IMPACT REPORT 2020 Value for generations - SDG Invest
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IMPACT REPORT
2020
Value for generations
Impact report | 2020 1
|
A LETTER FROM OUR
CHAIR OF THE BOARD
DEAR STAKEHOLDER Though the pandemic has taken much attention and
2020 has been an unusual and challenging year, as demanded dedicated work, we see that the SDG Invest
we all have felt the effects of the COVID-19 pandemic. portfolio companies continously improve their sustain-
The circumstances of the pandemic have demanded ability initiatives. Our portfolio has undergone a positive
remarkable behaviour from the public and from private development on the road to sustainable transformation,
companies alike. We have closely followed how our illustrated for instance through increased commitment
portfolio companies have navigated the challenging to the Science Based Targets initiative. 64 % of our
conditions brought on by the pandemic. companies are now committed to the initiative, which
ensures CO2e reduction targets are aligned with the
It has been great to see SDG Invest portfolio companies Paris Agreement. This is an increase from 35 % in 2018.
respond compassionately to the pandemic. A company There is a similar increase in circular economy com-
such as Novo Nordisk chose to pay bills to subcontrac- mitment, with 97 % of portfolio companies committed
tors ahead of time, while Johnson & Johnson has been in to circularity, up from 60 % in 2018. Though few SDG
the frontline developing a vaccine. We also saw our com- Invest portfolio companies are circular by design, they
panies engage in partnerships to address the pandemic. are committed to integrating circular economy princi-
The portfolio company Edwards Lifesciences Corp. part- ples. We commend their dedication to creating real and
nered with a shipping service to deliver critical technolo- impactful change.
gy to hospitals. Additionally, NVIDIA, Intel, Microsoft, IBM
are all part of a larger collaboration with the US Gov- At SDG Invest, we have a holistic approach to sustain
ernment with the purpose of helping researchers better ability, and we will continue to push for sustainable
understand the pandemic, its treatments, and potential development through our active ownership activities.
cures. These initiatives highlight how our companies have We see positive transformations in many areas of sus-
used their resources to provide aid during the pandemic. tainability but reaching the UN Sustainable Development
Goals will require further action. We believe that action
The beginning of 2021 also marks our three-year track is especially necessary on the areas of responsible tax
record. SDG Invest delivered a return for 2020 at 7.46 % behaviour and protection of biodiversity. These two top-
after costs. We are proud that we delivered a higher re- ics will increasingly be a theme in our active ownership
turn than the global market again. Since our inception in engagements with all the portfolio companies.
2018, SDG Invest has delivered a return on investment at
35.06 % at year-end 2020. The number of investors has We look forward to 2021 and to our continuous work
increased to above 1000 private investors, a milestone towards achieving the SDGs.
that we are also proud to have reached.
Over the past three years, we have seen a remarkable
increase in the focus on sustainable investments and on
sustainability in general. KARIN VERLAND
Chair of the Board
»Over the past three years, we have
seen a remarkable increase in the
focus on sustainable investments
and on sustainability in general.«
2 | Impact report | 2020
TABLE OF
CONTENTS
Delivering impact and return��������������������������������������������������������������������������������������������������4
3-year track record for SDG Invest������������������������������������������������������������������������������������5
2020 impact highlights���������������������������������������������������������������������������������������������������������������� 6
2020 sector SDG impact�������������������������������������������������������������������������������������������������������������7
SDG Invest and the UN Sustainable Development Goals������������������������� 8
Investing in sustainable development������������������������������������������������������������������������10
A unique analysis�����������������������������������������������������������������������������������������������������������������������������12
The SDG Invest Sustainability Scorecard����������������������������������������������������������������� 13
An ambitious approach to active ownership�������������������������������������������������������� 14
PORTFOLIO IMPACT
Impact 1: CO2e emissions�������������������������������������������������������������������������������������������������������� 1� � � � 6
�
Impact 2: Human rights and responsible supply chains���������������������������� 1� � � � 9 �
Impact 3: Sustainability focus and work with material issues�����������������21
Impact 4: SDG integration and solutions�������������������������������������������������������������������23
Impact 5: Diversity and inclusion��������������������������������������������������������������������������������������25
Impact 6: Responsible tax behaviour���������������������������������������������������������������������������27
Impact 7: Circular economy��������������������������������������������������������������������������������������������������2� � � � � 9
Impact 8: Partnerships for systemic changes����������������������������������������������������� 3 �����0
Photos: Front and back page: Halfpoint, page 11: Evgeniy Trifonov, page 22: Joseph Jurciukonis,
page 24: Filipe Frazao, page 25: LumiNola, page 28: Rudmer Zwerver, page 31: Carey Wagner
Impact report | 2019
2020 |3
|DELIVERING IMPACT
AND RETURN
HIGHLIGHTS
+1,000 7.46% 100%
investors return in 2020 engagement rate in
(42.9 % increase from 2019) after costs active ownership efforts
WEIGHTED AVERAGE
CARBON INTENSITY
OF THE SDG INVEST
PORTFOLIO
(tons of CO2e emissions/$M sales) 122.65 162.40 147.90
MSCI World MSCI World
Index ESG Leaders
As of April 30 2020
FINANCIAL OVERVIEW 2.5 %
Communication 0.5 %
services Utilities
59 5,276,706 8.6 %
Health 27.7 %
portfolio companies employees in portfolio care Information
(FY 2019) 14.2 % techno-
Consumer logy
$1,500.25 $7,619.75 Sector
discretio-
nary
bn bn
break-
annual revenue market cap size
14.3 %
down
in portfolio (FY 2019) 16.1 %
Materials
Consumer
$82.9 million 16.1 %
Industrials
staples
SDG Invest market value
4 | Impact report | 20203-YEAR TRACK RECORD
FOR SDG INVEST
February 2021 marks the month where SDG Invest We invest in companies that take leadership in sustain-
achieved a 3-year track record. Since the beginning, able transformation. Despite the positive developments,
our approach to investment has built on the belief that we continue to push for further improvements. We
sustainable companies are tomorrow’s winners. We are conduct active ownership activities with all the compa-
proud that the results of the past three years support nies in our portfolio, and we are active participants in UN
this belief. PRI, Climate Action 100+ and Investor Alliance for Human
Rights. We update our screening methodology annually
SDG Invest has amassed over 1,000 investors, who have to reflect the most ambitious sustainability develop-
received yearly returns after costs above the market. ments. We are on the forefront of sustainable develop-
We consistently prove that returns do not need to be ment and we will continue to stay there.
compromised when investing sustainably
We would like to express a huge ‘thank you’ to all the
Companies in our portfolio exhibit a positive impact de- investors who believe in us and in the 2030 agenda.
velopment, as key parameters show improvement over
the past three years. The SDG Invest portfolio companies
constantly improve their commitment to sustainability,
while contributing to the agenda set forth by the UN
Sustainable Development Goals (SDGs).
