Responsible investment

Responsible investment Report on our Environmental, Social and Governance (ESG) activities Climate change – a global challenge Page 9 Guidelines now ...
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Responsible investment Report on our Environmental, Social and Governance (ESG) activities

Climate change – a global challenge Page 9 Guidelines now apply to all asset classes Page 12 A better prepared garment industry Page 26




We are Unipension Your pension fund is part of the Unipension consolidated administration service, which comprises the Architects’ Pension Fund (AP), MP Pension – The Pension Fund for Danish MA’s, MSc’s and PhD’s (MP) and the Pension Fund for Agricultural Academics and Veterinary Surgeons (PJD). We are owned by our members, and our mission is to provide life-long financial security for our highly skilled members and their families by offering competitive pensions, products and services.

References in this report to “Unipension” and “we” are to the Architects’ Pension Fund (AP), MP Pension – The Pension Fund for Danish MA’s, MSc’s and PhD’s (MP) and the Pension Fund for Agricultural Academics and Veterinary Surgeons (PJD) and any investment-related legal entities of these pension funds.

Cover page photo: Unipension Photograph taken at a garment factory in Dhaka, Bangladesh.

Layout: · Printing: Grafisk Rådgivning ApS.



• Introduction


• Responsible investment


• Climate change – a global challenge


• Guidelines now apply to all asset classes


• Exclusion of companies


• Company dialogue


• Results-oriented dialogue


• Exclusion of countries


• Voting at general meetings


• Active ownership 2014


• A better prepared garment industry


• Class action


• National and international co-operation


• ESG costs




Global investor with a holistic approach Unipension is a global investor. Our investments span every corner of the world, and we invest in all asset classes and all sectors. Because our portfolio is so wide-reaching and broadly based, we need to take a holistic and consistent approach to responsible investment.

that it is our responsibility as investors to actively seek to influence and move companies in the right direction through dialogue.

CEO of Unipension Cristina Lage Photo: Thomas Busk

Since 2009, we have made targeted efforts to establish guidelines for responsible investment. Our goal has always been for our guidelines to apply to all asset classes in our investment universe. We have now achieved this goal. Effective from 2014, the guidelines were made to apply also to government bonds as the last of the asset classes. Government bonds were added based, among other things, on guidelines issued by the Danish government regarding investment in government bonds, which Unipension played an active role in drafting. Climate change and international co-operation Active ownership is the cornerstone of our approach to responsible investment. We believe

For example, this applies to climate issues, which are a key focus area for Unipension. We therefore took additional measures to strengthen our efforts in this area in 2014. We signed the Global Investor Statement on Climate Change (GISCC) and joined the Institutional Investors Group on Climate Change. We believe that climate change is a global concern, and we need to co-operate broadly if we are to achieve real change. We may be underweight in certain company types, e.g. coal, because they are not interesting from an investment perspective, but as an individual investor excluding companies that extract fossil fuels will not bring us to the results we desire. We want to use our ownership to influence both extracting and energy-intensive companies. To really move things in terms of climate change, we need political action. We need to actively influence politicians in order to develop international guidelines and rules that we can navigate by, and we have committed to doing just that by signing the GISCC.


We believe that climate change is a global concern, and we need to co-operate broadly if we are to achieve real change

Our CIO, Niels Erik Petersen, is also a member of the UN PRI Advisory Board, an office that makes it possible to participate in shaping developments in the field of responsible investment. We spend resources to become smarter, and we take action Last year, we travelled to visit the companies and industries that have previously had some issues. We saw garment factories in Bangladesh and tar sand extraction facilities in Canada, both representing investment areas that have given rise to critical debate in recent years. In 2014, we were involved in a number of new class action lawsuits against international and Danish companies to be compensated for financial losses but also, where required, to inspire change in the ways specific companies are governed. It takes strong governance to solve problems quickly and effectively. Efforts will continue in 2015 In 2015, we will complete the implementation of the guidelines across all asset classes and increase our focus on environmental themes, including climate issues. We are working to map the carbon-intensiveness of our portfolio, to identify and evaluate low-carbon investment opportunities and to develop our climate change know-how.

In this combination of developing a model for addressing ESG issues and developing resources for investigative, critical work and skills development, we will continue our work as responsible investors with the emphasis on active ownership. Enjoy the read!

Cristina Lage CEO of Unipension



Responsible investment

Complying with legislation  Companies we invest in should not act contrary to legislation in the coun tries whose legislation they are subject to.

Human rights Companies we invest in should not perform any actions directly violating human rights or indirectly encouraging or contributing to the violation of human rights.

Labour standards Companies we invest in should not perform any actions directly violating the freedom of association or indirectly encouraging or contributing to violation of the freedom of association.

Companies we invest in should not be involved, directly or indirectly, in any type of forced or compulsory labour or employment.

Companies we invest in should not be involved, directly or indirectly, in illegal child labour.

Companies we invest in should not be involved, directly or indirectly, in discrimination in respect of labour or employment.

Companies we invest in should not perform any actions that directly or indirectly cause a lack of adequate health or safety or substandard working conditions in the workplace.


