This report shows public data only. Is this your organisation? If so, login here to view your full report.

Swedfund International AB

PRI reporting framework 2019

You are in Strategy and Governance » Investment policy

Investment policy

SG 01. RI policy and coverage

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

01.3. Indicate if the investment policy covers any of the following

01.4. Describe your organisation’s investment principles and overall investment strategy, interpretation of fiduciary (or equivalent) duties,and how they consider ESG factors and real economy impact.

Swedfund is Sweden's development finance institution. Through the Ministry for Foreign Affairs, the Swedish government has assigned Swedfund (corporate ID number 556436-2084) to be Sweden's development finance institution for investments in poor countries.

Our mission is to reduce poverty through sustainable business. Our activities shall contribute towards achieving the goals for Sweden's Policy for Global Development (PGD) and Agenda 2030 

In collaboration with strategic partners, we shall participate in economically, socially and environmentally sustainable investments that create better conditions for people living in poverty and under repression. With our strategic partners, we shall participate in investments which are not considered to be realisable through purely commercial financing. The company's activities shall promote progress towards equality. Our overarching and most important goal is to create jobs with good work environments and good working conditions.

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]

Across all its investments, Swedfund encourages the following

  • Adhere to internationally recognized standards for (i) sustainability; (ii) business integrity; (iii) anticorruption; (iv) corporate governance; and (v) human rights.For example: UN GC, IFC Performance Standards, OECD-guidelines for MNE
  • Adopt and implement a whistleblowing service in order to make it easy to anonymously report serious irregularities.

Across all its investments, Swedfund requires the following:

  • Comply with legal and regulatory requirements.
  • Comply with ILO's Core Conventions and ILO's Basic Terms and Conditions of Employment.
  • Comply with the Harmonized EDFI Exclusion List.
  • Adhere to applicable IFC Performance Standards.
  • Adhere to Swedfund's requirements on anti-corruption.
  • Provide ESG information (including human rights) and on development results, as requested by Swedfund.
  • Comply with Swedfund's requirements with respect to Swedfund's monitoring of its investments.

In addition to these requirements, Swedfund sets more long-term requirements in its direct investments regarding the supplier chain and human rights. For the full policy, see swedfund.se

In addition to the above mentioned norms our RI approach also includes:

  • EDFI Exclusion List
  • EDFI Guidelines for OFCs
  • EDFI Harmonized Environemental and Social Standards
  • The World bank group's corporate governance development framework 
  • UN guiding principles on Business and Human Rights  

Our business model is based on three pillars:  Impact on society, Sustainability and financial viability. By establishing development targets and working closely with our portfolio companies, we can monitor developments and ensure that they evolve in the right direction.

Impact on society - Swedfund aims to help create jobs with a good working environment and good employment conditions.

  • Job creation
  • Tax
  • Share of women in senior management
  • CO2e emissions
  • Additionality
  • Overall impact/benefit

Sustainability - Swedfund aims to help create sustainable enterprises in the world's poorest countries.

  • Environment/climate
  • Human rights and working conditions
  • Business ethics and anti-corruption

Financial viability- Swedfund aims to help create enterprises that are profitable in the long-term and therefore financially viable in the world's poorest countries.

  • Growth
  • Profitability
  • Return on equity

CRITICAL PARTS OF OUR BUSINESS MODEL

Our business model integrates the global goals through our three pillars. But it also manages risks, the inputs we make and the investments we take on.

RISK 

As a development finance institution, risk is pivotal to our business. Swedfund invests in countries and areas where the risks are more numerous and potentially more serious than they are in developed markets. Accepting risk is part of our mission – to improve the living conditions of people in poverty by creating sustainable businesses and decent jobs in developing countries.

Swedfund invests in places in the world where, although there is strong need for foreign capital, private investors often consider the risks to be too high. Consequently, our greatest risks lie in our investments. Risk management is therefore an equally natural part of our business as it is in our portfolio companies.

The more sustainable and advanced companies Swedfund can join forces with and build, the better the outcomes for the community in which they operate. In its operations, Swedfund is exposed to many different factors that are difficult to influence. We manage risks at different levels: strategic, investment, operational and financial. Sound risk management is both a prerequisite for the business and a potential way of improving development results.

TIME PERSPECTIVE

We always invest with a long-term perspective, usually between 7 and 10 years. A vital long-term objective for our investments is that they must always contribute to realising Agenda 2030. Our strategic sustainability goals relate to a three-year period, which is the medium term for us. Our long-term approach and sustainability are the source of an important part of our additionality and enable us to act as a catalyst. Our long investment cycle also means that we have a portfolio, which combines investments from 2005 and onwards. Earlier investments were made in line with a partially different mission and our working methodology then also differed from our current approach.