FUND DEVELOPMENT 2018–2020
2020 13.506,06
2019 Net asset value
12.568,07
2018 (NAV), DKK
9.484,96
35,06 %
Return of invest-
ment (ROI) since 25,68 %
initial offering –3,72 %
1089
Number of investors 614
89
PARTNERSHIPS
Listed on Retail partner-
NASDAQ C openhagen Member of Investor Signatory Signatory ships with
Impact report | 2020 5
|2020 IMPACT
HIGHLIGHTS
IMPACT OF COMPANIES IN
THE SDG INVEST PORTFOLIO
97 %
have targets for reduction
97 % of CO2e emissions
2019: 97 % | 2018: 93 % 34 %
are committed to average number of women
circular economy on boards of directors
2019: 81 % | 2018: 60 % 2019: 32 % | 2018: 29 %
79 % 24 %
are engaged in sustainable
average number of women
multi-stakeholder initiatives,
in executive management
which proactively works
for a sustainable future Value for 2019: 23 % | 2018: 24 %
2019: 78 % | 2018: n/a* generations
64 % 100 %
are part of the Science are actively working to
Based Targets initiative mitigate own negative impact
2019: 53 % | 2018: 35 % 2019: 100 % | 2018: 100 %
71 % 83 %
are working with their supply have products/solutions that directly
chain to reduce CO2e emissions contributes to solving the SDGs
2019: 62 % | 2018: 44 % 2019: 72 % | 2018: n/a*
Increase compared to Decrease compared to Unchanged from the
2019 Impact Report 2019 Impact Report 2019 Impact Report
*) We have changed the scoring methodology (increased requirements). Therefore this number is not comparable with the 2018 Impact Report.
6 | Impact report | 20202020 SECTOR
SDG IMPACT
KEY OPPORTUNITIES AND CHALLENGES
Development needs and business opportunities are increasingly
becoming two sides of the same coin. These are the key opportu-
nities and challenges for the sectors in which we are invested
INDUSTRIALS,
HEALTH CARE 8.6 % 8.6 %
Health care
MATERIALS
AND UTILITIES 30.9 %
Opportunities: Developing circular models Opportunities: Providing innovative
to increase access to existing products and solutions in infrastructure and raw mate
services. Leveraging technology. Providing rials, develop ‘green’ products and new
16.1 %
underserved communities with healthcare. products and services that address
Consumer
The sector directly contributes to SDG 3. environmental and health challenges.
staples
The circular economy principles are
Challenges: Ensuring the access and especially important to implement.
affordability of life-saving products. Over-
coming access and affordability issues in Challenges: Reducing environmental
developing markets and access for the 14.2 % impact of production.
bottom of the economic pyramid. Consumer
discretionary
0.5 %
Utilities
14.3 %
Materials
CONSUMER STAPLES INFORMATION TECHNOLOGY AND
AND CONSUMER
DISCRETIONARY 30.3 % COMMUNICATION
SERVICES 30.2 %
Opportunities: Reducing materials use and Opportunities: These sectors act as
16.1 %
limiting single-use consumption. Enabling Industrials enablers, and can enhance financial
responsible consumption and sustainable pro- inclusion, quality education, smart cities
duction. Integrating circular economy principles and innovate products that are more
is important in efforts to reduce the impact of energy efficient and essential in the
packaging and of raw materials. Developing transformation to a sustainable world.
affordable and nutritious food and improving
access for bottom of the economic pyramid. Challenges: Managing e-waste and
combating technology misuse with a
Challenges: Respecting human rights and 27.7 % special focus on human rights and digital
labour rights throughout the value chain, Information security and
especially in the supply chain. Improving Technology privacy.
nutritional values and biodiversity
2.5 %
Communication
services
Impact report | 2020 | 7SDG INVEST AND THE UN
SUSTAINABLE DEVELOPMENT GOALS
At SDG Invest, we contribute to the fulfilment of
the UN Sustainable Development Goals (SDGs)
through the companies in which we invest and
the tools we apply as asset manager.