Environment Companies we invest in should not cause any serious or long-term environmental damage.

Corruption  Companies we invest in should not be involved in serious cases of corruption.

Controversial weapons  Companies we invest in should not be involved in activities associated with anti-personnel landmines, cluster munitions and nuclear, biological or chemical weapons.

Trade restrictions and weapons embargoes Companies we invest in should not trade in contravention of resolutions on trade restrictions and weapons embargoes adopted by the United Na tions or the European Union and either acceded to by Denmark or directly applicable in Denmark.

Breach of other ethical standards  If a company has breached fundamental ethical standards other than those referred to above, we may make a specific resolution to apply our guidelines to the company and treat it accordingly.

Corporate governance The guidelines on corporate governance of Danish companies are based on the recommendations in force from time to time prepared by the Committee on Corporate Governance of the Copenhagen Stock Exchange.

The guidelines on corporate governance of non-Danish companies are based partly on the OECD Principles of Corporate Governance and partly on the legislation and recommendations on corporate governance of the countries in question.



Photo: Unipension


Climate change – a global challenge Climate change is a global challenge that will affect our society and financial systems in many ways and to varying degrees in the future. At Unipension, we are committed to participating actively in driving positive change. According to the vast majority of climate researchers, it is a well-established fact that the global climate changes we are witnessing are man-made. Politicians from all over the world are therefore working to get all the components for a global agreement in place for the climate summit being held in Paris in December 2015. Irrespective of the outcome of the summit, climate change will to a certain extent be unavoidable. The effects will influence the global society across sectors, national borders and economic cycles and consequently will also have a fundamental impact on investment. Unipension worked intensively with the subject of climate change throughout 2014. In spring, we drafted an detailed report on the subject,

On the contrary, what is required is fundamental, significant change in global energy consumption in order to limit future climate change which is available on our website, and in autumn our investment team made a research trip to the United States and Canada to get an overview of how many relevant parties stand on the challenge of climate change. We met with representatives of the UN, university professors, NGOs, clean-tech investors, insurance technicians, politicians and a number of large, leading pension funds from South America, Australia, North America and Europe. We also went to Fort McMurray in western Canada where oil sands are extracted. We came back from the trip with a deeper understanding of how global investors and the

markets view climate change and of their actions and expectations. We gained valuable all-round insights into the developments taking place at grass-root level, at university level and at official (UN) and political level. There are many aspects to the climate challenges of the future: The overall framework is not just about reducing carbon emissions and handling the wide-ranging consequences of climate change; it is also about meeting the global society’s growing demand for energy. Divestment has its consequences In step with a growing recognition of the gravity of the effects of climate change, many Danish pension funds are currently experiencing mounting pressure to take a position on and contribute to combating climate change. One solution is that we as investors should divest all assets related to fossil fuels. However, the global society is deeply dependent on fossil fuels, and being a part of our society and the economic system is de facto synonymous with contributing to climate change. This means that simply divesting assets related to fossil fuels is not a feasible option. On the contrary, what is required is fundamental, significant change in global energy consumption in order to limit future climate change, and such a transition will take many decades. In spite of their harmful effects, fossil fuels represent great utility value in the global society, and a serious shortage of energy could have disastrous effects. A significant decline in the access to using fossil fuels, leading to a smaller supply, would have very serious humanitarian consequences, especially in more vulnerable developing countries.



Political action required A global political agreement is required, as the problem cannot be solved by one individual country or region alone. It requires a concerted effort. Today, there is greater political awareness and willingness to signing declarations of intent to reduce carbon emissions than previously. One example is the bilateral declaration on climate change presented by China and the United States in November 2014. Although this declaration has limited value in terms of its contents, it is nevertheless important because it places China in a central position on the climate agenda. However, this does not mean that a global agreement is imminent but rather that the world’s largest carbon emitters are beginning to show a greater willingness to take action. As active investors, we are monitoring this political shift closely, as it may be of vital importance for the companies we invest in.

A global political agreement is required, as the problem cannot be solved by one individual country or region alone Global political initiatives designed to handle climate change will set the agenda for many future investments. This applies to future regulation, incentive programmes and energy efficiency requirements. Such changes to framework conditions – and particularly the uncertainty surrounding their implementation – increase the specific investment risk on climate-related investment projects. This is something that makes many institutional investors demand that politicians send clear signals about their market interaction. Going green Climate change not only presents new risks, it also presents new investment opportunities. Such opportunities may arise within a wide range of fields, including infrastructure, sustainable energy, carbon capture technology, energy efficiency improvement, purification of potable water, air quality enhancement and

