How does the ESG-analysis work in practice?
How does the ESG-analysis work in practice?
How dose the ESG-analysis work in practice?
The foundation of what we do in the responsible investments team is ESG analysis.
ESG stands for environmental social and governance.
So, in practice, what we do is analyze companies on these parameters both in terms of business risks and opportunities.
when I do the analysis and look at the environmental factors then focus areas of course, climate change.
I look at how the companies are affected or might be affected by climate change, and what they can do to reduce their impact, and how that will impact the company going
I think all companies should at least have targets related to reduction of energy consumption, and also related to increase their share of renewable energy.
I also think that the companies should look at how they can reuse and recycle materials in order to mitigate the risk that lack of resources will increase costs going forward.
Tamra is a norwegian company, providing recycling systems globally.
Tamra is interesting because they have a business model that really contributes to more sustainable development.
It was also clear when I met the company that sustainability is anchored on board level, and it's part of their strategy to optimize the use of limited resources.
On top of financial targets, they also have targets related to environment social and governance issues.
When we look into the social aspects of a company so the s in ESG, this could include a broad range of complex issues depending on where the company operates and what it does.
For example, we look at how a company addresses human rights and labor rights
in its operations or supply chain.
In terms of Human Rights, this might relate to how a company manages aspects such as land rights, community relocation issues, or doing business in conflict-affected
In terms of labor rights, this might relate to the extent to which employees can organize themselves, the risk of childhood forced labor, health and safety, working hours, and so on.
But additionally, we could also look at the extent to which companies produce
products and services that might meet societal needs.
A good example of company managing the s aspects very well is Novo Nordisk.
Novo Nordisk is a Danish pharmaceutical company with around 40,000 employees, it is also one of the leading companies in the world in regards to diabetes care.
For example, the company has adopted an equitable pricing policy for its diabetes products.
As part of the business model, this policy allows the company to gain a foothold in the least developed countries as defined by the UN.
In these regions, the company provides its three insulin products for 20% of the price offered in Western countries.
This enables the company to enter new markets, while helping millions of people in the struggle against diabetes.
As the head of corporate governance, I am responsible to represent everyone that owns an idea found in our continuous dialogue with the companies they own collectively through our funds.
This is the G for governance in ESG.
One way to do this is to have a continual dialogue with the companies on a broad range of subjects, like gender diversity on boards, remuneration, and incentive programs, or capital structure.
The highest decision-making forum in Ana listed company is the Annual General Meeting, and we go to hundreds of those every year to voice our opinion.
Another important aspect of governance work is the nomination committee, which is a forum where large owners decide how the board the company should be constructed.
This is MTG, large Swedish media company based in Stockholm, and a company where I
am represented on the nomination committee.
We meet the evaluate the board annually, we decide what competencies are needed, who should sit on the board, and who should be the chairman of the company.
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