OUR TEAM’S IMPACT
How the SDG Invest team contributes to the SDGs
• Ensure education in sustainable • Ensure financial strength and
development through thought growth to maximise a sustainable
leadership, whitepapers, news development through our invest-
letters, and external events ment product
• Active ownership where we engage
with all companies in the portfo-
lio, international organisations and
sustainable movements
• Introduction of new t echnologies to • Diverting investment in black
promote sustainable development energy to green energy by
e.g. the Sustainability Scorecard excluding oil and coal as part of
our negative ESG screening
• Active ownership to drive the SDG agenda
• Collaboration through international part-
nerships including the UN PRI, Climate
Action 100+, and Investor Alliance for
Human Rights
• Financing and mobilising private funding
for sustainable development
8 | Impact report | 2020PORTFOLIO IMPACT
How the companies in the SDG Invest
portfolio contribute to the SDGs
• Eradicating • Sustainable • Access to health-
poverty by in- forestry, agri care services and
clusion of local culture and food medicines
communities and production with • Developing new
job creation focus on nutritio products and
• Creating products nal value services
and solutions for
BoP markets
• Training in sustain- • Gender diversity at • Responsible
able development board level and at water and waste
throughout the the level of execu- treatment
supply chain tive management • Protect and
• Increasing capa- • Gender pay gap restore water-
bilities for BoP focus related eco
segments systems
• Increasing ren • Inclusive and • Inclusive and
ewable energy in sustainable eco- sustainable
energy mix nomic growth, full industrialisation,
• Improvement in and productive and upgrading of
energy efficiency employment and infrastructure
decent work for all • Reduction of
• Promotion of GHG emissions
labour rights in the
supply chain
• Equal opportu- • Improving housing • Circular economy
nities for all and facilities, tech- – reduce, recycle
focus on living nology solutions, and reuse
wage as minimum air quality and • Sustainable
payment inclusion of BoP production
segments methods
• Science Based • Collecting ocean • Sustainable forest-
Targets and plastic for reuse ry and land use
climate change • Responsible • Integration of a
strategies water usage biodiversity focus
and t reatment in value chains
• Support to
ecosystems
• Responsible tax • Sustainable development
behavior through partnerships within and
• Supporting across sectors and countries
and promoting • Donation to causes that
responsible and positively impact and contribute
transparent legal to reach all of the SDGs
measures
Impact report | 2020 | 9INVESTING IN
SUSTAINABLE DEVELOPMENT
SDG Invest conducts impact investing in global com- They are able to form and take part in multi-stakeholder
panies that are part of the sustainable transformation. partnerships that create systemic changes. They impact
The companies take leadership in transforming their millions of people through their value chains, business
business to a sustainable world. As such they are part models, and products. This is why their decisions and
of creating a »sustainable development… that meets the business operations impact the social and environmen-
needs of the present without compromising the ability of tal aspects of the world tremendously. Global com-
future generations to meet their own needs.« 1 panies that take leadership on the global challenges
and the SDGs are essential in achieving sustainable
Global companies have the financial strength to scale development for all.
innovative solutions across the world.
TRENDS FOR THE SUSTAINABLE COMPANY
Through our active participation in the field of sustain- The report has analysed 668 companies and finds:
ability, we have an in-depth understanding of the areas
where global companies need to increase their focus. • Women represent only 34 % of all board members.
We believe essential topics that should be a priority for Board level is the layer of governance with greatest
companies in the coming year are senior management participation of women.
diversity and biodiversity. • The situation is worse at the executive level where
women represent only 14 % of all leaders.
SENIOR MANAGEMENT DIVERSITY
The European Women on Boards ‘Gender Diversity For SDG Invest portfolio companies, the average per-
Index 2020’2 highlights interesting points that we would centage of women at the level of board of directors is
like to emphasise in this year’s impact report. The report also at 34 % and at the level of executive management it
analyses women’s participation in corporate governance is 24 %. Although the percentage of women in executive
in the largest European companies that are listed in the management is higher for SDG Invest companies than
STOXX 600 Europe index or, in some countries, national for the index companies, there is still a significant lack of
stock exchange indexes. diversity in senior management. Companies need to ac-
tively address this issue to create sustainable transfor-
mation on gender diversity. This implies setting specific
diversity ratio targets at senior management levels and
creating initiatives that are designed to reach the targets
within a set time frame.
»At SDG Invest, we believe that senior manage-
ment diversity and biodiversity are key topics
for companies to address going forward.«
1) Source: ‘Our Common Future’ also known as the Brundtland Report, 1987
2) Source: bit.ly/genderdiversityindex2020
10 | Impact report | 2020BIODIVERSITY In May 2020, the European Commission released the
Biodiversity refers to the variety of life on Earth, the an- EU Biodiversity Strategy to 2030, which is a potential
imals, plants and bacteria that are essential to healthy game changer for EU nature, food and farming policies.
ecosystems. Biodiversity is vital, yet the loss of biodi- At SDG Invest, we are pleased to see such positive
versity has accelerated in recent decades. The 2019 developments, but we believe that they cannot stand
‘Global Assessment Report’3 by the Intergovernmen- alone. Biodiversity is a global issue and global compa-
tal Platform on Biodiversity and Ecosystem Services nies can and should address biodiversity through their
reported that one million animal and plant species are value chain.
now threatened with extinction.
Biodiversity is a new focus area for the business sector
Biodiversity is threatened by a variety of factors such with companies trying to understand their depend-
as climate change and pollution. However, accord- encies, impacts and responses related to biodiversity.
ing to the World Wide Fund for Nature (WWF), the With suppliers all over the world, global companies
largest threat by far is ‘changes in land and sea use’, need to understand their entire supply chain to exer-
which entails practices such as logging, unsustainable cise proper due diligence through a responsible supply
agriculture, housing development and mining. Private chain management programme. At SDG Invest, we will
companies therefore have an important role in tackling address this issue in future active ownership processes
the issue of biodiversity. and integrate this topic in our analysis of companies.
As always, we want to see companies take a proactive
approach to create real sustainable transformation and
to have a positive impact on both business operations
and on the sector as a whole.
IMPACT INVESTING
Impact investing is defined as “investing in companies or organi
sations that contribute measurable positive ESG or Sustainable
Development Goal outcomes, alongside financial returns.”
3) Source: ipbes.net/global-assessment
Impact report | 2020 11
|A UNIQUE ANALYSIS
The SDG Invest portfolio consists of carefully selected
companies with a strong financial and sustainable profile.
The selection is based on a three-step model where
every aspect of the company is evaluated.
A THREE-STEP MODEL FOR SELECTING COMPANIES
FINANCIAL SELECTION SECTORIAL SCREENING SUSTAINABILITY SCORING
The StockRate model Negative screening SDG Invest Sustainability Scorecard
• Strong earnings history Exclusion of companies Screening and analysis of
• High financial strength operating in certain companies’ approach to
• High economic industries • Leadership
stability • Sustainability
• Governance
The third step is how SDG Invest ensures a portfolio Our scoring is comprised of three categories:
comprised of the most sustainable companies around
the world. Our proprietary screening tool, the SDG • Sustainability weighs 25 %
Invest Sustainability Scorecard, facilitates a scoring • Governance weighs 25 %
process based on our expert knowledge in sustainabili- • Leadership weighs 50 %
ty. The Scorecard is what ensures a portfolio of the most
sustainable companies around the world. We invest in companies that are on the forefront of
sustainable development and the Leadership category
In 2020, the Sustainability Scorecard consisted of 45 thus carries the most weight. In this category, we ana-
parameters, including 149 different scoring options lyse if the company is taking leadership in advancing the
based on a maturity scale. Each company in the SDG sustainability agenda.
