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Responsibility 2018. |
In ATP’s Policy of Responsibility in Investments, ATP’s Supervisory Board sets out a number of basic principles and minimum criteria for the portfolio companies’ conduct. Among other things, the policy states that ATP does not invest in companies that deliberately and repeatedly violate the rules and regulations of the... |
If a thorough investigation finds a company to be in breach of ATP’s Policy of Responsibility in Investments, the company may be excluded from ATP’s investment portfolio, although ATP prefers to influence its portfolio companies through critical dialogue. |
FACT-FINDING – AN OPEN, IN-DEPTH INVESTIGATION. |
Fact-finding is the approach most commonly used by ATP to determine whether a company has violated ATP’s Policy of Responsibility. A fact-finding is an open investigation, based on a variety of sources. These may include legal documents, open sources, reports from NGOs or company websites. Among other things, ATP analy... |
If a fact-finding indicates a possible breach of ATP’s Policy of Responsibility in Investments, ATP’s ESG analysts will present the findings of the investigation to the Committee for Responsibility with a recommendation to the Committee on engaging in targeted dialogue with the company or excluding it. |
If a fact-finding indicates that the company’s conduct is in keeping with ATP’s Policy of Responsibility in Investments, the fact-finding is concluded. |
ATP’s screening efforts are based on the severity of the specific allegation, not by the size of the investment in the specific company. |
BREACH OF ATP’S POLICY OF RESPONSIBILITY IN INVESTMENTS When ATP’s Committee for Responsibility has decided that a portfolio company has violated ATP’s Policy of Responsibility in Investments, it is decided if ATP will exclude or engage in a targeted dialogue with the company. |
Targeted dialogue ATP engages in a targeted dialogue with a portfolio company in breach of ATP’s Policy of Responsibility in Investments if there is deemed to be a reasonable expectation that ATP, based on its current investment, can persuade the company to change its conduct. In other words, the stated purpose of the ... |
Exclusion ATP’s Committee for Responsibility may also choose to exclude a company without first engaging in a dialogue with it. Exclusion entails selling ATP’s equities or bonds in a company and removing the company from ATP’s investment portfolio. |
However, in line with the OECD guidelines and the Danish Business Authority’s Guide to Responsible Investment, ATP views exclusion as a last resort only to be used when all other options for influencing a company have been exhausted. ATP finds that investors usually have a better chance of influencing their portfolio c... |
Fact-finding |
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Responsibility 2018. |
TOPICS OF ATP’S FACT-FINDINGS IN 2018. |
In 2018, ATP carried out 19 fact-findings of companies in its portfolio. Most of these fact-findings were initiated and carried out according to the general screening processes for ATP’s equities and corporate bonds, but some of the fact-findings were initiated as a result of external enquiries or media reports. |
As already described, ATP prioritises its screening and fact-finding according to the seriousness of the individual allegation and ATP’s perceived likelihood of it being true. Furthermore, ATP strives to carry out fact-findings if there is believed to be evidence that the company has intentionally and repeatedly violat... |
Labour rights were the overriding theme of the year’s fact-findings. In 2018, ATP carried out six fact-findings of companies which had been accused of having disregarded labour rights in different ways. In addition, ATP carried out a fact-finding of alleged child labour in a company’s supply chain and a fact-finding of... |
Another recurring issue in several fact-findings carried out in 2018 was corruption and cartel behaviour. Five times during the year, ATP investigated companies accused of facilitating corruption, for example by bribing public officials, or which had been accused of having participated in illegal cartel-like activity w... |
Environment and climate were also a recurring theme, which was investigated in three of ATP’s fact-findings in 2018. ATP investigated a case in which a company had been accused of deliberately discharging pollutants into the sea, harming marine biodiversity. In another case, ATP investigated a company which had been ac... |
Read more about some of the fact-findings which ended in exclusion or targeted dialogue on page 66. |
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Labour conditions. |
Corruption. |
Environment. |
Human rights. |
Local populations. |
Child labour. |
Safety. |
Topics of ATP’s fact-finding in 2017 |
