Managing assets against the stream

If everyone in the world lived as we do in Sweden today, we would need almost four planets to meet the need of natural resources. The business and financial sectors play important roles in resolving this issue.

How and where we invest our money is of importance. Everyone can make a difference regardless of whether they are saving on a personal level, are a larger pension fund manager or a religious community such as the Church of Sweden. Assets at the national level totalled SEK 8.3billion at the end of 2018. These assets are managed actively with a focus on sustainability.

The population of the world, as well as the middle-class, are growing. More and more people have access to a better standard of living and this is very encouraging.

At the same time, the need to live and consume in a more sustainable manner is increasing. We only have one Earth, and nature has its limits. We are already exceeding these limits today. If everyone in the world lived as we do today in Sweden, we would need almost four planets to meet the need of natural resources.

The business and financial sectors play important roles in resolving this issue. Politicians, organisations and individuals have to act responsibly. But without bringing to bear the innovative power of the business sector and the workings of the financial sector, we will not be able to manage the challenges that the world is facing. And these challenges are great.

According to the WWF Sweden has the tenth largest ecological footprint on average in the world.

Need for more food

Between now and 2030 (within just more than 10 years!), the demand for food is expected to increase by 35% and the demand for energy by 50%. However, the effects of climate change can already be seen on all continents of the world.

In addition to this, the demand for water is expected to exceed supply by 40% in 2030. During the course of a quarter century the world has succeeded in cutting extreme poverty in half, and this is nothing less than a major victory.

At the same time, more needs to be done since every eighth person is still hungry and the differences in incomes are increasing.*

As a response to these challenges the world leaders met during 2015 and agreed upon 17 global sustainable development goals. 

*Sources: National Intelligence Council, 2012, Global Trends 2030: Alternative Worlds, and IMF/Christine Lagarde, Economic Inclusion and Financial Integrity, May 27, 2014. 

Solutions and long-term value creation when selecting companies

The Church of Sweden’s financial policy stresses that asset managers must actively seek out companies who contribute to sustainable development through their conduct, goods or services. This regards companies that work systematically and goal-oriented with sustainability issues.

It may also regard companies that find new business opportunities by developing products and services that are advancing solutions to some of the most pressing, current, societal needs. Here are some examples from the equity portfolio:

Health and effective healthcare

Our holdings in funds include several companies who work proactively with disease prevention and also contribute to the effective treatment of rapidly spreading diseases. The Danish Novo Nordisk, a leader in the treatment of diabetes, is an example of such a company.

Other companies, such as Varian Medical Systems and Elekta, make important contributions to the efficient and effective care of cancer patients. The Manila Water Company is contributing to disease prevention in the Philippines and Vietnam.

Over the last few years, they have expanded access to clean water and proper sanitation facilities in these countries. Still, more than 4 000 children under the age of five die each year in the world due to lack of clean water and poor hygiene.

Companies that contribute to development

We live in a world in which resources are inequitably distributed. Even though a greater number of people over the last few decades have been able to enjoy a better standard of living, the gap between the rich and the poor is increasing.

A number of the companies that the asset managers have chosen devote their efforts to where needs are greatest. Bank Rakyat, an Indonesian bank in which the majority of loans are granted to micro-companies as well as small and middle-sized companies, is an example of such a company. These efforts are important to developing a local business sector and creating economic development.

The British pharmaceutical company GlaxoSmithKline (GSK) has an elaborate strategy for countries where the need of medicines and pharmaceuticals is great. The company receives the highest score in the Access to Medicine ranking which is conducted by the independent foundation Access to Medicine Foundation.

This ranking explains how GSK has increasingly focused its efforts on working to reduce and counteract diseases such as HIV/aids, malaria and tuberculosis. In recent years, GSK has adapted its prices to poorer countries to make its products more affordable. 

Products and services that save energy

Climate change is a reality and emissions need to be rapidly reduced. We invest in several companies that are leaders in saving energy. Buildings account for 40% of the world’s energy use.

During 2013, the Irish company Kingspan, who offer solutions for thermal insulation, are estimated to have reduced customers’ emissions of greenhouse gases by 25 million tons. This corresponds to three times as much as the entire city of London’s yearly emissions arising out of the consumption of electricity.

Another example is Atlas Copco whose electrical vehicles are 40 to 70% more energy effective than corresponding vehicles run on diesel. We also invest in several e-commerce companies (Ocado and others) whose business models have led to more efficient logistics and lower emissions in comparison to traditional commerce. 

Large companies with clear goals

Some of the companies that we invest in have a significant impact on the environment and the daily lives of people due to the products that they offer and their sheer size. In these cases, asset managers choose companies that reduce their negative impact and contribute to important sustainability initiatives.

In 2010, Unilever committed to cutting its carbon footprint in half by 2020 while carrying out its strategic plan to double its sales. H&M, whose garments are manufactured in low-cost countries where the workers often earn very low minimum wages, have committed to ensuring that workers at their strategic suppliers will receive fair, living wages by 2018. Approximately 850 000 workers, most of whom are women, will be positively impacted by this commitment.