other solutions intended to solve the challenges resulting from climate change. Some part elements will probably not have the potential to solve climate issues in a single move, but they may be part of the solution. Fundamental and global change should be driven by the sum of many individual elements and initiatives. This may produce investment opportunities in areas which are not quite as headline-catching as, say, wind turbines, but which may nevertheless form an important part element. This aligns well with our intention that Unipension should seek out commercially sustainable solutions in order to meet our goal of generating high risk-adjusted returns. Unipension’s role The most efficient way in which we, as a pension fund, can encourage climate policy action is through international co-operation with other investors. In autumn 2014, the boards of directors of Unipension resolved that the pension funds would join the Institutional Investors Group on Climate Change (IIGCC) and sign the IIGCC’s 2014 Global Investor Statement on Climate Change. The IIGCC is the interest group of institutional investors investing in the climate field, and this makes it a good platform for speaking with one voice. Unipension has made a commitment through the UN Principles of Responsible Investment (UNPRI), which is also a major forum for discussing investor views on climate change. Active ownership is the most practical tool available to institutional investors in relation to climate-related challenges. Fossil fuels – whether or not we opt for divestment – will remain a core part of our energy consumption for the coming decades. So, the question is not whether we hold such assets (or are merely dependent on fossil fuels in the remaining investment universe) but rather whether we can be long-term, active owners with a clearly formulated strategy for dialogue and commitment, and thereby contribute to nudging the company in the right direction and actually achieving change. Moreover, institutional investors co-ordinating their commitment has been proven to be the


Photo: Colourbox

best tool available for institutional investors to achieve lasting change. In 2014, we dialogued with 33 companies worldwide concerning issues specifically related to climate change. Among these were also the oil sands companies we visited during our trip to the United States and Canada. Carbon footprinting Carbon footprinting can be a relevant tool in exercising active ownership when used to compare companies of a similar nature. There is still no standardised method available in the market for measuring carbon footprinting, which makes it a challenge to carry out precise measurements. Carbon footprinting has the potential to gradually become a useful tool that can contribute to strengthening the understanding of a portfolio’s exposure to potential future legislation in the area. Once more standardisation has been introduced, Unipension would benefit from also sign-

ing up to the Montreal Pledge or similar initiatives. Active ownership in the climate field goes further than just addressing companies extracting fossil fuels, as the scope for influencing the actual volumes of carbon emissions is probably greater if we address the companies’ consumption of fossil fuels (demand) rather than the manufacturers of fossil fuels (supply). We take the opportunity to interact with all types of companies and try to convince them to change their behaviour; not only in relation to reducing carbon emissions but also in relation to optimising resources, becoming more energy efficient and aligning to expected consequences of climate change. This contributes to anchoring the focus on climate change more firmly in portfolio management compared with simply side-lining fossil fuels in order to send a political signal.



Photo: Colourbox

Guidelines now apply to all asset classes In 2014, the boards of directors expanded the guidelines for responsible investment to include government bonds. This means that our guidelines now apply to all asset classes. Since 2008, we have been working to develop a systematic approach to responsible investment in our day-to-day work. Based on a member survey, the boards of directors began by adopting guidelines for listed companies, because this is where an active ownership approach makes the

most sense. As a shareholder, you own a part of the company, which gives you the right to make demands and seek influence by voting at general meetings. The work in relation to responsibility in listed companies gave us quite a lot of experience, which we could benefit from


as the time became ripe to address the other asset classes, which are more complicated from a responsibility point of view Right from the adoption of the first set of guidelines for responsible investment in 2009, the intention was to eventually include all asset classes. Because asset classes are inherently different, we cannot implement the guidelines in exactly the same way across all asset classes. Yet, it was crucial for us to stay as close to our fundamental principles as practically possible. Listed companies in practice We monitor our investment universe of listed companies to ensure they comply with our guidelines. Collecting and analysing information about the companies on a global scale is outside scope of our skills and resources. We have therefore engaged Hermes Equity Ownership Services Ltd of London to perform this task for us. Every three months, they screen the listed companies of our portfolio with a view to identifying suspected violations of our guidelines. If a company is suspected of a violation based on the screening or information from the media, NGOs or the like, the company will be placed on our focus list. We will then assess the suspicion in more detail. If we find that a company has violated our guidelines, we will place it on the dialogue list or the exclusion list. The dialogue list is reserved for companies where we expect to see improvement through dialogue. Dialoguing with a company is resource-intensive and requires in-depth market and industry knowledge. We therefore co-ordinate our inquiries with a group of international investors in order to achieve better results. For Danish companies, we enter into dialogue ourselves, as we have good knowledge of the Danish market, the companies and the other local investors, ensuring that we achieve a meaningful dialogue. The exclusion list is reserved for companies where we do not expect dialogue to remedy the violations. An example of this could be a manufacturer of illegal cluster munitions. Since man-

ufacturing these weapons is part of the company’s business concept, it would not make sense to enter into dialogue with them with a view to persuading them to stop production. We do not invest in companies that have been excluded. The exclusion list is available on our website, If an excluded company no longer violates our guidelines, we will reintroduce it to our investment universe, making it eligible for investment once again. Unlisted companies in practice The boards of directors adopted guidelines for responsible investment in unlisted companies in 2013. Investments in unlisted companies are typically made for a number of years and through investment funds. This makes it difficult to get rid of the investment in the event of a violation justifying exclusion. It is therefore important, instead of the classic screening used for listed companies, that we conduct a thorough investigation of the conditions affecting the unlisted target company, so-called due diligence, before we make a decision to invest. At the same time, our asset managers are contractually bound to inform us if our guidelines are violated after an investment has been made. Real Estate in practice In 2013, the boards of directors expanded the guidelines for responsible investment to include real estate. Environmental considerations are typically in focus in connection with real estate investments, but according to our fundamental principles, we are also required to consider human rights and corruption when we invest. This means that employment conditions during construction must be in order and that building permits may not be obtained by way of bribery if we are to invest in real estate. Investment in real estate need not be direct, so Unipension does not have to own the buildings. Investments may also be made through listed estate companies or in unlisted companies. The procedure for such real estate investments will therefore be adapted to each individual asset class as described above.