GEOGRAPHY

Our mission is to invest in operations and countries which qualify for development financing in accordance with the OECD/DAC’s definition. We prioritise investments in the least developed countries and in low-income countries, and also invest in post-conflict countries. We shall invest where the need is greatest, but our new owner directives also give us the opportunity in exceptional cases to invest in upper medium-income countries. One example of an exception may be investment in renewable energy in an upper middle-income country, with the aim of reducing CO2emissions. This kind of investment benefits poorer countries, where climate change may have the most severe consequences.

Our sustainability focus areas 

  • Decent work
  • Environment& Climate
  • Gender Equality
  • Anticorruption& Business Ethics
  • Human Rights
  • Tax

SECTORS

Our three priority investment sectors are Renewable energy, Financial institutions and Funds, and Healthcare 

1. Financial institutions & Funds

The finance sector is viral for a country's economic and social development. Lack of access to finance is one of the greatest limiting factors in businesses’ ability to grow in developing countries. Swedfund finances banks and funds in under-financed markets, and this enables them to increase their financing and lending to businesses and entrepreneurs. Our ambition is to help build a finance sector which is inclusive with particular focus on women entrepreneurs and owners of small businesses.

2. Energy & Climate

Entrepreneurs in developing countries cite deficiencies in electricity supply as another major obstacle in running and developing their operations. Swedfund invests in renewable energy since the development of climate-friendly energy is one way of accelerating progress towards Agenda 2030.

3. Healthcare

During 2018, Swedfund adopted a new focus sector, Health. However, investments in the health sector have been taking place for many years and the encouraging development results that these investments have contributed to have led to health becoming a separate sector. Many of the investments within health are made in the form of share investments. In many cases, Swedfund is a shareholder who also plays an active role on the board of directors. This gives us an opportunity to support the enterprise’s development by contributing our experience and special focus on sustainable development. 

01.6. Additional information [Optional].

          
        
I confirm I have read and understood the Accountability tab for SG 01 I confirm I have read and understood the Accountability tab for SG 01

SG 01 CC. Climate risk

01.6 CC. Indicate the climate-related risks and opportunities that have been identified and factored into the investment strategies and products, within the organisation's investment time horizon.

Within Swedfund's overall mission of contributing to poverty reduction by financing sustainable businesses in emerging markets, Swedfund will seek to minimize the negative climate impact of all our investments, both with respect to new investments, the current portfolio companies and our own operations. When evaluating a new investment opportunity Swedfund carefully considers climate risks and opportunities associated with that specific company, sector and market. Climate-related and environmental aspects are an integral part of Swedfund's ESG work and we apply IFC's Performance Standards in our investment processes and management. Swedfund will seek to minimize the negative climate impact inherent in each investment. The specific actions required to mitigate climate risks and to maximize climate opportunities are agreed upon in an Environmental, Social and Governance Action Plan (ESGAP) before we make an investment. 

Swedfund's Board of Directors is responsible for defining and managing risks. By working actively within our three pillars, we strive to generate results and long-term value. At the same time, we manage all the risks arising in our investment operations. 

Initiatives relating to the environment and climate form an integral part of the investment process based on Swedfund’s sustainable development policy and separate stance regarding the environment and climate. Climate is one of two thematic areas to be considered before decisions are taken concerning new investments regardless of sector, geography or instrument. In 2015, Swedfund decided to focus solely on investments in renewable energy, thus excluding investments in fossil energy generation. Swedfund also has a model to estimate CO2e, based on the GHG protocol to proactively measure, manage and report greenhouse gas emissions.

During the reporting year, Swedfund has conducted an analysis of how climate and environmental risks impact Swedfund’s investments and, in turn, how they can impact Swedfund’s financial position. The analysis summarises the key environmental risks in the investment portfolio and how Swedfund works to manage and mitigate them. Swedfund’s risk profile is analysed from a "top-down" and "bottom-up" approach. "Top-down" analyses and categorises the external climate risks the portfolio is exposed to. "Bottom-up" includes Swedfund’s investment process, i.e. the identification and management of environmental and climate-related risks in the portfolio, as well as CO2e emissions from investments

Within "Energy" Swedfund only invest in renewable energy production and distribution. Swedfund recognizes that investments in Financial Institutions need to shift from supporting high to low carbon activities. An investment in a Financial Institution creates a multiplier effect as its capital flows are distributed to different parts of the economy and reaches thousands of clients across a number of sectors. When making investments in Financial Institutions, Swedfund will seek to support the financing of a broad range of climate change initiatives such as energy efficiency improvements, renewable energy, risk management and relevant insurance products. In general we recognize e.g. following climate related issues in our markets in the medium and long term: poverty, gradually rising sea levels, stronger tropical storms, extreme drought, more unpredictable rainfall, more extensive and longer-lasting heat waves, and gender differentiating effects.

