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Swedfund International AB

PRI reporting framework 2019

You are in Strategy and Governance » Objectives and strategies

Objectives and strategies

SG 05. RI goals and objectives

05.1. Indicate if and how frequently your organisation sets and reviews objectives for its responsible investment activities.

05.2. Additional information. [Optional]

Swedfund measures portfolio companies adherence to Swedfund's Sustainability Targets. Fullfillment of the targets is a requirement within three years of the time of Swedfunds investestment. Information is collected by a self-declaration from, Swedfund Portfolio Company Annual Sustainability, and the results are presented externally in Swedfund's annual Integrated Report. 

For the purpose of supporting the portfolio companies in their ESG work, in the implementation of ESGAP and in other development efforts to achieve the strategic sustainability goals, Swedfund makes site visits to portfolio companies. Site visits are also an important tool for checking compliance with our sustainability requirements and we carry out site visits to check on all three pillars.

At the beginning of the year, a plan is drawn up for which portfolio companies are to be visited during the year. The selection of companies and the type of visit is based on the risk in the portfolio company’s operation, our knowledge of the company’s challenges and information from the companies through the annual Swedfund’s Portfolio Company Sustainability Report, as well as previous audits or visits.

Swedfund applies and distinguishes between three different types of visit: external audit which is carried out by an external consultant, internal audit which is carried out by Swedfund’s own ESG team, as well as site visits which are less comprehensive than an internal audit, and which are carried out by the ESG team as a component of our active advocacy. Over and above the ESG team’s visits, Swedfund’s CEO, Investment Managers and Investment Analysts also visit our portfolio companies as part of our active advocacy within all three pillars.

During the year ESG Managers carried out a total of 14 visits; 6 internal site visits to portfolio companies,  2 portfolio companies underwent an internal ESG audit by 6 by other external finance parties.

 


SG 06. Main goals/objectives this year

06.1. List the main responsible investment objectives that your organisation set for the reporting year.

Responsible investment processes

Key performance indicator

          ESG Training for Swedfund employees –  Basic training on IFC Performance Standards for new employees
        

Progress achieved

Introduction of new employees includes a standard introduction to ESG including Swedfund’s Ethical Compass, Strategic Sustainability Goals and ESG considerations in the investment process. The introduction module is completed with additional one to one ESG sessions depending on the role of the new employee, for example on the international frameworks Swedfund has adopted.

During autumn 2018 we conducted a basic internal training on IFC Performance Standards for new Investment Analysts and Investment Managers. This training increases our investment staff’s capacity to identify and assess ESG related risks and impacts in our potential investments and portfolio companies. We aim to continue knowledge building on IFC Performance Standards within our staff even during 2019.

Key performance indicator

          Training of ESG matters for all employees in personnel meetings
        

Progress achieved

To enhance the engagement of all Swedfund’s employees in ESG matters, we provided three internal trainings on ESG matters at our personnel meetings during 2018. The objective of the trainings was to introduce general ESG frameworks to all personnel, increase the organisations’ knowledge on IFC Performance Standards and United Nation’s Guiding Principles on Business and Human Rights as well as how we use these frameworks in our investment process.

The first training provided an overview to the international frameworks and standards that Swedfund has adopted, such as Global Compact, OECD Guidelines for Multinational Companies, UNPRI and Sustainable Development Goals. Second training introduced briefly IFC Performance Standards, focusing on the most common standards and their application within healthcare sector. The third training provided introduction to internationally recognised Human Rights and how Swedfund is addressing these. All trainings were conducted internally by ESG Team.

Key performance indicator

          Further integration of ESG issues into investment organisation’s meetings and personnel meetings
        

Progress achieved

Swedfund has continued to further integrate ESG activities into the investment process and to communicate on ESG related issues within the organization in different ways during 2018: Swedfund conducted  portfolio reviews and relevant ESG issues were  discussed as a part of the standard agenda. In this way the management and the investment managers are aware of the current ESG status of the portfolio. In the same way ESG issues and updates are integrated into the weekly sector team meetings, as a representative from ESG team participates into these sector team meetings. Further, ESG is now also a part of the introduction for every new employee and ESG team conducts additional internal trainings when needed.