Development in ESG-coverage 2009-14 ESG-coverage 2009 Gilt-edged Bonds Emerging Markets Debt High Yield Assets covered

Danish Equities Foreign Equities Private Equity Real Estate

Assets covered


ESG-coverage 2013 Gilt-edged Bonds Emerging Markets Debt High Yield Danish Equities Assets covered

Foreign Equities Private Equity Real Estate

Assets covered


ESG-coverage 2014 Gilt-edged Bonds Emerging Markets Debt Assets covered

High Yield Danish Equities Foreign Equities Private Equity

Assets covered

Real Estate Cash


In relation to investment in real estate, we will prefer properties that have obtained a recognised certification. To the extent possible, we will also ensure that properties we invest in are not let to companies appearing on our pension funds’ exclusion list. Government bonds in practice In 2014, the boards of directors expanded the guidelines for responsible investment to include government bonds. In order to map the situation in relation to human rights violations, corruption, environment, etc. in the individual countries, the countries are screened on a quarterly basis. This exercise requires in-depth knowledge of the conditions prevailing in each individual country and extensive research, which the pension funds have neither the resources nor the skills to do. Country screening is therefore carried out by Sustainalytics B.V. of the Netherlands. If, based on our screening, we believe that a country violates our guidelines, we will make an individual assessment to identify the gravity of the violation. If the violation is of a serious nature, we will keep the country in question under observation with a view to monitoring developments. If we believe that the violation is of a particularly serious nature, but we have not

been able to identify any recent improvement in the country in question, and there are no indications of any imminent improvement, the country will be excluded. We will also exclude countries where investment in government bonds is prohibited due to sanctions. Investing in countries appearing on our pension funds’ exclusion list is not permitted.

If, based on our screening, we believe that a country violates the guidelines, we will make an individual assessment to identify the gravity of the violation.

A country which has been excluded may be reintroduced to the investment universe if it no longer violates the guidelines, or if sanctions issued against it are lifted. A country may also be taken off the exclusion list if conditions in the country are seen to improve, and such improvement is assessed to impact favourably on the violations on which the exclusion was based. Our exclusion list of countries is found on page 18 of this report and is also available from our website,



Exclusion of companies At 31 December 2014, we had 34 companies on our exclusion list. Most of them are involved in activities related to controversial weapons. The use of such weapons in an armed conflict may have grave consequences for the civilian population and cause widespread loss of life, something our pension funds do not want to be an accessory to. For example, this is why our pension funds do not want their investments to be contributory to activities associated with nuclear weapons. An example of a company involved in nuclear weapons is Lockheed Martin of the United States, one of the world’s largest weapons manufacturers and a leading aviation industry supplier and supplier of other advanced technology, including satellites, rockets and missiles. Lockheed Martin manufactures the Trident nuclear missile, a sea-based, intercontinental missile carrying nuclear warheads. These nuclear missiles are used by both the US and the UK navy in the 14 US Ohio class submarines and the 4 UK Vanguard class submarines, respectively. The pension funds do not want to invest in companies that manufacture missiles used exclusively or primarily to deliver nuclear warheads and, as a result, Lockheed Martin is excluded from our investment universe. The French military also uses nuclear weapons in its four Le Triomphant class submarines, namely the M51 nuclear missile, which is also a sea-based, intercontinental missile like the Trident. The M51 missile is manufactured by the European company Airbus, which for the same reason is also on our exclusion list. Another company involved in the M51 nuclear missile is the French electronics group Thales, which de-

velops air and space travel, transport, security and defence technologies. The company manufactures an electronic system developed specifically for the M51 nuclear missile, which is the reason why the pension funds do not want to invest in Thales. Cluster munitions also fall under the controversial weapons category, and our pension funds do not want their investments to contribute to activities associated with certain types of cluster munitions. Our guidelines are based on the Oslo Convention of 2008, the objective of which has been to prohibit certain types of cluster munitions. The US company Textron manufactures the CBA-105 Sensor Fuzed Weapon, which is a specific type of cluster munitions mainly used by the US military. This bomb contains ten submunitions each containing four projectiles, which is contrary to the Oslo Convention, and for that reason we have excluded the company. All of the companies mentioned here are on our exclusion list, which is available from our website, Here you can also get an elaborate explanation of our reasons for excluding the individual companies. The involvement in controversial weapons is often part of such companies’ core business, and we therefore do not expect that dialogue would change their business strategy. Nevertheless, companies sometimes do cease their production of controversial weapons. If that happens, we will take them off the exclusion list, making them eligible for our investment universe. We reassess the companies on the exclusion list on a quarterly basis.


