SWEDEN- Swedish investment manager Folksam has announced a screening of its entire Sek105bn (e11.3bn) portfolio for environmentally unfriendly companies and for those that violate human rights. The strategy, launched at the beginning of the year, is underway and expected to take around six months to complete.
Carina Lundberg who is responsible for corporate governance says the decision to undertake an entire screening originated from their clients. “We already considered human rights and environmental issues but our customers were demanding that we take a greater stand on both these issues,” she says.
The UN declaration on human rights, the International Labour Organisation’s criteria for employees’ human rights and the OECD declaration on multinationals will be used as yardsticks by which to evaluate companies and their employment practices. Folksam says that henceforth it will make a point of investing in companies with an environmentally friendly approach to running their businesses.
Having screened the portfolio and identified offending companies, Folksam will use corporate governance and engagement rather than exclusion. An exception to this is the tobacco industry which Folksam has stated it refuses to invest in. Since the introduction of the policy, it has offloaded a holding in Swedish Match, a Stockholm-listed tobacco company.
Lundberg says they have not set concrete deadlines for offending companies to mend their ways or lose Folksam’s backing. Rather it will be done on an individual basis and offending companies will be given roughly three months to enter a dialogue or to show that they are responding to their corporate governance demands before Folksam withdraws support.
Of the Sek105bn portfolio, it is too early to tell what percentage is invested in companies likely to fall short of the SRI criteria. Lundberg says they know that many of the consumer products companies they invest in are likely to fail to meet the SRI criteria and this sector will come under particularly close scrutiny.
Sweden is one of Europe’s most progressive countries in embracing socially responsible investing. Last June the PPM default fund AP7 blacklisted 30 companies from its equity portfolio following a scathing report on their environmental and ethical records. Reasons given for exclusion included, among other, the manufacture of landmines and allegations of discrimination against women.