Danish pension fund firm LD Pensions is collaborating with the Future-Fit Foundation to adopt the charity’s framework for sustainable business practices as the basis for its new active ownership policy.
According to the UK-based charity, the framework – the Future-Fit Business Benchmark – shows companies how to become genuinely sustainable and generates meaningful data on their effects on society and the environment.
LD Pensions has begun a major series of mandate tenders , a process due to take place over the next 12 months or more. When selecting managers, the firm said it would take into account their willingness to take the Future-Fit Business Benchmark directly to prospective companies.
LD is preparing to manage up to DKK100bn (€13.4bn) in a holiday allowances fund , established in response to a change to Danish holiday rights law in line with EU rules.
The pension fund manager said it believed influencing a firm’s actions as a shareholder was more effective that simply divesting stock.
Kristoffer Fabricius Birch, LD Pensions’ head of equities, told IPE: “Transparent and credible sustainable development indicators can make companies change behaviour, and Future-Fit is the best framework we have seen.”
The partnership reflects changes LD Pensions made to its active ownership policy earlier this year, which put more emphasis on supporting investee companies in acting sustainably and responsibly with regard to the environment and society. The previous policy focused more on minimising investment risks by including ESG (environmental, social and governance) criteria when investing, according to Fabricius Birch.
LD Pensions said the Future-Fit foundation offered a practical tool for companies to measure and report their own social and environmental impact. Previously, it said, the industry has lacked concrete data on how businesses can be run lucratively and sustainably at the same time.
“Once we’ve educated our managers, we ask them to take this to companies when they meet them on a regular basis,” Fabricius Birch told IPE. “That’s how I think we can have an impact. I don’t believe in just divesting or tilting portfolios towards companies that help the climate.”
The pension fund firm launched a tender process last month for a global equities mandate that would be managed to have a positive impact on the environment, called the ‘Positive Pursuits’ mandate. This phrase, coined by the Future-Fit Foundation, refers to any activity with an outcome that can aid the transition to a more sustainable society.
However, the new partnership with Future-Fit would apply to all of LD Pension’s investments, Fabricius Birch said.
“What we really want to do with every security we own is to encourage and support companies reducing their own negative impact on the world, and become ‘future fit’ as they define it, and that is done by operating within the planetary and social boundaries that we all face,” he said.
LD Pensions said that, while it was positive that many companies reported on how they improve the sustainability of their production methods year-on-year, the foundation’s framework examined how such activity related to global limits such as temperature rise and material resources, rather than simply comparing behaviour against past performance.