For the purposes of our guidelines, nuclear weapons mean for example: • • • • • •

nuclear warheads components exclusively or primarily used in nuclear warheads missiles exclusively or primarily used for delivering nuclear warheads components for missiles exclusively or primarily used for delivering nuclear warheads delivery systems and platforms exclusively or primarily used for delivering nuclear warheads ownership, management, operation, etc. of a nuclear weapons base or similar facilities.

For the purposes of our guidelines, activities associated with nuclear weapons mean: 1. acquiring or manufacturing nuclear weapons 2. searching for or receiving assistance in the manufacture of nuclear weapons 3. assisting, encouraging or persuading others to acquire, manufacture or control nuclear weapons 4. receiving nuclear weapons from others 5. transferring nuclear weapons or control over nuclear weapons to others.

For the purposes of our guidelines, activities associated with cluster munitions mean: 1.  the use, development, manufacture, acquisition, stockpiling, retention or transfer to any person of: a. cluster munitions that are in contravention of the Oslo Convention b. key components for cluster munitions that are in contravention of the Oslo Convention 2. assisting, encouraging or persuading others to participate in the activities listed in 1 above.



Company dialogue At Unipension, we emphasise dialogue over exclusion. We do that because we want to see the companies improve and thereby achieve higher returns in the long term. Our focus areas and our dialogue with companies are mainly governed by the dialogue list. This list generally develops on the basis of our regular screenings for companies that violate our guidelines.

We had dialogues with a total of 275 companies in 2014, discussing 776 social, environmental and governance issues In 51.3 per cent of the cases, the discussions on corporate governance were relevant.

However, accidents, developments in a particular sector, amended legislation, interests of society and similar factors may also affect our focus areas.

A more detailed overview of how the dialogues of 2014 were distributed in terms of geography and topic is provided on our website.

In recent years, we have seen repeated accidents in garment factories in Bangladesh, and again this year we focused on improving workers’ rights and fire safety in the factories. A

We had dialogues with a total of 275 companies in 2014, discussing 776 social, environmental and governance issues. more in-depth description of our visits to the Bangladesh garment industry is provided on page 26. Since 2011, we have been working to forge closer relationships with a number of major Danish companies. The goal has been to get more insight into and a greater understanding of their CSR strategies, efforts and philosophies. This enables us as responsible investors to better understand the companies’ response patterns and to better engage in dialogue with the companies, also at a more formal level. In 2014, we became more deeply acquainted with the CSR policies of four Danish companies, and we expect to continue dialoguing with Danish companies in the years ahead.

It is not possible to screen unlisted companies the way we screen listed companies. Our asset managers are therefore contractually obligated to inform us if a specific company violates our guidelines. Dialogue progress We enter into dialogue with companies in order to prevent violation of our guidelines. When we engage in dialogue with a company, it is therefore important for us to communicate our goals clearly to the company and to work together with the company’s management to find out how we can achieve that goal. To this end, we have developed a milestone system in collaboration with our external service provider, partly to structure and schedule the dialogue and partly to track progress. We ended a dialogue successfully in 87 cases in 2014. This means that the companies have implemented the guidelines and work processes we proposed, thereby ending the guideline violations. A more detailed overview of the progress in our dialogues is provided on our website.




Engagement with 275 companies

Engagement with 7 companies

Strategy and risk 17 %

Governance 51 %

Environmental 11 % Social and ethical 21 %

Strategy and risk 42 %

Environmental 8% Social and ethical 17 %

Governance 33 %

Danish companies rarely have as serious and extensive issues concerning e.g. human rights, the environment or corruption as foreign companies do. We will always discuss the issue of corporate governance with both Danish and foreign companies.



Dialogue with results Our external service provider Hermes Equity Ownership Services Ltd, the company screening our investment universe, has had an ongoing dialogue with one of Europe’s largest power utilities in the period 2010-14. Among other things, the power utility has launched an initiative intended to help its customers reduce their emission of greenhouse gases. The company had already defined a goal of reducing its own carbon emissions and reducing the use of coal for power generation. However, the company also wanted to make its customers reduce their overall carbon footprint. In the period 2010-13, the company reduced the customer-related greenhouse gas emissions by 9.8 tonnes of CO2e. This exceeded the company’s reduction of carbon emissions from its own power generation during the same period. The company measured the emission of greenhouse gases in three areas:

a. own internal energy consumption b. own energy production c. customers’ overall energy consumption.

What we did In 2010, Hermes had its first meeting with the power utility. The parties discussed how the company could best induce its customers to reduce the overall carbon footprint in their homes. The company has ambitious plans to distribute intelligent power meters to all customer homes over the next decade. The customers have also been offered various incentives to enhance their energy consumption efficiency, and the power utility has installed solar panels on the roofs of customer homes.