Invest portfolio has been analysed with the Sustainability
Scorecard. This process gives an in-depth understanding The parameters in the scorecard are aligned with the
of each company, allowing us to highlight areas where UN Sustainable Development Goals (SDGs). The screen-
the company is performing well and areas where we can ing thus gives a clear depiction of how the company is
make recommendations for further improvement. positively contributing to the achievement of the 2030
agenda. Furthermore, the SDGs are directly integrated
in several parameters.
12 | Impact report | 2020THE SDG INVEST
SUSTAINABILITY SCORECARD
ANNUAL UPDATE 2020 In 2020, we added three new parameters within the
We update the Scorecard parameters each year to topics of data privacy as a human right, responsible tax
reflect the latest initiatives, trends, standards and behaviour and unconscious bias. Read more about the
regulations within sustainability. As the sustainability new parameters in the impact areas 2, 5 and 6.
agenda moves forward, so should the companies that
are leaders within the field.
Sustainability 2.82 %
Civil society
Governance
engagement
Leadership 7.25 % 7.04 %
Diversity and Maturity
inclusion
8.80 %
Human rights and
supply chain
23.91 %
Steward-
ship 6.34 %
Climate and envi-
ronment
7.32 %
Oversight
8.70 % 7.32 %
Brand Diversity
6.71 %
10.14 % Workforce
Innovation
3.66 %
Red flags and
crisis handling
Impact report | 2020 13
|AN AMBITIOUS APPROACH
TO ACTIVE OWNERSHIP
Action points in Action points in
annual letter (2020) annual letter (2019) Improvement in
276 279 44 %
of the action points from 2019.
ENCOURAGING DEVELOPMENT HUMAN RIGHTS VIOLATIONS ON UYGHUR MUSLIMS
THROUGH ANNUAL ENGAGEMENT A special attention area this year is related to the ex-
To ensure a portfolio consisting of the most sustainable posure and accusations of forced labour of the Uyghur
companies in the world, SDG Invest conducts an annual people and other ethnic minority citizens in the Xinjiang
analysis of all our companies. We use this analysis as region of China. These citizens have been imprisoned
a basis for dialogue with each company. Every year we in detention camps and then transferred to produc-
send a letter to all our companies to highlight potential tion facilities supplying global companies. In August,
areas for improvement on their sustainability perfor- we mapped the companies in our portfolio with any
mance. We offer specific recommendations to the connection to the Xinjiang region. We found that six of
companies, with 279 action points in 2019 and 276 action our companies had a connection to the region and we
points in 2020. Last year, in 2019, we saw improvement immediately initiated a dialogue to clarify their involve-
in 44 % of our recommended action points, illustrating ment. Our efforts were enhanced by our participation
how our companies are continuously evolving in a in a campaign organised by the Investor Alliance for
positive direction. Human Rights that addresses this issue. The campaign
has launched a range of investor actions, including a
corporate engagement campaign and a Call to Action
to disengage from business relationships in
the region. Together we stand stronger.
14 | Impact report | 2020ACTIVE OWNERSHIP
• 100 % engagement rate
• We have created an active ownership policy in accordance
with Danish law (law on financial companies §101a section 2-7).
Read more on sdginvest.dk/aktivt-ejerskab/
CLIMATE ACTION 100+ WE RESPOND TO CURRENT CASES AND ISSUES
As a ‘participant’ member of the investor-led initia- We monitor news coverage of all the companies in our
tive Climate Action 100+, we are actively taking part in portfolio, to stay informed on possible cases that may
investor discussions and in engagement with compa- arise. If we consider the cases contrary to our invest-
nies. Climate Action 100+ is established to ensure that ment principles, we place the implicated company on
the world’s largest corporate greenhouse gas emitters our watchlist and initiate direct contact. It is important
take necessary action on climate change. We would like that we understand how our portfolio companies are
to highlight two initiatives that we have been a part of managing cases and how they seek to mitigate any
through Climate Action 100+ in 2020. given wrongdoing. Investing in large companies gives
complex issues. We expect our portfolio companies to
• The ‘Say on Climate’-Campaign encourages com- be transparent about issues and dilemmas, and to take
panies to have a ‘say on climate’-vote at their annual actions that address and mitigate negative impact.
general meetings. The purpose is to give investors a
vote on the adequacy of a company’s transition plan WE DEMAND SUSTAINABLE IMPROVEMENTS
toward net-zero, while consolidating investor support The SDG Invest active ownership approach is based on
for companies that are leading the transition. engaging in difficult dialogues and demanding action
• The Net-Zero Company Benchmark was developed from the companies in our portfolio. Our philosophy is
during 2020 by a range of stakeholders and will be that a sustainable company is a company for the future.
used to assess each focus company’s alignment with Investors need to stand together and demand changes
the key commitment priorities of the Climate Action to create systemic change for a sustainable future.
100+ initiative. We have been part of discussions with
companies surrounding the scoring methodology of
this benchmark.
PARTNERSHIPS AND ALLIANCES
FOR SYSTEMIC CHANGE
Impact report | 2020 15
|IMPACT 1
CO2e EMISSIONS
2020 64 %
Science based targets 2019 53 %
2018 35 %
2020 71 %
Working with supply chain to reduce CO2e emissions 2019 62 %
2018 44 %
2020 97 %
Targets for reduction 2019 97 %
2018 93 %
Companies with Science Based Targets
2020 24 %
With the status ‘committed’
2019 29 %
With the status ‘target set’ 2020 76 %
2019 71 %
In 2015, 196 governments around the world adopted Global companies play a crucial role in reducing
the Paris Agreement and committed to combat climate emissions and creating the technology necessary
change by limiting global temperature rise to well be- to transform society. At SDG Invest, we believe it
low 2°C, with efforts to limit warming to 1.5°C. To achieve is important that global companies acknowledge
this goal, GHG emissions must halve by 2030 and drop their role in combating climate change, which is why
to net-zero by 2050, requiring an economic and social environmental impact is a central parameter when
transformation in society. investing in a company.