Key performance indicator

          Review of Policy for Sustainable Development and stakeholder dialogue on Swedfund’s requirements to its investments
        

Progress achieved

Swedfund’s Policy for Sustainable Development was adopted by the Board in 2015. During 2018 Swedfund started a process to update the Policy, so that it would better reflect the updated sustainability agenda and stakeholder expectations. One of the main issues that needed to be addressed is Swedfund’s approach to Human Rights and our requirements to our portfolio companies regarding Human Rights. The process of updating Policy for Sustainable Development was designed to be involving and consultative. In late 2018 Swedfund hosted a stakeholder dialogue on the Policy update for its key civil society organisations representing different ESG aspects, such as working conditions, Human Rights, environment and climate, and gender. The purpose of the consultation was to understand stakeholders’ expectations on Swedfund’s focus areas, desired ambition level and working procedures. Furthermore, the Policy draft was released for public consultation via our home page.

Key performance indicator

          Further development of Human Rights Assessment as a part of the investment process
        

Progress achieved

During 2018 we have:

  • Completed two in-depth analyzes of human rights in companies in the exit phase;
  • Created and implemented a tool to identify the need for in-depth human rights analysis, so-called "trigger list";
  • Have started an internal human rights working group with representatives from different departments;
  • Have worked with external experts and other DFIs to clarify and develop our human rights work;
  • Have started to design and implement a grievance mechanism in accordance with the UN Guiding Principles on Business and Human Rights; and
  • Implemented an analysis of human rights risks and impacts as an integrated part of the investment process. Human Rights issues are included in investment agreements where applicable, at this stage for direct investments.

Financial performance of investments

Key performance indicator

          Swedfund’s investments shall be financially viable
• Profitability  
• Growth  
• Return on Equity
        

Progress achieved

Sustainable and long-term profitable companies create more positive development effects, such as decent jobs. One of Swedfund’s targets is to ensure that our investments are financially viable. Swedfund monitors the financial performance of each company, on the basis of the companies' specific conditions in the markets in which they operate. The monitoring of each investment is carried out internally. With reference to each company's operation, and commercial secrecy in the investment agreements we have entered into, it is not possible for us to report key ratios at individual company level. Therefore, we have decided to report key ratios at an aggregate level for the companies, since this gives a picture of their performance.

Financial viability of our portfolio companies

Growth (including comparable direct investments): 4%

Profit margin direct investments: 2%

Profit margin return on average equity for FIs: 20%

Internal Rate of Return for Funds: 10%

Return on Equity (on average for comparable direct investments): 14%   

Figures are based on latest available audited financial statements  of companies in Swedfund's portfolio end of 2017. For more information regarding financial viability, calculation methodologies, and results analysis, see our Integrated Report 2018.

ESG characteristics of investments

Key performance indicator

          Adhere to the ILOs Core conventions
        

Progress achieved

Regarding the status of adherence to ILO Core Conventions in Swedfund’s portfolio, we have divided our portfolio companies in three categories, to better reflect our targets and requirements. The figures below present the share of the companies that adhere to ILO Core Conventions in each category at the end of 2017:

Portfolio companies less than three years in Swedfund’s portfolio: 88%

Portfolio companies more than three years in Swedfund’s portfolio: 77%

Portfolio companies in Exit phase: 50%

Key performance indicator

          Carbon footprint
        

Progress achieved

Swedfund measures CO2e emissions for all portfolio companies. We have carried out an extensive analysis of the impact of our portfolio companies on climate and have built in model based on the Greenhouse Gas Protocol (the GHG protocol). The methodology is supporting the work we are carrying out with respect to the environment and climate, under which our portfolio companies have been reporting their water, electricity and energy consumption already for some time. To ensure that the data we receive in our model is as relevant as possible, we surveyed our direct investors through separate climate questionnaires when building the emission calculation model. We supplemented this information with the purchased sector data. Measuring climate data can pose challengesresulting from the fact that sector information is based on industrialised countries and not on developing countries, and the estimates included in the measuring methods.

Total CO2e emissions from Swedfund’s portfolio in 2017 were about 24 thousand tons compared with about 35 thousand tons in 2016. For further information, please see our Integrated Reporting 2018.