Hermes recommended the company to develop a business plan showing the financial, social and environmental benefits to be gained from a wide range of activities, all aimed at reducing customers’ carbon footprint. Hermes continued the dialogue on this subject over the next four years and met with the company’s management to elucidate the commercial benefits of increasing the roll-out of e.g. meters and solar panels to its customers. As part of the dialogue, a meeting was held with the chairman of the company’s board of directors. Results After assessing the business case, the power utility committed to rolling out/distributing the meters, and by end-2013 it had installed more than 1.3 million meters in private homes. Thanks to these efforts, more than 90 per cent of the customers who made small and simple changes by means of information gathered from the distributed meter were able to reduce the energy consumption of their household. The company launched a major initiative to measure the gains achieved, among other things by using the meters supplied to the households. The survey showed that in the period from 2010 to 2013, the company’s customer-related greenhouse gas emissions had been reduced by 9.8 tonnes of CO2e. This exceeded the reduction achieved on the company’s own emissions in the same period. This example shows the value of focusing not just on the company’s own emissions, but also on customer, i.e. consumer, emissions.


Exclusion of countries In 2014, the boards of directors expanded the guidelines for responsible investment to include government bonds. In order to map the situation in relation to human rights violations, corruption, environment, etc. in the individual

countries, the countries are screened on a quarterly basis. A list of excluded countries as at 31 December 2014 is provided below.





Central African Republic




Equatorial Guinea



Papua New Guinea




South Sudan




Syrian Arab Rep

Iran, Islamic Rep


Korea, Dem. Rep

Yemen, Rep



Voting at general meetings At Unipension, we are active owners of our investments, and a crucial part of exercising active ownership is voting at general meetings. We vote on all shares in listed companies carrying votes and, where possible, also on corporate bonds. Shareholder agreements in unlisted companies generally prevent us from voting directly at the companies’ general meetings. Instead, we practice active ownership by serving on advisory boards for the investments and thereby influencing the companies in the direction we want. In 2014, we voted at a total of 1,949 general meetings globally, 42 of which were in Denmark. Our voting results for both Danish and foreign companies are available on our website. Here you can also search for specific companies, countries and general meeting periods and read a report showing a distribution of the votes by geography and topic in 2014.


Meetings where voted against (or voted against AND abstained) 34 %

We maintain a close dialogue with our Danish companies and have in-depth knowledge of the market. We therefore review each individual agenda item submitted for consideration at general meetings in Danish companies. This ensures that we take a position on the issues addressed in “Recommendations on corporate governance”. In order to prepare the Danish companies for how we intend to vote, we inform them early in the year about what we as


1,949 meetings (22,816 resolutions) Meetings where abstained 1 %

New corporate governance recommendations As responsible investors, we encourage all Danish companies to follow the “Recommendations on corporate governance” issued by the Committee on Corporate Governance under the Copenhagen Stock Exchange. These recommendations describe in detail what is expected of a Danish listed company in terms of composition of the board of directors, remuneration of management, shareholder relations, etc.

42 meetings (620 resolutions)

Meetings where voted with management by exception 1 %

Total meetings voted in favour 64 %

Meetings where abstained 17 %

Meetings where voted against (or voted against AND abstained) 19 %

Total meetings voted in favour 64 %


Photo: Colourbox

shareholders expect from them in relation to the recommendations. The Committee on Corporate Governance updated the recommendations twice in 2014, and in that connection we will also update our expectations of the companies. We hope and expect that this will give rise to a more fruitful dialogue between us

and the companies, resulting in better corporate governance. When it comes to companies operating outside Denmark, we liaise with external consultants to exercise our voting rights.



Shares: Active ownership in 2014 This map shows the value of the overall portfolio of listed shares as at 31 December 2014. The map also shows how many companies we engaged in dialogue with and the number of general meetings we voted at in 2014.   A detailed map with a search function is available at

Global Holdings in DKK



275 companies


1949 companies

North America Holdings in DKK Dialogue Voting

18,182,651,365 119 companies 1036 companies

Europe excl. Denmark Holdings in DKK Dialogue Voting

South America Beholdning i DKK Dialogue Voting

360,475,295 0 companies 19 companies

7,037,634,762 83 companies 429 companies


Denmark Holdings in DKK Dialogue Voting

5,835,922,093 7 companies 42 companies Asia Holdings in DKK Dialogue Voting

6,034,406,369 53 companies 371 companies

Africa Holdings in DKK Dialogue Voting

121,140,937 2 companies 7 companies

Australia and New Zealand Holdings in DKK Dialogue Voting

1,183,020,773 11 companies 45 companies




A better prepared garment industry In Bangladesh, several initiatives have revealed a stronger focus on giving workers in the garment industry better conditions, and a wide variety of improvements have been made in a relatively short period of time. Unipension has visited the country, which is home to the world’s second-largest garment industry. As investors with a key focus on responsible investment, Unipension has been monitoring developments in work conditions in Bangladesh on an ongoing basis. Conditions which, to put it mildly, leave much to be desired. In December 2014, we had the opportunity to visit Bangladesh together with our external consultants Hermes and other investors to get a first-hand impression of the work conditions. We visited several garment factories and spoke with several international brands that have garments manufactured at the factories. Rana Plaza made a difference In 2013, Rana Plaza in Dhaka collapsed with devastating consequences. More than 1,000 people were killed and over 2,500 were injured. Despite the extent and the severe consequences of the disaster, something good came from it too. Two new initiatives Two initiatives were established after the Rana Plaza tragedy. Accord on Fire and Building Safety in Bangladesh (Accord) is a co-operation between trade unions and employers in the garment industry, including H&M. Alliance for Bangladesh Worker Safety (Alliance) is mainly a North American initiative supported by Wal-Mart and others. These two initiatives are intended to improve conditions for workers, among other things by establishing high standards for fire safety in factories. The factories have already made very good progress under the two initiatives. In particular, fire safety had visibly improved at the factories we visited. For example, escape routes were now clearly marked. All floors had fire fighting equipment,

