Since joining the company, Amir Hassan, LD Pensions’ new ESG analyst, has given a significant boost to LD Pensions’ work on responsible investment and sustainability. For example, he has assessed oil companies’ transition plans as part of our active ownership strategy and ensured a better data foundation for LD Pensions’ future climate work. In addition, he monitors potentially problematic environmental, social and governance (ESG) issues within the portfolios and contributes to the development of LD Pensions' policy on responsible investment practices.
It has been exciting to join an organisation that places ESG high on the agenda. I would say I’ve been kept very busy since I started. As the role was newly created and the ambitions were high, I’ve had to prioritise my tasks. In addition to the more strategic considerations, my work in the area of active ownership has taken up a lot of my time.
What is active ownership?
Active ownership means that, as shareholders, we seek to influence the companies we invest in to adopt a more responsible and sustainable approach. We do this by casting our votes at general meetings and through ongoing dialogue with the companies, also known as ‘engagements’. In some cases, it is necessary to exclude companies entirely.
Amir Hassan says:
"We have chosen to invest significant resources in our active ownership, as it is a crucial part of our overall ESG strategy. Working with active ownership is very rewarding, as you can actually influence companies and see results in both the short and long term.”
Voting at general meetings has increased many times over
This spring is peak season for annual general meetings. In 2022, LD Pensions voted at 612 annual general meetings, which is a significant increase compared with 2021; see figure. In 2023, we expect to vote at more than 900 general meetings.
“We have a tradition of voting at the annual general meetings of all the Danish companies in which we invest. It is particularly amongst international companies that we have stepped up our efforts. There are a number of companies where we wish to influence management to adopt a more responsible and sustainable approach. Here, we can certainly see that we have been allocated more resources, enabling us to justify and elaborate on our positions far more effectively,” says Amir Hassan.
In 2022, we considered a total of 8,347 resolution items at the annual general meetings and voted against management’s recommendations in 35 per cent of cases. The fact that we so often vote against management is because we focus on companies with low sustainability performance and companies where management takes a different view of the company’s activities to our own. For example, we focus on companies’ plans for reducing greenhouse gas emissions and examine whether realistic targets for reducing emissions have been set, and whether there is open and credible reporting on their climate impact.
“We often see shareholders putting forward their own proposals for companies’ climate plans. This helps to press companies in a more sustainable direction. However, the best results are typically achieved when companies themselves take responsibility for launching initiatives that reduce their carbon footprint,” explains Amir Hassan.
Seeking to exert influence through dialogue
Dialogue is one of the most important tools for influencing companies. In 2022, LD Pensions contributed a total of 479 ‘engagements’ in collaboration with the international ESG consultancy Sustainalytics, with the aim of improving areas of concern relating to ESG. This represented a significant increase compared with the previous year. For example, efforts are being made to ensure that a major US retail company provides its employees with better opportunities to organise themselves into trade unions. In LD Pensions, they also participated in so-called proactive ‘engagements’ on issues such as human rights and responsible taxation. Through these efforts, a deterioration in conditions at several hundred companies worldwide is being prevented.
To maximise our influence, we take part in a coordinated approach towards relevant companies on behalf of many institutional investors. LD Pensions’ equity fund managers also engage with companies, for example by demanding transparency and reporting from them.
In some cases, exclusion is necessary
In 2022, we updated our exclusion policy. This led to a significant increase in the number of companies on our exclusion list. This is primarily due to a decision to take a tougher stance towards companies that extract thermal coal and oil from tar sands. We are aware that exclusion means we no longer have the opportunity to influence these companies directly, but at the same time it is important to set clear boundaries. The exclusion policy also covers companies that produce weapons in breach of international conventions, such as nuclear weapons, cluster bombs, poison gases, etc. Furthermore, we exclude companies that refuse to engage in constructive dialogue or that have repeatedly breached international conventions and standards.
Continued strengthening of active ownership
It is very satisfying to see the results of such a significant strengthening of our active ownership.
“LD Pensions was already built on a solid foundation when it came to ESG initiatives. Step by step, we are simply adding more areas of focus, thereby strengthening our influence as a shareholder. It is very meaningful work to be part of,” explains Amir Hassan.
Our active ownership creates value for the company’s employees and society as a whole, and it is LD Pensions’ view that this ultimately also helps to generate higher returns on investment. We will therefore continue to strengthen this area in 2023 and beyond.
You can keep up to date with LD Pensions’ initiatives in the area of active ownership on the ‘Latest News’ page.
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