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Responsibility 2018 to other investors who may not be too concerned about what impact their portfolio companies have on the local community. |
Tailored solutions for selecting fact-finding cases In order to ensure efficient ESG integration, ATP tailors its ESG processes to suit the relevant investment processes. This also applies to methods for identifying companies that may be in violation of ATP’s policies. |
Different processes are needed to identify potential violations, depending on whether the investment is made in an infrastructure project in Southern Europe or in a US listed equity. While the availability of systematised data from an external data provider enables quantitative screening of listed equities, a more asse... |
SCREENING AS A SELECTION METHOD IN THE LIQUID PORTFOLIO Over the years, ATP has developed systematic and efficient screening processes for liquid assets, such as listed equities and corporate bonds, to enable ATP to continuously monitor whether companies in the portfolio violate the basic principles set out in ATP’s Po... |
Screening is an efficient selection method for listed companies, as there are relatively large amounts of data on the conduct of listed companies, both from the media, NGOs, court documents and from the companies’ own reporting. Because the data volumes and the level of information are so high, it is possible to design... |
In 2018, ATP developed risk-based screening methods to monitor its global equity pool. When investing in global listed equities, ATP selects equities from a pool of several thousand companies based on proven, factor-based market data analyses. Because the portfolio is relatively dynamic, ATP has adjusted its processes ... |
SCREENING OF ATP’S INVESTMENTS. |
The screening is based on information provided by external data providers who continuously monitor and assess the conduct of thousands of Danish and international companies on a number of parameters with both quantitative and qualitative elements. The data providers’ monitoring is based on media reports, NGO reports, c... |
ATP sometimes also receives information from external sources about a portfolio company’s possible breach of ATP’s Policy of Responsibility in Investments. Such information and input are included in the screening process on an equal footing with other information from our data providers. Screening is carried out severa... |
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Responsibility 2018 screening and decisions about the fact-finding and any exclusion are objectively justified. |
Structure of ATP’s screenings In the selection of quantitative indicators for the screening process, ATP incorporates a wide spectrum of ESG issues relating to international conventions and Global Compact principles. These indicators cover a wide range of environmental issues (such as biodiversity), human rights (such ... |
Three stages. |
Stage 1 – Quantitative screening The first step of the screening process is to select companies among ATP’s current investments that potentially violate ATP’s Policy of Responsibility in Investments. Based on the selected quantitative indicators, with reference to the methodology applied by our data providers, ATP has ... |
Stage 2 – Qualitative assessment and prioritisation If a company’s score is below the threshold value, it is investigated whether conduct and allegations, if true, would also constitute a breach of ATP’s Policy of Responsibility in Investments. This leads to the second step of the screening process where the allegation... |
Stage 1. |
Stage 2. |
Stage 3. |
Screening process |
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Responsibility 2018. |
Stage 3 – Selecting companies for fact-finding If the allegations are believed to be serious and constitute a potential breach of ATP’s Policy of Responsibility in Investments, the company is subjected to a more thorough investigation known as a fact-finding. |
SCREENING ATP’S EQUITY POOL When investing in global listed equities, ATP selects equities from a pool of several thousand companies based on proven, factor-based market data analyses. Companies quickly enter the portfolio and may just as quickly be removed from the portfolio. As a result, in 2018 ATP devised a risk-ba... |
This screening method is based on a specific problem or topic which ATP is keen to know its potential level of exposure to. The topic may be selected on the basis of previous fact-findings or a recent news story. ATP then analyses the extent of the problem on the basis of the equity pool. If ATP identifies companies in... |
The risk-based screening is designed to clarify the extent of possible future exposure to a given ESG topic. |
OTHER SCREENING METHODS. |
Finally, there are many listed companies which ATP is not invested in, nor is considering investing in. Consequently, the risk of ATP being associated with any problematic conduct by such companies is minimal, and therefore ATP generally does not initiate investigations of such companies on its own accord. However, the... |