alarm systems had been updated, and smoke detectors had been installed. To date, most factory fires have been caused by electrical faults, and improvements had also been made in this area, so the electrical systems no longer posed a fire hazard. Employees specially trained in fire safety were easy to spot at the factories as they were wearing either a special vest or an armlet. Moreover, fire drills are now held on a regular basis. Although a lot has been achieved in a short time, there is still quite a lot of work to be done. For instance, many factories still have not installed fire-retardant doors and sprinkler systems, which is a requirement under both the Accord and the Alliance. Some factories had prepared action plans for the implementation of corrective action, but far from all. Child labour The global society reacted sharply when a few years ago Bangladesh had major issues with child labour, including in the garment industry. Unipension has guidelines concerning child labour, and it was therefore only natural for us to address this issue during our visit to the country. We met with Unicef and Save the Children to get an update on the conditions for children in Bangladesh. We wanted to know whether any improvements had been made in the area. Child labour has largely been eliminated in factories that manufacture garments for international brands. All international manufacturers have introduced a zero tolerance policy for child labour, and a factory risks losing its contract immediately if it uses child labour.


However, although conditions are improving, child labour is still an issue in Bangladesh. Several initiatives to combat child labour have been launched in the country, and we visited two NGO partners focusing specifically on this issue. Unicef has established schools in the slum districts of Dhaka, among other steps, and Save the Children and Danish garment manufacturer Bestseller, among others, operate a production college where young people aged 16-18 can learn a trade, e.g. textile printing, qualifying them directly for an apprenticeship, which in the vast majority of cases will subsequently guarantee them a permanent job. Work continues There is no doubt that the garment industry still has quite a lot of work to do when it comes

to improving labour standards. This was confirmed when we met with the International Labour Organization (ILO). If the target of exports reaching USD 50 billion by 2021 is to be achieved, the government has a big job to do in helping the garment industry, including encouraging the setting up of factory health and safety committees, improving infrastructure or building more fire stations, where necessary. If it fails to do so, there seems to be a real risk that Bangladesh will not be able to continue to attract international garment manufacturers. The international manufacturers could have chosen to relocate their production elsewhere after the Rana Plaza accident, but the vast majority of them chose to stay. If they had moved their production, they would no longer be able

Photo: Unipension



Photo: Unipension

to influence conditions. Instead, they have committed to contributing to improving labour standards. They are leading the way, and if the factories want to retain their contracts with these manufacturers, they will have to make the improvements required. Investors and consumers will also be checking that the manufacturers make sure to use factories with good health and safety standards. As responsible

Bangladesh Bangladesh is one of the world’s poorest and most overpopulated countries. Some 166 million people inhabit an area which is just under 3.5 times the size of Denmark. The garment industry, which is the world’s second largest after China, employs about 4 million people working in more than 5,000 factories. Some 80 per cent of the employees are women. At 31 December 2014, Unipension had invested about DKK 600 million in the Bangladesh garment industry.

investors, it is our duty to check whether the garment manufacturers live up to the commitments they have signed up to under the Accord or the Alliance, and labour standards in general, and in 2015 we will continue to monitor developments in the work to improve health and safety for the Bangladesh garment industry workers.

China India Myanmar


Class action We have almost 2,000 companies in our portfolio worldwide, and in the vast majority of cases the investments are unproblematic and produce satisfactory results for both parties. But in a few cases, we experience companies that have provided misleading or incorrect information, causing us to make investments on an incorrect basis. If the incorrect information has caused us to incur a loss on our investments because the companies have misinformed the market, for instance, and this has made us act on an incorrect basis, we will file a claim. This type of action, which is typically prosecuted as a class action lawsuit, has so far been most widely used in the United States. The idea of holding companies accountable for their actions and shareholders seeking compensation for their losses is gradually becoming accepted in Europe, and we are seeing more and more of such cases.