METHODOLOGY
At SDG Invest, we believe that transparency in 97 % of our companies submit their emissions data
reporting is an important prerequisite for enabling to CDP following the Greenhouse Gas Protocol.
sustainable investments. We therefore publish key The remaining 3 % publish emissions data in their
metrics on the carbon footprint of the SDG Invest yearly reports. We work under the assumption that
portfolio as recommended by the Task Force on this publicly available data is accurate, however
Climate-Related Financial Disclosures (TCFD). Our each company may vary in how they measure and
carbon footprint metrics have all been developed report their emissions. When calculating market-
following the methodology set forth by the TCFD*. based metrics, we have used location-based data
To calculate our carbon footprint metrics, we for companies that lacked this information.
need reliable data on the GHG emissions of each
company in our portfolio.
*) Source: bit.ly/tcfd_methodology
16 | Impact report | 2020THE CARBON FOOTPRINT OF
THE SDG INVEST PORTFOLIO
WEIGHTED
AVERAGE
CARBON
INTENSITY 123.19 125.21 162.4 147.9
(tons of CO2e/$M sales)
Market-based Location-based World Index ESG Leaders
TOTAL CARBON CARBON CARBON
EMISSIONS OOTPRINT
F INTENSITY
(tons CO2e/$M revenue) (tons CO2e/$M invested) (tons CO2e)
Market-based Location-based Market-based Location-based Market-based Location-based
6009.69 6056.91 72.49 73.06 181.36 182.79
Though the weighted average carbon intensity of our Another area of positive impact in 2020 is the number of
portfolio is considerably lower than the ‘MSCI World ESG companies that have joined the Science Based Targets
Leader’, we do not claim to be a ‘green’ investment fund. initiative (SBTi). These companies have committed to
Despite this, we see that our portfolio companies are setting emissions reduction targets that are aligned with
placing more emphasis on limiting their CO2e emissions. the goals of the Paris Agreement. Their commitment is
This focus on reducing environmental impacts is evident crucial to avoiding the worst effects of climate change.
in the development of our portfolio over the past years.
A larger share of our companies is committed to re- At SDG Invest, we believe that companies that set ambi-
ducing not just their own carbon emissions but also the tious targets for their carbon footprint will be innovation
emissions of the supply chain. Supply chain emissions and transformation leaders in the future. The transition
are on average more than five times greater than the to net-zero emissions will create new business oppor-
direct emissions of a corporation1 , which means that tunities in creating innovative technologies, improving
reporting and reducing CO2e emissions in scope 1 and operational practices, and keeping ahead of legislation.
2 is not enough if we are to reach the goals in the Paris An increased focus on CO2e emissions in the SDG Invest
Agreement. It is incredible to see 71 % of the companies portfolio is a positive sign for future growth.
in our portfolio addressing this important issue.
»At SDG Invest, we believe that c ompanies that set
ambitious targets for their carbon footprint will be
innovation and transformation leaders in the future.«
1) Source: bit.ly/cdp_supply_chains
Impact report | 2020 | 17THE IMPACT OF SBTi TARGETS
From 2015-2019, the companies The reduction is
working with science-based targets equivalent to the
25 % 78
have reduced their emissions by annual emissions from
coal-fired
power
plants
THE SCIENCE BASED TARGETS INITIATIVE It follows that SDG Invest is urging the companies in our
The Science Based Targets initiative (SBTi) is a partner- portfolio to achieve the status ‘targets set’.
ship between CDP, the United Nations Global Compact,
World Resources Institute and the World Wide Fund for The Science Based Targets initiative shows companies
Nature (WWF). The initiative enables companies to set how much and how quickly they need to reduce their
emissions reduction targets that are validated by latest GHG emissions to prevent the worst effects of climate
climate science and in line with the goals of the 2015 change. The initiative is leading a net-zero carbon transi-
Paris Agreement. tion along with the more than 500 companies that have
achieved the ‘targets set’ status through the initiative.
There are two different status levels in the SBTi. The These targets are making a real difference in global
status ‘committed’ indicates that a company has stated emissions, with the typical SBTi company reducing scope
an intent to set emissions reduction targets aligned with 1 and 2 emissions at a linear rate of 6.4 % a year since
SBTi criteria. The status ‘targets set’ indicates that the setting their respective targets.
target has been validated and approved and thus that it This is more than the 4.2 % annual
meets the goals of the Paris Agreement – to limit global reduction the SBTi requires for
warming to well-below 2°C above pre-industrial levels targets aligned with the goal
and pursue efforts to limit warming to 1.5°C. of limiting warming to 1.5°C.
CASE MICROSOFT AIMS TO BE CARBON NEGATIVE Therefore, Microsoft has implemented an internal
Microsoft is leading the way toward a zero-carbon carbon fee, which holds business divisions financially
economy with their ambitious targets on carbon re- responsible for reducing carbon emissions. The com-
duction. Not only has the company already achieved pany will also deploy $1 billion in a Climate Innovation
carbon neutrality across global operations, Microsoft Fund, to accelerate the development of carbon reduc-
has also committed to being carbon negative by 2030. tion and removal technologies. These technologies
Carbon negativity implies that Microsoft will remove are an important part of reaching net-zero emissions in
more carbon than it emits by the year 2030. This goal 2050, although they should never stand alone. Microsoft
will cover their own direct emissions as well as the is illustrating how carbon reduction and removal tech-
emissions in their supply and value chain. The target is nologies can be a supplement to reducing emissions in
supplemented by one that is even more ambitious: By operations and in the value chain.
2050, Microsoft will remove all the carbon the company
has emitted from the environment, either directly or by With their ambitious approach, Microsoft is in a leader-
electrical consumption, since it was founded in 1975. ship position in the transition to a net-zero economy and
they act as a source of inspiration for companies seeking
Microsoft realises that reaching their targets will require to take action on minimising their own carbon footprint.
a tremendous commitment and the emergence of new
technologies that do not yet exist.