Other activities

Key performance indicator

          Applied and become active member of the GIIN
        

Progress achieved

Key performance indicator

          Case stories presented in annual Integrated Report to show how ESG is integrated
        

Progress achieved

Please refer to Swedfund\s Integrated Report for 2018

other description (1)

          Gender equality
        

Key performance indicator

          Share of female employees / in management / in boards in our portfolio
        

Progress achieved

Share of female employees 2017: 40% (2016:42%, 2015: 33%)

Share of women in management positions 25% (2016:22%, 2015: 21%)

Share of women in boards 16% (2016:17%, 2015: 20%)

For the fourth consecutive year we are measuring and reporting the share of women employed in our portfolio companies (including investment funds and their holdings), and the women in management positions and on company Board of Directors in our Integrated Report 2018. For further information, please see our Integrated Reporting 2018. Disclosure is part of  our work on gender equality.

other description (2)

          Job creation
        

Key performance indicator

          A growing number of jobs within Swedfund's portfolio companies
        

Progress achieved

Net increase of number of jobs in  our portfolio companies (comparable units) amounted to about 8600 jobs, 8%, between 2016 and 2017. Through its investments Swedfund supports a total of  about 167 000 direct job opportunities (2016:   about 121 000, 2015: about 106 000).

Direct jobs also generate a large number of indirect jobs. According to the model that Swedfund works with (aligned with CDC), each direct job opportunity generates an average of 7.5 indirect job opportunities.

06.2. Additional information.

Results achieved in relation to strategic sustainability targets

Sustainability target: Adherence to ILO Core Conventions

Regarding the status of adherence to ILO Core Conventions in Swedfund’s portfolio, we have divided our portfolio companies in three categories, to better reflect our targets and requirements. The figures below present the share of the companies that adhere to ILO Core Conventions in each category at the end of 2017:

Portfolio companies less than three years in Swedfund’s portfolio: 88%

Portfolio companies more than three years in Swedfund’s portfolio: 77%

Portfolio companies in Exit phase: 50%

Sustainability target: ESG Management System

Swedfund aims to contribute to the creation of businesses which are viable in the long term, and therefore requires portfolio companies to establish a management system for environmental and social issues. In conjunction with the initial analysis of a prospective investment, an assessment is made to determine whether a management system is in place. If this is not the case, the scope to bring about improvements is evaluated. If Swedfund opts to proceed with an investment, the requirements for improvements are tied to the financial conditions for the disbursement of funds.

A sustainable development policy must be established and adopted by the management of the portfolio companies. The sustainable development policy lays the foundations for the way in which a business must approach sustainable development, and it is vital that it does not simply become a desk exercise, but is also implemented in the portfolio companies’ operations. The implementation of a management system for sustainability issues is an important step to ensure that the policy is implemented and established.

To determine whether a portfolio company meets the strategic sustainability goal, Swedfund uses monitoring to determine whether the portfolio company has implemented a management system and, if so, whether it includes the relevant components:

  • SUSTAINABILITY  POLICY A sustainability policy must be established and adopted by the management of the portfolio companies.
  • IDENTIFICATION OF RISKS AND IMPACTS A system/routine must be established in order to identify sustainability risks and the areas that are affected.
  • PERFORMANCE MANAGEMENT The company's results within identified risks and impact areas must be continually monitored and evaluated in order to measure and improve results over time.
  • RESPONSABILITY AND COMPETENCE A member of the company’s management team must have overall responsibility for sustainable development issues.
  • EMERGENCY PREPAREDNESS In the case of fixed installations, action plans must have been established for accidents and disaster situations.
  • REPORTING Reporting must take place regularly and at least annually both to the management and to the board of directors of the portfolio company, as well as to Swedfund.
  • STAKEHOLDERS Internal and external stakeholders must be identified and consulted in situations which affect them and be given relevant information at appropriate times and intervals.

Regarding the status of implementation of Environmental and Social Management System (ESMS) in Swedfund’s portfolio, we have divided our portfolio companies in three categories, to better reflect our targets and requirements. The figures below present the share of the companies that have implemented an ESMS in each category at the end of 2017:

Portfolio companies less than three years in Swedfund’s portfolio: 94%
Portfolio companies more than three years in Swedfund’s portfolio: 68%
Portfolio companies in Exit phase: 60%

For more information, see our Integrated Report 2018.

Sustainability target: Anti-corruption Management System

Swedfund's portfolio companies undertake in agreements to adopt and implement a management system to handle anti-corruption issues.

Regarding the status of implementation of anti-corruption management system in Swedfund’s portfolio, we have divided our portfolio companies in three categories, to better reflect our targets and requirements. The figures below present the share of the companies that have implemented such a system in each category at the end of 2017:

Portfolio companies less than three years in Swedfund’s portfolio: 78%
Portfolio companies more than three years in Swedfund’s portfolio: 64%
Portfolio companies in Exit phase: 50%

For more information, see our Integrated Report 2018.


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