As responsible investors, it is our job to ensure that the companies we invest in comply with corporate governance rules Class action lawsuits are filed all over the world. In order to ensure a uniform approach to such lawsuits, the boards of directors of the pension funds in 2014 established guidelines for class action, which form an integral part of our guidelines for responsible investment. In addition to financial compensation for losses we have in-

curred, the purpose of participating in class action lawsuits is to try to improve, if possible, the governance of the companies sued. Corporate governance often becomes part of a class action lawsuit since the imprudent acts of a company generally originate from mismanagement of the company. As responsible investors, it is our job to ensure that the companies we invest in comply with corporate governance rules. We therefore see these lawsuits as a part of our guidelines on active ownership. The number of class action lawsuits against Danish companies continued to increase in 2014, which we believe is a positive development as we find it only fair that Danish companies are also held accountable for their actions or omissions. We are currently participating in class action lawsuits against several Danish companies as we have incurred losses because companies have misinformed the market. Monitoring the various lawsuits against companies all over the world is a big and demanding task, and it requires that we use the right monitoring systems and ensure that the necessary documents are provided in due time. We therefore co-operate with Institutional Protection Services Ltd in London and a number of law firms in various countries that specialise in gathering information about all upcoming and pending lawsuits of this type all over the world. Since 2009, we have received more than DKK 45 million in compensation from class action lawsuits.



National and international co-operation The complexity and changes to the agenda in the environmental, social and governance (ESG) area call for increased international co-operation. IIGCC Our main focus in 2014 was to step up our international co-operation in environmental matters. Since 2010, we and a large number of other investors all over the world have been co-signatories to the Global Investor Statement on Climate Change. The organisation behind the statement is Institutional Investors Group on Climate Change (IIGCC). By signing this statement, investors support the IIGCC’s work to persuade governments worldwide to introduce appropriate climate regulations. In order to increase access to relevant information in the area and support this agenda further, Unipension joined the IIGCC in 2014. UN PRI Unipension has been a signatory to the UN Principles for Responsible Investment (UN PRI) since 2009. Niels Erik Petersen, CIO and CEO of Unipension Fondsmæglerselskab A/S, has been

a member of the Advisory Council of UN PRI since 2010. The year 2014 was characterised by a restructuring at UN PRI’s management level in which Niels Erik Petersen participated actively as a member of the Governance Committee. For two years, UN PRI has been working on a new reporting tool and a new system for assessing the data UN PRI receives from its signatories. As a result, there was no official and mandatory reporting in 2013 and 2014. However, we participated in all voluntary pilot projects with a view to testing and assessing the new systems. Mandatory reporting will be resumed from 2014, and we will be reporting on these results in 2015. At the national level, we are still active members of the association Dansif, which is a networking forum for professional investors, advisory firms and others engaged in ESG ac-

Principles for responsible investment defined by the UN, which we have committed to complying with: 1. We will incorporate ESG issues into investment analysis and decision-making processes. 2. We will be active owners and incorporate ESG issues into our ownership policies and practices. 3. We will seek appropriate disclosure on ESG issues by the entities in which we invest. 4. We will promote acceptance and implementation of the Priciples within the investment industry. 5. We will work together to enhance our effectiveness in implementing the Principles. 6. We will each report on our activities and progress towards implementing the Principles.

Photo: Thomas Busk

Photo: Thomas Busk


Investeringschef Niels Erik Petersen

ESG-ansvarlig Zaiga Strautmane

tivities in Denmark. Our Head of ESG, Zaiga Strautmane, is deputy chair of the association. Through this position, she contributes to ensuring that relevant ESG knowledge and experience is exchanged, for instance through meetings and written, scientific reports on complicated ESG-relevant subjects prepared by external and independent experts.

products we as investors demand. In order to set the development in motion, we readily make our knowledge available and express our requests in connection with product development, drafting of guidelines and instructions, etc.

The quality of the ESG decisions we make largely depends on the information available. The area is constantly evolving, and the market is therefore not always ready to offer the

We are also a member of the ICGN (International Corporate Governance Network) and the CDP (Carbon Disclosure Project).

ESG costs We are continuously working to calculate the potential financial consequences of exclusions that narrow our investment universe. In so doing, we seek to take account of the investment consequences of changes made to our exclusion list and current price movements. We have made calculations for the period 2009-2014, and we have not seen any unequivocal indication of the degree to which the exclusions have affected the results. The total administrative expenses related to our ESG activities remain very low. The expens-

es, which include fees to our external service providers, voting at general meetings, investment universe screening, payroll costs and other expenses, still represent less than 0.005 per cent of the total amount of assets Unipension had under management at 31 December 2014. Since introducing our guidelines for responsible investment in 2009, we have not been able to establish any noteworthy effect on neither return nor risk. We will continue to monitor this in the years ahead.



Relevant links In this report, we mention several organisations and principles. If you want to read more, links to the respective websites are provided below. Accord on Fire and Building Safety in Bangladesh: Alliance for Bangladesh Worker Safety: Corporate governance recommendations of the Copenhagen Stock Exchange’s Committee on Corporate Governance Carbon disclosure project: Dansif: FN’s Global Compact: Hermes Equity Ownership Services Limited: Institutional Investors Group on Climate Change: Institutional Protection Services: International Corporate Governance Network: OECD’s Principles of Corporate Governance Sustainalytics: UN PRI:

Arkitekternes Pensionskasse MP Pension - Pensionskassen for Magistre & Psykologer Pensionskassen for Jordbrugsakademikere & Dyrlæger Smakkedalen 8 · 2820 Gentofte ·

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