18 | Impact report | 2020IMPACT 2
HUMAN RIGHTS AND
RESPONSIBLE SUPPLY CHAINS
2020 100 %
Responsible supply chain management 2019 100 %
2018 100 %
2020 68 %
Responsible supply chain management with due
diligence procedures incl. follow-up descriptions
2019 64 %
2018 61 %
2020 98 %
Has a specific focus on child labour in human rights work 2019 93 %
2018 n/a
2020 17 %
Actively engaged in securing a living wage in supply chain 2019 12 %
2018 n/a
2020 74 %
Actively working to ensure human rights 2019 60 %
with established due diligence procedures
2018 40 %
Public commitment to respecting data privacy 2020 20 %
and freedom of expression as a human right Previous years n/a
The UN Declaration on Human Rights states that »All We see that 68 % have supplier audits and due diligence
human beings are born free and equal in dignity and procedures in place in relation to responsibly sourced
rights.« The SDGs and the 2030 agenda are grounded in materials, while 74 % have these procedures in place in
these fundamental rights and achieving the SDGs means relation to human rights and labour rights.
realising human rights for all. It is a moral imperative
for the corporate sector to respect human rights and At SDG Invest, we encourage our companies to continu-
ensure that the principles and actions in the UN’s Guiding ously develop and improve their due diligence practices
Principles on Business and Human Rights are followed. and their engagement with suppliers. We know that
global companies who prioritise this work can have a
At SDG Invest, we identify companies with a p roactive positive impact on millions of lives throughout their
approach to mitigating breaches on human rights global supply chains.
and labour rights within their own operations and in
their supply chain. 100 % of the companies in the SDG
Invest portfolio have policies in place that cover their
suppliers, illustrating that they have understood their
responsibility in the supply chain. We also evaluate
whether companies have due diligence procedures in
place, and what these procedures entail. In responsible
supply chain management, we are proud of the positive
development in our portfolio.
Impact report | 2020 | 19»The living wage is one of the most powerful tools for
business to contribute to their workers’ human rights.«
— Phil Bloomer, Executive Director, Business & Human Rights Resource Centre
THE SUSTAINABILITY SCORECARD, PRIVACY, 20 % of the companies in our portfolio acknowledge data
DATA SECURITY AND HUMAN RIGHTS privacy and security as a human right, including compa-
In 2020, we updated the Sustainability Scorecard to nies such as Microsoft, Cisco and Infosys. These compa-
include a topic that has gained increased attention over nies integrate data privacy concerns in every phase of
the past years, namely privacy and data security in the developing products and services, and they are trans
context of human rights. In this digital age, compa- parent about how data is collected and secured.
nies are collecting and using an increasing amount of
personal data, with ensuing questions on how this data Technological developments such as Artificial Intelli-
is being handled. Advocacy groups, non-profits and gence (AI), Internet of Things (IoT) and Big Data Analyt-
consumers alike are demanding greater attention on the ics represent huge opportunities in finding innovative
legal and ethical responsibilities of companies in privacy solutions to achieve the SDGs. However, there is also a
and data security. risk that such new technologies can cause significant
harm. At SDG Invest, we believe companies should
The SDG Invest portfolio consists of companies that ope acknowledge their responsibility in ensuring ethical use
rate in a global context and regulation on data protection of data. We are using our role as investors to encourage
varies across locations. We believe that commitment to action on this topic both in our own active ownership
data privacy and security should not be dependent upon activities and in partnership with the Investor Alliance
the presence of regulatory frameworks. The new param- for Human Rights, where we are also in dialogue with
eter therefore evaluates whether data privacy is explicitly other investors.
respected as a fundamental human right, rather than
being solely treated as a compliance consideration.
CASE THE COMPLEXITIES OF Several companies in the SDG Invest portfolio are
PROVIDING A LIVING WAGE nonetheless committed to ensuring living wages, in-
Low wages are a driver of increased inequality around cluding Kering, Burberry and Unilever. This work is often
the world and addressing low wages in global supply characterised by a collaborative approach, where civil
chains is essential. The ability to earn enough for a society organisations such as the Fair Wage Network
worker to cover their basic needs and the needs of their are consulted upon for their expertise.
families is recognised as a human right and global com-
panies play an important role in ensuring this right. Another company continuously increasing their en-
gagement with ensuring a living wage is Axfood. With
The living wage differs from the minimum wage, as it an overarching goal of eradicating poverty in their sup-
goes beyond complying with legal requirements. A liv- ply chain by 2030, Axfood has been collaborating with
ing wage takes into account the basic needs of workers Oxfam on various projects since 2017. One such project
and their families, allowing them to afford a basic living in the basmati rice growing region in Punjab, Pakistan
and participate in society. It does more than keep peo- has already resulted in increased income, especially
ple out of poverty. for smallholder farmers who are women. Axfood will
continue their work and have begun analysing supply
Ensuring a living wage in the supply chain is not without chains surrounding strawberries, mangoes and tea.
barriers, as fragmented supply chains create complex
relationships between buyers and suppliers.
20 | Impact report | 2020IMPACT 3
SUSTAINABILITY FOCUS AND
WORK WITH MATERIAL ISSUES
2020 100 %
Working actively to mitigate own negative impact 2019 100 %
2018 100 %
2020 76 %
Working actively to mitigate own
negative impact with external partners
2019 69 %
2018 61 %
2020 92 %
Materiality assessment updated within the last 3 years 2019 95 %
2018 88 %
2020 100 %
Sustainability reporting with KPIs and long term strategy 2019 100 %
2018 100 %
Audited reporting (multiple KPIs and
2020 56 %
sustainability reporting method
2019 53 %
2018 70 %*
An impactful and value-creating sustainability strategy and to share knowledge and best practices to move the
is centred around core business operations. Determin- agenda forward. Partners, therefore, enable companies
ing material issues through a materiality assessment will to enhance and accelerate their own efforts.
allow companies to identify and prioritise the issues that
matter most to the company and its stakeholders. Such It is important that we as investors can trust the validity
an analysis provides a solid foundation for an integrat- of the data published by the companies. This can be
ed sustainability strategy. 92 % of the companies in the achieved through an audit of sustainability data. We
SDG Invest portfolio have published the results of their decided last year that such audits should cover more
materiality assessments. than scope 1 and 2 CO2e emissions. Audited reporting
should cover multiple KPIs on environmental and social
All our companies are working to mitigate their own factors as well as the methods used to gather this data.
negative impact, with 76 % collaborating with external This comprehensive audit was completed by 56 % of the
partners. Engaging with partners on topics of sustaina- companies in our portfolio and ensures that the data is
bility allows companies to increase their reach of impact reliable and trustworthy.
