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How does SKAGEN work with sustainability?

Sustainability expert Sondre Myge Haugland answers questions about materiality, how SKAGEN influences development and what makes a difference over time

How can a fund management company contribute to sustainable development?

Through SKAGEN's funds, our clients are part-owners of many different companies around the world. If we choose to invest in companies that have a sustainable business model or that demonstrate positive change, then we are part of driving the development. Fund management companies, banks and other players in the financial market that influence how capital is distributed and used in society have an important and fundamental role to play.

How do SKAGEN's funds work with sustainability?

Our portfolio managers and sustainability team work together on the thorough company analysis of all investment cases. This is at the heart of SKAGEN's active and value-based investment philosophy. They have a variety of tools and sustainability data they can use in this process from Sustainalytics, TPI and Refinitiv amongst others.

Our Group-wide policy sets a strict framework for what type of companies we can, and cannot, invest in. Some sectors and products are excluded from the investment universe. When we own a company, we follow them up on a quarterly basis, and engage with them if we see that it is needed. We are very committed owners who push when needed and help a company make positive change. We also see voting as an important way to influence companies in a more sustainable direction. We usually vote at 90-100 percent of meetings and general meetings.

Would you say that active ownership is where SKAGEN makes the biggest difference?

Yes absolutely. We put a lot of effort into this and also like to invest in undervalued companies, where we can support their efforts to become more sustainable. We can make a big difference like this, in addition to using voting rights. As a last resort, we exclude companies, although we would prefer to be involved in changing companies.

How might an engagement with a company play out in practice?

The dialogue starts with an issue we believe it is important for a company to address. These are issues that we believe could impact the company's reputation, for example, but that could also increase the risk to our investment. This type of engagement can take a long time to implement and accommodate. That is why we often have several status meetings along the way to ensure that a company is on the right path towards the goal.

Which questions are most important?

Important sustainability factors are those that affect a company's bottom line, and what these factors are vary from industry to industry. In the energy sector, for example, CO2 emissions are an important factor, while for a software company, data security and privacy are crucial.

Furthermore, we believe that all companies should comply with global norms and standards.

We also work extensively on corporate governance issues. A good management team that has a long-term and sustainable business strategy and treats its owners fairly is the basis for our clients to get the best possible return. And not least, it is important that companies treat their employees well and do not have a detrimental impact on the environment.

Is it important for clients that the funds invest sustainably?

We see increased demand for responsible investments in all client segments and in all markets. We are convinced that sustainability and long-term, risk-adjusted returns go hand in hand. Companies with sustainable business models are what will give our clients the best returns over time. Integrating sustainability into investment decisions also helps us reduce the risk in our investments. Inadequate sustainability work, for example in environmental matters, can lead to increased costs, lower demand for a company's products and damage the value of the company.

Does SKAGEN work with sustainability as a company as well, in addition to the funds?

Yes. As a fund management company, we make the biggest difference through the funds' investments, but we would not be credible in the long run if we did not contribute positively as an employer, buyer and participant in the community. We are striving to become a more sustainable company, promote diversity and gender equality and raise awareness about climate challenges.

We use the UN Global Compact principles as guidelines when it comes to human rights, labour law, the environment and anti-corruption, in addition to the UN's 17 sustainability goals. We have chosen to focus on three of the latter: equality, decent working conditions and economic growth, as well as combating climate change.

How can one follow your sustainability efforts?

Since 2020, we publish a separate sustainability report every quarter. Here we provide information about the sustainability work being done in the funds and in SKAGEN as a company. We report on the funds' CO2 footprint and ESG risk ratings and provide updates on current issues. The report is based on three pillars: active ownership, integration in the investment process and exclusion.

On the sustainability theme page on our website, we describe in more detail how we work with sustainability and publish news and articles.

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Historical returns are no guarantee for future returns. Future returns will depend, inter alia, on market developments, the fund manager's skill, the fund's risk profile and management fees. The return may become negative as a result of negative price developments.