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Sometimes ATP also chooses a topic to obtain more and better information and data from the companies on specific ESG risks, so that ATP can make better decisions.
Active ownership – Thematic engagements.
Circular economy.
Anti-corruption Climate and transport.
Living wage Diversity in management.
Climate reporting 25 companies 57 companies 7 companies 12 companies 6 companies 88 companies.
Indigenous peoples 5 companies
54.
Responsibility 2018.
CIRCULAR ECONOMY.
Circular economy is considered by many as an important means to achieving a more sustainable development, including promoting UN SDG 12 on sustainable consumption and production. The Danish government’s announcement of its ‘Strategy for the circular economy’ in September 2018 is the latest in a series of key policy and...
One of the means to securing the green transformation and promoting a more sustainable development is to introduce circular principles in the economy. The basic concept of the circular economy is that companies should attempt to eliminate or minimise waste and instead integrate traditional waste products into the value...
Plastics, food and electronics companies with the greatest potential ATP is very keen to understand how companies can work with circular economy principles and has therefore engaged in a number of dialogues on circular economy with some of the Danish and foreign companies ATP invests in. In this thematic engagement, AT...
ATP committed to promoting circular economy measures.
The motivation for conducting a thematic engagement on the circular economy is that ATP wants to promote circular economy measures among the companies in its portfolio. The aim of the thematic engagement is to learn more about the companies’ efforts to reuse and recycle or remake resources and products. ATP can use thi...
It also gives ATP more insight into the extent to which ATP’s portfolio companies are prepared for possible new environmental regulation in the area.
European bias Circular economy is a European concept, and the dialogues with Japanese and US companies were centred on recycling and remaking as well as sustainable production.
European food companies have a longer history of adopting circular economy measures than their US and Japanese counterparts. However, it was clear from the dialogues that the vast majority of the companies had taken measures to increase waste recycling, focus on residual products etc. Several companies mentioned regula...
ATP also engaged in a dialogue with a number of companies whose production relies primarily on plastic products. These included both US and European companies as well as a single Japanese company. European companies showed the best performance in this group, too. Several US companies mentioned that the sustainability a...
ATP found it difficult to establish a dialogue with US electronics manufacturers. Only European and Japanese companies were interested in engaging in a dialogue on circular economy. The companies had experience with sustainable production and circular economy measures. Consumers and economic sustainability were mention...
55.
Responsibility 2018.
Generally, ATP found that most companies focused on sustainable production and measures to increase recycling, for example. However, the companies’ level of experience with this type of measures varied. Particularly northern European companies experienced a regulatory and political push for a transition to circular bus...
DIVERSITY IN MANAGEMENT.
Gender equality is an essential part of the UN Universal Declaration of Human Rights and Sustainable Development Goals (SDG 5). In many contexts, there is a demonstrable gender imbalance in top management and in various decision-making bodies which is a key theme in the debate on gender equality and diversity.
Diversity is also a key theme for ATP and is incorporated into our dialogue with the companies. In this connection, ATP seeks to ensure that the companies take steps to prevent discrimination in all its form, including strengthen internal processes and policies that promote gender equality.
Whereas investors, in particular, have focused on the gender balance of company boards, ATP wants to extend the dialogue on diversity and gender equality to include other corporate management levels.
In 2018, ATP therefore decided to conduct a thematic engagement with a view to understanding and promoting portfolio companies’ gender diversity in parts of their top decision-making bodies.
Selecting companies with low gender diversity Consequently, 57 companies with particularly low gender diversity in one or more decision-making bodies were selected based on data on the individual portfolio companies’ gender balance at management and board level. The companies were selected from different sectors, with ...
Companies must have policies, procedures and targets in place.
During its dialogue with the selected companies, ATP called for more clarity on the companies’ policies, procedures, plans and targets with a view to promoting gender diversity in decision-making bodies. ATP also emphasised that the topic is a priority for ATP and that we expect the companies to implement targeted acti...
Lack of focus on diversity may be a cultural issue ATP found that the companies had already proposed measures and policies to promote gender diversity in the companies’ top decision-making bodies. However, ATP also found that the majority of the companies’ policies and ambitions in the area largely reflected geographic...