01.7 CC. Indicate whether the organisation has assessed the likelihood and impact of these climate risks?

01.8 CC. Indicate the associated timescales linked to these risks and opportunities.

Swedfund does not do any short term investments. We handle medium (3 years) and long-term (7-10 year) investments with the same approach. Hence, in all investments Swedfund will seek to minimize the negative climate impact inherent in each investment.

01.9 CC. Indicate whether the organisation publicly supports the TCFD?

01.10 CC. Indicate whether there is an organisation-wide strategy in place to identify and manage material climate-related risks and opportunities.

Describe

The following documents collectively formalise Swedfund's standpoint and organisation-wide strategy regarding climate/climate-related risks and opportunities 

  • Sustainability Policy
  • Climate position paper
  • Owner directives 
  • ESG toolkit
  • Strategic sustainability targets 

 

1.12 CC. Indicate the documents and/or communications the organisation uses to publish TCFD disclosures.

specify

          Annual Integrated reporting and a Climate report on a three year basis to our owners to assess climate related risks and opportunities
        

SG 02. Publicly available RI policy or guidance documents

New selection options have been added to this indicator. Please review your prefilled responses carefully.

02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.

URL/Attachment

02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

02.3. Additional information [Optional].

- Swedfund's Code of conduct: http://www.swedfund.se/media/1319/swedfund_code_of_conduct.pdf

- Swedfund's Position on Children's Rights: http://www.swedfund.se/media/1682/swedfunds-position-on-childrens-rights.pdf

- EDFI Guidelines for offshore Financial: Centres, http://www.swedfund.se/media/1125/summary_of_edfi_guidelines-_ofcs_2011.pdf

- Swedfund’s Anti-Corruption Policy: http://www.swedfund.se/media/1677/swedfunds_anti-corruption_policy.pdf 

- Swedfund's tax Policy http://www.swedfund.se/media/1861/swedfund_tax_policy.pdf  

-Swedfund’s position on Climate Impact : https://www.swedfund.se/media/2015/swedfunds-position-paper-on-climate-2017-10-27.pdf

-Swedfund's ethical compass: https://www.swedfund.se/media/2161/swedfund-ethical-compass.pdf 

 


SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

Swedfund has an obligation to identify and prevent conflicts of interest in the company's operations, based on Swedfund’s Code of Conduct.

2014 Swedfund developed a policy for managing conflicts of interests. The policy instructs how and when to report conflicts and also comprise a self-assessment form that employees can fill in if necessary. Swedfund’s IC addresses any potential conflicts of interest in the investment process.

Swedfund's procedures for conflicts of interest:

  • Self-declarations from each employee is submitted continuously, annually at a minimum, and it is each individual's responsibility to immediately submit such declaration for revision to the General Counsel, CFO and the responsible legal counsel if a conflict of interest might have occurred.
  • In case the review results in that the conflict of interest is material, the employee immediately is released from managing and decision-making in all relationship and communication between Swedfund and the external parties with which the conflict of interest exists.
  • The self-declarations are filed by the legal department.
  • Failure to declare conflicts of interest may be regarded as misconduct and may even be punishable.
  • The above is also described in the staff handbook and referred to in the Investment Manual.

03.3. Additional information. [Optional]

Swedfund has an obligation to identify and prevent conflicts of interest in the company’s operations, based on the following legislation and internationally accepted principles

• The Companies Act (2005:551)

• The Insider Act (1990: 1342); The Market Abuse Act (2005: 377)

• ILPA - Private Equity Principles

• EFFAS - ACIIA Principles of Ethical Conduct

• OECD - Managing Conflict of Interest in the Public Service

• CFA Institute - Code of Ethics and Standards of Professional Conduct

In addition to the above there is also so-called deli conflict of interest (Sw. delikatessjäv), i.e. situations where there is a risk of impartiality other than those specified in the law. Those consist of irrelevant considerations due to friendship or hostility. This situation can also arise in family situation, in relation to husband/ wife, or partner, children, grandchildren, siblings, parents, minors under guardianship, etc.


SG 04. Identifying incidents occurring within portfolios

04.1. Indicate if your organisation has a process for identifying and managing incidents that occur within portfolio companies.

04.2. Describe your process on managing incidents

At Swedfund ESG Incidents mean any environmental, social or governance incident in relation to the project, including, but not limited to the death of a person, an accident causing an injury that requires medical attention and/or hospital care, adverse impact on human rights, fire, leakage of substances dangerous to human beings or the environment, labor strike, harassment, fraud, theft and corruption. The portfolio companies are contractually bound to report serious incidents to Swedfund in most cases within 72 hours of its occurrence. The reporting covers serious incidents at portfolio companies, as well as funds’ portfolio companies. When serious incidents are reported, Swedfund follows up that appropriate actions have been taken. Depending on the circumstances, an action plan is drawn up by the portfolio company.


Top