Responsible companies keep up with the times and are able to successfully tap into ethically conscious market trends. A good example of this is new products and services that help fight climate change. Norges Bank Investment Management (NBIM), one of the world’s biggest investors, is regarded as a frontrunner in responsible investment.
NBIM controls the Norwegian Government Pension Fund, which is financially backed by Norwegian oil profits. At the end of August, the market value of the NBIM’s portfolio was approximately EUR 797 billion.
“Responsible investment is an integrated part of our investment process. We are a long-term fund with investments in more than 9,000 companies. As a large investor, NBIM also wants to contribute to the development of international principles and industry standards related to corporate responsibility,” says Marthe Skaar, NBIM’s Manager of communications and external relations. Under its current mandate, the fund can invest 60% in equities, 35–40% in fixed-income securities and up to 5% in real estate globally outside Norway.
Climate change and children’s rights have been NBIM’s focus areas for the last decade. The third focus area is sustainable water management. In 2015, NBIM published a revised version of its NBIM Investor Expectations: Water Management guide. The purpose of the guide is to express how NBIM expects companies to manage the challenges and opportunities related to water resources. UPM was one of the companies consulted by NBIM for input and discussions during the drafting of the guide, as UPM ranks among the top performers in NBIM’s framework assessing water disclosure in corporate reporting.
NBIM is one of UPM’s shareholders. According to Skaar, deforestation is one of the risk factors to which NBIM pays particular attention. “When we investigate possible investment choices, we focus on areas such as sustainable forestry practices and certification schemes related to paper production.”
In some cases, NBIM decides to divest if a company’s long-term risks look too high. Last year, NBIM divested its stake in 73 companies following an assessment of environmental and social risk factors.
Active ownership is the most important way for NBIM to influence the companies in which it invests. This starts with voting and contributing statements at annual general meetings. Skaar reveals that NBIM participated in more than 3,500 annual general meetings in 2015. Continuous dialogue is vital. “As a large, long-term investor, we usually have good access to senior management and specialists in the companies that we invest in. We let the companies know what we expect and encourage them to show openness in their disclosure and communication.”
UN Global Compact points the way
Skaar is happy with the rising trend of disclosure of ‘non-financials ’ such as emission figures. “Comprehensive non-financial information is important, as it helps understand the effects good governance and environmental and social issues may have on the risks and profits related to investments.”
An increasing number of companies recognize that corporate responsibility helps them put their values and goals into action and meet stakeholder expectations. A good example is the UN’s voluntary Global Compact initiative, whose member companies commit to responsible business practices in areas such as human rights, working conditions, the environment and anticorruption.
In the last 15 years, the number of companies participating in the Global Compact has grown from a couple of dozen to more than 8,000. UPM joined the Global Compact in 2003. In January 2016, the UN invited UPM to join Global Compact LEAD, which consists of 50 of the most sustainably advanced companies across all geographical regions and industry sectors. UPM is the first forest industry company and also the first Finnish company ever to receive such an invitation.
UPM as a responsible investment
Through the renewing of the bio and forest industries, UPM is building a sustainable future across six business areas worldwide. Our products are made of renewable raw materials and are recyclable. The group employs around 19,600 people and its annual sales are approximately EUR 10 billion. UPM is listed on UPM shares are listed on NASDAQ OMX Helsinki.
- UPM is listed on CDP Forest A list and is the forest and paper industry leader in the Dow Jones Sustainability Europe Index (DJSI) for 2016-2017.
- UPM was invited to join UN-led Global Compact LEAD in January 2016.
Read more about UPM as an investment.