrivärden’s business model, it has the greatest opportunity to exert an influence in corporate governance–related matters.

The materiality analysis shows that some sustainability areas are deemed to be particularly important, within which Industrivärden has chosen to actively pursue its owner role. These focus areas are:

  1. Responsible corporate governance and a sustainable role in society
    Good corporate governance including good business ethics and anti-corruption, diversity and good work conditions.
  2. Minimized negative climate and environmental impact
    Reduced impact on the world around us.
  3. Sustainable production and innovation
    Development and innovation of sustainable products and services as well as sustainable production with greater resource efficiency.

Based on these focus areas, relevant goals have been established with support of the UN’s Agenda 2030 framework for the Global Sustainable Development Goals (SDGs). From an influence perspective, SDGs 5, 8, 9, 12, 13 and 16 relate to Industrivärden’s portfolio companies within the framework of Industrivärden’s active ownership. SDGs 5 and 13 also pertain to the Company’s own operations.

Focus areas

Industrivärden shall be an engaged and responsible owner that contributes to well-managed companies for the sustainable development of society. In doing so it is able to offer long-term attractive shareholder value at balanced risk.

Industrivärden’s portfolio companies are active in various sectors and geographies, and thus the material sustainability issues differ from company to company. However, from a materiality perspective, certain more general, relevant matters can be identified. Moreover, given Industrivärden’s business model, it has the greatest opportunity to exert an influence in corporate governance–related matters.

The materiality analysis shows that some sustainability areas are deemed to be particularly important, within which Industrivärden has chosen to actively pursue its owner role. These focus areas are:

  1. Responsible corporate governance and a sustainable role in society
    Good corporate governance including good business ethics and anti-corruption, diversity and good work conditions.
  2. Minimized negative climate and environmental impact
    Reduced impact on the world around us.
  3. Sustainable production and innovation

Development and innovation of sustainable products and services as well as sustainable production with greater resource efficiency.

Based on these focus areas, relevant goals have been established with support of the UN’s Agenda 2030 framework for the Global Sustainable Development Goals (SDGs). From an influence perspective, SDGs 5, 8, 9, 12, 13 and 16 relate to Industrivärden’s portfolio companies within the framework of Industrivärden’s active ownership. SDGs 5 and 13 also pertain to the Company’s own operations.

Reporting in accordance with the EU Taxonomy

The EU Taxonomy Regulation is intended to help investors and companies identify and compare investments that contribute to sustainable development.

Industrivärden is not subject to the Taxonomy Regulation. Industrivärden’s portfolio companies are subject to the

Taxonomy Regulation and their taxonomy is included in respective portfolio company’s sustainability reports for 2023.

Last update: Feb 28, 2024