EU regulation on sustainability risks
On March 10, 2021 a new EU disclosure regulation came into effect, requiring financial market participants to provide information about how sustainability risks are taken into account regarding investments in financial products. The aim is to create a more sustainable financial market not least by simplifying comparisons between the sustainability work of various funds. VFF Pension invests solely in funds that meet the Association’s guidelines and the new regulation will provide support in evaluation of fund managers and funds.
Through its investments VFF Pension can make an impact in the areas of environment, social accountability, social conditions, human rights and anti-corruption. In order to shape the direction of its capital management, VFF Pension’s board has specified both Investment Guidelines and a Risk Policy.
The Investment Guidelines stipulate that VFF Pension shall deliver long-term stability and sustainable growth in value. The over-riding goals for capital management are to ensure that the value of the assets always covers pension undertakings in both the long and short terms, and to offer the most competitive bonus rate possible over time. Continued integration of sustainable investments in VFF Pension’s asset management is one of the strategic goals set by the board. VFF Pension aims to achieve a healthy balance between financial, environmental and social values in its capital management. In addition to financial criteria, environmental, social and governance (ESG) factors are a natural consideration in capital management. VFF Pension monitors primarily negative consequences on sustainability factors in the investment process through definition of investment universe, portfolio composition and by playing an active role in invested funds. Identification of primarily negative consequences is conducted both prior to and during the investment process through exclusion, which means that the Association will not invest in funds that place assets in a way that does not meet VFF Pension’s sustainability criteria.
VFF Pension Investment Guidelines
VFF Pension’s criteria for work with sustainable investments is part of the Investment Guidelines set by the board, whereby VCC Pension aims to:
- Maintain a healthy balance between financial, environmental and social values in its capital management.
- Invest in companies that pay due attention to ESG factors and that follow international norms for human rights, working conditions, the environment and anti-corruption. These norms are specified in various UN declarations and conventions.
- Avoid investments in controversial weapons such as cluster bombs, anti-personnel mines, chemical weapons, biological weapons and nuclear weapons.
- Avoid investments in the production of tobacco and pornography, since this kind of operation is not in line with VFF Pension’s values.
VFF Pension’s process for integrating sustainability in capital management
Opt in/Väljer in
In the drive to seek out new investment opportunities, sustainability is an important criterion and VFF Pension looks for fund managers who share the Association’s view of sustainability issues and who meet the Association’s requirements regarding responsible investments. When investing in new funds, VFF Pension obtains information about which ethical criteria the capital manager applies, as well as information about the asset manager’s sustainability process.
Opt out/Väljer bort
In order to reduce any negative impact on its portfolio, VFF Pension opts out of fund managers who do not share the Association’s views on sustainability issues.
On behalf of VFF Pension, ISS ESG reviews all funds in the overall portfolio based on VFF Pension’s sustainability criteria and responsibilities for its capital management. The review is carried out on the portfolio submitted by VFF Pension on the review date. The various funds’ assets are those most recently registered. In particular, ISS ESG assesses the funds’ assets through norms-based screening, sector-based screening and checking specifically for controversial weapons.
Norms-based screening identifies companies that do not respect international norms governing environmental protection, human rights, labour law or anti-corruption. The check for controversial weapons identifies companies involved in anti-personnel mines, cluster bombs, chemical weapons, biological weapons and nuclear weapons. Sector-based screening identifies companies where 5 % or more of their turnover can be related to the production of pornography or tobacco.
The framework of the ISS ESG review includes dialogue with companies that are assessed as violating norms governing environmental protection, human rights, labour law or anti-corruption. The purpose of this dialogue is to collect relevant facts so as to ensure a comprehensive and objective analysis. ISS ESG seeks to identify how the company takes responsibility for specific violations, and also how the company works preventatively to avoid future violations. In addition, VFF Pension conducts active dialogue with fund managers primarily to persuade such companies to make relevant changes rather than exclude them. In cases in which persuasion does not have the desired effect, VFF Pension may opt to exit the fund.
Sustainability rating of the portfolio
Proportion of that part of the portfolio that does not meet the VFF Pension sustainability criteria. Review as per 2020-06-30
- Human rights: 0.07%
- Environmental protection: 0.03%
- Labour law: 0.01%
- Controversial weapons: 0.01%
- Anti-corruption 0.00%
VFF Pension’s remuneration policy
At present VFF Pension does not provide variable remuneration to employees, but if this is introduced in the future the Association will ensure that such remuneration is in strict accordance with the sustainability work conducted by VFF Pension.