Specifically, there are three types of input. Firstly, ATP works with an external weapons expert to ensure that ATP does not invest in producers of cluster bombs or landmines which would be a violation of international conventions. Nor does ATP invest in companies involved in the production of nuclear weapons in violat... |
Screening of government bonds. |
ATP has established separate processes for investments in government bonds. As a result, ATP does not invest in government bonds in countries against which the EU or UN has imposed targeted sanctions. ATP also includes the OECD’s long-term country risk classifications in its investment process for government bonds. Rea... |
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Responsibility 2018. |
CASE: Targeted dialogue with company on improved safety for workers. |
Since December 2016, ATP has been carrying out a fact-finding of the Mexican oil and gas company Petroleos Mexicanos (Pemex) with a focus on safety measures for workers. A large number of fatal accidents at work sparked an investigation of whether the company had failed to take appropriate safety measures to protect it... |
After a preliminary investigation, ATP was able to conclude that Pemex’ safety measures were inadequate. Among other things, the company had chosen not to obtain international certification of its safety measures, which is common practice in the industry. Nor was Pemex sufficiently transparent about its challenges and ... |
During the dialogue, Pemex gradually became more sympathetic to ATP’s views and is now in the process of upgrading their safety systems. In autumn 2018, ATP was informed that the company will initiate a process to obtain international safety certification. In light of the work now being done by the company, ATP decided... |
OECD guidelines are incorporated into our processes – also for equities. |
ATP has established a number of fact-finding and screening processes in order to minimise the risk of ATP investing in companies that violate the fundamental principles and minimum criteria of the conduct of portfolio companies set out in ATP’s Policy of Responsibility in Investments. At the same time, these processes ... |
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Responsibility 2018. |
CASE: Exclusion of JBS S.A. and sale of corporate bonds in Pilgrim’s Pride Corporation. |
In summer 2018, ATP became aware that a leading global investor had excluded the Brazilian food company JBS S.A. due to the risk of involvement in systematic corruption. ATP was not invested directly in the company, but owned corporate bonds in JBS S.A.’s subsidiary Pilgrim’s Pride Corporation. As a result, ATP made th... |
ATP’s fact-finding revealed that a number of settlements and lawsuits in recent years has proved that JBS S.A. has been involved in extensive, longstanding bribery of politicians and authorities in Brazil, and that the company’s senior management has been deeply and systematically involved in the bribery. By all accoun... |
ATP also finds that the company has not shown the necessary willingness to rectify the situation. On the contrary, there are several indications that some members of the company’s then senior management abused their knowledge of an impending settlement with the authorities on the company’s bribery to engage in illegal ... |
Although the company has implemented certain mitigating measures, ATP does not find them to be adequate or sufficiently removed from the practices of the former management. As a result, ATP decided to exclude JBS S.A. from its investment portfolio and subsequently sell its investment in the subsidiary Pilgrim’s Pride C... |
CASE: Fact-finding of alleged food production near Chernobyl. |
In 2018, ATP investigated a Ukrainian food company which was being accused of operating risky chicken farms and factories in a former Chernobyl exclusion zone in the Ukraine, and of harassing and attacking local activists protesting against the company’s activities due to their alleged negative impact on the local comm... |
ATP’s investigation showed, however, that the farm was several hundred kilometres from the exclusion zone around Chernobyl – much further away from the exclusion zone than the capital Kiev and located in an ordinary agricultural and residential area. It is true that the farm is located in the vicinity of an area where ... |
Furthermore, ATP was not able to find any evidence that the company had harassed or attacked the protestors, although there is evidence to suggest that the company’s management has a track record of failing to involve the local community in connection with expansion projects etc. |
In the end, ATP concluded that the evidence against the company was insufficient, and the fact-finding process was brought to an end. |
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