»An impactful and value-creating sustainability strategy
is centred around core business operations. Determining
material issues through a materiality assessment will
allow companies to identify and prioritise the issues that
matter most to the company and its stakeholders.«
*) We have updated the requirements here, which is why 2018 is not comparable with 2019 and 2020.
Impact report | 2020 21
|CASE WASTE MANAGEMENT INC. Waste Management Inc. is specialised in managing
IS MITIGATING NEGATIVE IMPACT waste streams to maximise the reuse and recycling of
A prerequisite for qualifying for our portfolio is that the waste. This process is a key feature of a sustainable
companies are working actively to mitigate the negative transition of the economy. However, Waste Manage-
impact on their surroundings. This means that the com- ment Inc. also operates landfills across North Ameri-
pany acknowledges the adverse effects of their opera- ca, as existing available technologies cannot process
tions and undertakes specific actions to mitigate these. all waste streams for recycling. Acknowledging the
negative impact of landfills, the company has created
Some companies will naturally have larger negative landfills that are highly engineered. Waste Management
impacts than others when it comes to environmental Inc. captures gas generated by the landfills and turns
factors such as their carbon footprint. It is essential that it into energy, converting the gas into an alternative to
these companies are aware of how to mitigate their fossil fuels, some of which is used to power their own
impact. One of the largest emitters in the SDG Invest vehicles. Additionally, Waste Management Inc. monitors
portfolio is Waste Management Inc., and the company landfills after they close and supports their conversion
illustrates how negative effects of operations can be into parks, wildlife habitats or solar farms.
transformed into both a positive contribution to the sus-
tainability agenda and into new business opportunities.
| Impact report | 2020IMPACT 4
SDG INTEGRATION AND SOLUTIONS
Products/solutions that directly 2020 83 %
contributes to solving the SDGs 2019 72 %
Redesign of existing products to target global challenges 2020 100 %
2019 100 %
Innovation of SDG related products
2020 97 %
2019 88 %
Use the SDGs as a strategic tool in sustainability work
2020 32 %
2019 45 %
Commitment to be an active company in solving 2020 83 %
global challenges addressed in CEO/Chair letter 2019 86 %
Achieving all 17 SDGs will only be possible if global 83 % of companies have products or services that di-
companies move away from ‘business as usual’ and rectly contribute to the SDGs in some way. Furthermore,
show commitment to the goals. We need new business 97 % of companies have ongoing innovation efforts that
models, products and solutions that address the devel- are related to the SDGs. These figures represent an
opment challenges presented by the SDGs. Fortunately, increase from last year, illustrating that our companies
meeting the SDGs also represents business opportu- understand that innovation is an essential part of meet-
nities estimated at $12 trillion. There is no reason that ing the SDGs.
companies should not engage with the SDGs.
The SDGs provide a blueprint for how to achieve a
All the companies in the SDG Invest portfolio are re- better and more sustainable future. If companies wish
designing their existing products to target the SDGs. to take leadership within sustainability, they should inte-
This could entail redesigning product packaging to be grate the SDGs in their strategy, and use the goals as a
less environmentally damaging, making products more strategic tool in business operations. 32 % of the com-
nutritious or adjusting production to use less resources. panies in our portfolio have a strategic approach to the
While these initiatives make a huge difference, new and SDGs and have set targets based on the goals. Further-
innovative solutions are also needed. In our portfolio, more, 83 % of companies show top level commitment to
the SDGs through directly addressing global challenges
in their CEO or Chair letter to stakeholders.
»83 % of companies have products or services that
directly contribute to the SDGs in some way. Further-
more, 97 % of companies have ongoing innovation
efforts that are related to the SDGs. These figures
represent an increase from last year, illustrating that
our companies understand that innovation is an
essential part of meeting the SDGs.«
Impact report | 2020 23
|CASE HENKEL IS USING THEIR EXPERTISE Henkel provides their expertise within adhesive tech- TO SOLVE SANITARY NEEDS IN INDIA nologies and within setting up and optimising produc- The SDG Invest portfolio consists largely of companies tion processes. The company, therefore, enables the with headquarters in developed countries, but our aim production of affordable and high-quality products. is to invest in companies that make a difference on a global scale. If the SDGs are to be achieved, there With this collaboration in India, Henkel is making a needs to be a focus on developing countries and the difference in the lives of thousands of girls and women. economic b ottom-of-pyramid markets. We therefore The company is supporting health education efforts analyse companies on whether they have developed by the Indian government, and they are contributing solutions s pecifically addressing development issues in to local job creation and female empowerment. This bottom-of-pyramid markets. partnership has direct impact on SDG 3, 4 and 5. Henkel is an example of one of our companies using their expertise to make a difference in a developing country. The company has established a partnership addressing sanitary needs in India, in collaboration with the startup organisation Niine and with the Indian government. The purpose of the partnership is developing and distributing feminine care products for the 80 % of India’s 350 million girls and women, who currently have no access to solu- tions for managing their menstrual cycles. 24 | Impact report | 2020
IMPACT 5
DIVERSITY AND INCLUSION
2020 71 %
Acknowledges gender pay gap 2019 50 %
2018 42 %
2020 73 %
Policy and KPIs for diversity and inclusion 2019 52 %
2018 47 %
2020 24 %
Average percentage of women in executive management 2019 23 %
2018 24 %
2020 34 %
Average percentage of women in board of directors 2019 32 %
2018 29 %
2020 19 %
Unconscious bias training at management level
Previous years n/a
Women’s equality and empowerment has its own SDG, For ethnic and cultural diversity, this figure increases to
and the ambition is to achieve gender equality by 2030. 36 %. This shows that there are also financial benefits to
Unfortunately, meeting this goal seems unlikely at the having a diverse workforce.