The topic remains a priority for ATP and the knowledge gained in connection with this thematic engagement will be used in future dialogues and voting on the subject.
LIVING WAGE.
ATP is acutely aware that the labour market in many countries around the world differs from the Danish labour market, and that working condi- tions vary considerably from one country to the next. The differences are especially pronounced on the issue of pay. In most countries, the minimum wage is set out in legislation...
56.
Responsibility 2018 a minimum wage that is high enough to cover their basic needs.
According to the OECD Guidelines for Multinational Enterprises, among others, this means that a company which operates or has suppliers in developing countries should actively work to ensure that their workers at least receive a living wage for their work.
Focus on companies in primary industries In light of the above, in 2018 ATP completed a thematic engagement on the topic of living wage. ATP analysed its portfolio and identified seven companies which were exposed to the issue – either because of their own activities, or because their suppliers were exposed. The analy-...
Great responsiveness among companies In the subsequent engagement, ATP found that the companies’ awareness of the concept of living wage was relatively high, and that several of the companies already had a sensible approach to the topic. For instance, two of the companies already had established supplier criteria which...
On the basis of their dialogue with ATP, three other companies also decided to look into the possibilities of requiring suppliers to pay their workers a living wage. Prior to the dialogue, the companies were requiring that their suppliers pay their workers the minimum wage, but did not consider whether the minimum wage...
However, some companies also emphasised the business challenges associated with going beyond the requirements of the law, but ATP believes that in this case the dialogue also made the companies realise that their stakeholders expect more of them than just legal compliance. Finally, ATP also engaged in a constructive di...
TCFD RECOMMENDATIONS ON IMPROVED CLIMATE REPORTING.
In June 2017, the Task Force on Climate-related Financial Disclosures (TCFD) presented their recommendations for companies and investors on climate-related financial disclosures.
The TCFD is a task force which was set up by the Financial Stability Board (FSB) on behalf of the G20 countries in continuation of the Paris Agreement. The fundamental idea behind their recommendations is that company disclosures should focus on the companies’ financial risks and opportunities in the transition to a lo...
As an asset owner, ATP is working with the recommendations on two fronts. ATP follows the recommendations, but, as active owners, we also try to influence our portfolio companies to adopt the recommendations. The TCFD recommendations for pension funds stress the importance of organisations such as ATP not only implemen...
Dialogue across sectors and countries In 2018, ATP decided to launch a thematic engagement on the TCFC recommendations. ATP is keen to enter into a dialogue with some of its portfolio companies to raise awareness of the recommendations by encouraging the companies to incorporate the recommendations into their disclosur...
The TCFD has prepared sector-specific recommendations for a range of sectors, including energy companies, banks,
57.
Responsibility 2018 construction companies, food companies etc. On the basis of these sector-specific recommendations, ATP selected 88 primarily foreign companies. Around half of the companies responded to ATP’s enquiries.
Widespread awareness among companies Many companies were already familiar with the TCFD recommendations, and only very few companies were not familiar with them.
Considerable interest in the recommendations was seen among the companies that were familiar with them, but not all of them had taken steps towards implementing the recommendations. In the course of the dialogue, ATP learned of only a few companies which were still in the process of deciding whether to follow the recom...
Some of the companies have been reporting on their climate risks for years, but are now aligning their reporting with the TCFD methodology, while others are now approaching climate risks from a new angle. In ATP’s view, one of the strengths of the recommendations is that they allow companies and organisations to take d...
ATP finds it positive that so many companies are embracing the recommendations. ATP can use this knowledge in its future dialogue with other companies.
ATP is also working with other investors on TCFD In addition to this thematic engagement, ATP is also working actively with other investors in PRI (Principles for Respon- sible Investment) with a view to entering into a dialogue with several companies on the promotion of the TCFD recommendations and their implementatio...
ANTI-CORRUPTION IN PHARMACEUTICAL COMPANIES.
In recent years, there have been several examples of investors facing concrete financial risks when portfolio companies fail to manage compli- ance – for example by lacking controls to prevent money laundering or corruption.
One of the industries which is particularly exposed to corruption risks is the pharmaceutical industry. This is because pharmaceutical companies deal extensively with public authorities and institutions throughout the value chain. Historically, there have also been many cases of corruption in the industry. In this them...
