We believe the fundamental impact of climate change has the direct impact on global economy. The transition into tackling these climate related risks and opportunities has since 2014, added a new dimension into our way of working and do business. Physical risks due to climate change as well as other macro trends are taken into consideration when screening new businesses and markets. Nordic Capital assess environmental factors and their impact as part of the investment process. Risks and opportunities considered and assessed are for example such as; dependency on natural resources, transports and logistics, heavy energy usage, chemical substances, water use and waste handling as well as identified future risks and opportunities such as the development of environmentally friendly technologies, transformation to renewables and efficiency in logistics and operational processes.
Nordic Capital believes that a company aware of its own environmental impact as well as understanding how the environment impacts their business is better able to manage associated risks and is more likely to have a long-term sustainable business model in place. We have clear requirements in our ESG integration and follow up on portfolio company level as well as in Nordic Capital’s own sustainability agenda. The global climate is changing in ways that affect our planning and day to day operations of businesses in our companies. We expect our portfolio companies to support a precautionary approach and encourage companies to ensure energy efficiency, lower greenhouse gas emissions, use water responsibly, reduce waste and chemicals, and choose sustainable materials when sourcing. We encourage our portfolio companies to disclose information on climate change mitigation and/or adaption as well as providing climate related financial risk disclosures.
Nordic Capital is a long-term investor, with an average holding period for realised buyout investments of average 5.4 years. The portfolio companies of the Nordic Capital vehicles are not being considered as high-carbon-intense businesses directly involved in such as the extraction of oil and gas, shipping and raw material industries. However, the transition risk of going into a low-carbon and climate resilient future is challenging every portfolio company indirectly and in different ways. Risks and opportunities depend on geographies, sectors, policy change, shifts in market preferences and norms, technology, time horizons and government and business commitments in limiting global temperatures to rise.
In our mission to deliver superior returns to our investors, Nordic Capital understands that these risks must unceasingly be evaluated and mitigated, and transition opportunities must be captured and capitalised upon on. We believe resource efficiency, capturing new markets and supporting the development of new technologies, products and services is not only crucial developing businesses, but also for the survival of portfolio companies.
Additionally, Nordic Capital is continuously evaluating possible impacts of change in national and international climate policies, directives and regulations.