current rate. In the Global Gender Gap Report 2020, the
World Economic Forum estimated that the gender gap At SDG Invest, we evaluate companies on their per
will close in 2120. This estimate illustrates that diversity formance on diversity and inclusion, and we are happy
and inclusion should continue to be a priority. to see a positive development in 2020. While the
number of women in executive management and on
For private companies, there is both a moral and a the board of directors is overall steady, we see a very
financial argument to actively engage in diversity and in- positive development in the number of companies
clusion initiatives. Diverse companies are more likely to acknowledging the gender pay gap and developing
outperform their peers, and companies lacking diversity policies and KPIs for diversity and inclusion. This is a
are increasingly being penalised. In their 2020 ‘Diversity positive sign that our companies are committed to this
Wins’ report, McKinsey & Co. found that companies in topic, a
lthough their commitment should be reflected
the top quartile of gender diversity on executive teams in senior management positions as well. We continue
were 25 % more likely to experience above-average to engage our companies on topics of diversity and
profitability than peer companies in the fourth quartile. inclusion through our active ownership.
Impact report | 2020 25
|PERCENTAGE OF WOMEN
24 % 34 % 14 % 34 %
xecutive
E xecutive
E
Board of Board of
manage- manage-
directors directors
ment ment
*
THE SUSTAINABILITY SCORECARD Equal opportunities for women, and for women of col-
AND U NCONSCIOUS BIAS TRAINING our especially, is often hampered by unconscious bias.
The Sustainability Scorecard has been updated in 2020
with a parameter assessing whether companies con- Interestingly, we see that unconscious bias awareness
duct unconscious bias training at management level. training is more prevalent in our companies located
The addition of this parameter is meant to expand in the US. This is not surprising, as the #MeToo move-
our focus on whether companies in our portfolio are ment and Black Lives Matter have highlighted that
committed to diversity and inclusion initiatives. At SDG sexual harassment and systemic racism are widespread
Invest, we believe that overcoming unconscious biases issues. There is, therefore, a growing focus on ensuring
requires conscious effort. diversity and inclusion through addressing underlying
structures such as unconscious bias. However, issues of
Unconscious bias refers to hidden prejudices that affect sexism and racism are not unique to the US. We believe
decision-making in situations such as recruitment and all companies should address these issues through
promotion of employees. These hidden biases often concerted efforts within diversity and inclusion.
disproportionately impact women and ethnic minorities,
who end up without the same favourable opportunities
awarded their white male counterparts.
CASE NVIDIA USES AI TO TACKLE Unconscious bias is also a focus for NVIDIA in the
UNCONSCIOUS BIAS retention and promotion phase, with the company
NVIDIA has integrated diversity and inclusion into the committed to equal opportunity for their employees. As
company culture with a specific focus on mitigating such, NVIDIA has included unconscious bias awareness
unconscious bias. In the recruitment process, NVIDIA pri- in compliance training for managers. Furthermore, they
oritises recruitment of women and underrepresented mi- have conducted training with over 300 leaders to build
norities and they have crafted job descriptions designed their awareness about unconscious bias. These actions
to eliminate unconscious biases using an AI-based show that NVIDIA is taking responsibility for unintended
third-party tool. Their recruitment process is continuously biases and that they are willing to work in a systematic
evaluated to ensure an equal opportunity recruitment manner to ensure diversity within the organisation.
pipeline, and the company engages in outreach activities
at industry events targeted at women and minorities.
*)
1) Dataset:
Source: European companies listed in the STOXX 600 Europe Index
globaltaxjustice.org/en/latest/427-billion-lost-tax-havens-every-year
26 | Impact report | 2020IMPACT 6
RESPONSIBLE TAX BEHAVIOUR
2020 7%
Public country-by-country reporting 2019 7%
2018 5 %
2020 44 %
Responsible tax policy 2019 41 %
2018 30 %
2020 2%
Endorsement of the B Team’s Responsible Tax Principles Previous years n/a*
According to the United Nations, taxes are an essential An example of a multi-stakeholder approach in the area
part of achieving the SDGs and they are a key mecha- of tax transparency is the new GRI Tax Standard, which
nism through which companies contribute to the com- came into effect 1 January 2021. This new standard is
munities where they operate. However, tax avoidance part of the GRI Standards, which is the most widely used
has been an issue for decades and is a leading driver sustainability reporting framework.
of inequality. It is estimated that the global economy
loses $427 billion annually in global corporations not The GRI Tax Standard represents the latest develop-
paying the taxes they owe 1 . It is therefore important that ment toward more transparent tax disclosures, and we
companies proactively address their tax behaviour in a hope that companies will implement the standard and
responsible way to ensure sustainable development. support a more transparent system. Tax transparency
is an area where there is room for improvement both in
International tax frameworks are consistently challenged general and in the SDG Invest portfolio specifically. We
by the complexity of new business models despite are looking for companies that are leaders in promot-
attempts to increase transparency in the tax system. A ing responsible tax behaviour and we will continue to
positive development in recent years has been the in- engage with our companies to ensure that their taxes
creasingly collaborative approaches to tax. Involving mul- contribute to sustainable development.
tiple stakeholders in efforts to increase transparency is
essential to ensure consistent and coherent tax systems.
»It is estimated that the global economy loses
$427 billion annually in global corporations
not paying the taxes they owe. It is therefore
important that companies proactively address
their tax behaviour in a responsible way to
ensure sustainable development.«
*) As we updated our Sustainability Scorecard methodology in 2020, this parameter is not comparable to data from 2018 and 2019.
1) Source: globaltaxjustice.org/en/latest/427-billion-lost-tax-havens-every-year
Impact report | 2020 | 27You can also read