Adequate processes may lead to reduced penalties Corruption, defined as bribery of politicians or public officials, is illegal and contravenes several conventions and laws, including the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the OECD Anti-Bribery Conven...
The UK and US authorities may prosecute foreign companies bribing public officials in a third country, if they also have operations in the UK and USA, respectively. A Danish company which has engaged in bribery in Nigeria, for example, may also be prosecuted in Denmark, the USA,
Neutral 7%
Positive 93%
Negative 0%
View on the recommendations
58.
Responsibility 2018 the UK and Nigeria and incur very substantial penalties. In other words, companies and their investors face very tangible financial risks when companies fail to effectively manage compliance.
Companies may also have their punishment reduced or escape punishment altogether under the FCPA and the UK Bribery Act, if they can prove that they have implemented adequate procedures and processes.
It is therefore relevant to examine the companies’ compliance functions and processes, not only to prevent corruption, but also to reduce the risk of penalties as a result of morally questionable activity in an organisation.
On the one hand, ATP wanted to influence the companies to manage corruption-related risks, including ensuring the continued development of their efforts to establish efficient compliance functions and processes. On the other hand, ATP also wanted to learn more about the companies’ thoughts on the design of their compli...
Culture and processes The dialogues showed that all the companies had a firm focus on preventing corruption and were able to demonstrate comprehensive anti-corruption policies and processes. The companies referred to their codes of conduct and separate anti-corruption policies. Several companies also described how remu...
RIGHTS OF INDIGENOUS PEOPLES.
The responsibility of companies and investors in relation to protecting the rights of indigenous peoples has been the subject of growing atten- tion in recent years. ATP expects that companies with a potential impact on the rights of indigenous peoples, e.g. through projects and activities in proximity to areas inhabit...
ATP wants that the companies we invest in respect and consider UNDRIP and ILO, making sure that local populations have been consulted in connection with the establishment of projects, and that free, prior and informed consent has been obtained before initiating a project.
59.
Responsibility 2018.
Selection of companies Extraction and recovery (including mining, oil and gas pipelines), agriculture (particularly palm oil and soya production), forestry and renewable energy (wind turbines and hydroelectric power plants) companies are among those that are most likely to have a negative impact on the rights of indige...
ATP contacted five companies: three energy companies and two forestry companies. The five selected companies or the companies’ business partners are, or have been, involved in disputes with indigenous peoples in Latin America, Malaysia, the USA and Sweden. ATP’s data provider does not have a separate data point for the...
The dialogues The dialogues showed ATP that the companies do not have the same range of experience in relation to operating in areas where they may have a negative impact on the rights of indigenous peoples. Human rights are addressed in the companies’ sustainability or responsibility policies, and the companies state ...
All five companies are aware of the special rights of indigenous peoples, and companies with direct dealings with indigenous people go to great lengths to comply with national or international standards and conventions. The companies maintain an ongoing dialogue with indigenous peoples and assign employees with extensi...
Some of the companies are also seeing a greater focus on indigenous peoples and hence a call for respect for their rights from the banks financing the projects, just as some of the companies are receiving more enquiries from investors on the subject.
CLIMATE AND TRANSPORT.
The transport sector accounts for a significant share of the world’s total carbon emissions. At the same time, there is a growing demand for transport solutions, such as increased freight due to increased cross-border trade, travel and private transport. ATP holds significant positions in transport companies, and it is...
In its dialogue with companies in the industry, ATP generally focuses on learning more about each individual company’s plans and strategies for cutting its carbon emissions, while also focusing on other climate-related financial risks.
For example, carmakers are facing a number of regulatory changes, as several countries, including Norway, Germany, Belgium and Denmark, have announced concrete plans to ban petrol and diesel cars.
For air and sea transport, which accounts for a relatively large share of global emissions, changed consumer patterns, new regulations and revised tariff structures may present a challenge to companies that are not working proactively with climate strategies.
Start-up of dialogue ATP’s thematic engagement on climate and transport is still ongoing. So far, ATP has contacted 12 transport companies. ATP successfully established a dialogue with eight of these companies. As the dialogue is still ongoing, it is still too early to draw any conclusions across industries, etc. Howev...