September 30, 2010
Two official reports recently published in Denmark are most likely to spur institutional investors further into Responsible Investment and engagement. The Danish government advocates engagement rather than exclusion and DanWatch calls for more transparency and cooperation in these efforts. GES Investment Services has provided advice and positive engagement examples for both reports.
In late September, the Danish government published a guiding document to responsible investment, ”Vejledning till ansvarlige investeringer”. The Minister of Economic and Business Affairs, Brian Mikkelsen, made the government’s stance clear in the introduction:
“The government finds it very important that investors take social responsibility in their investments /…/ excluding certain companies is not the best way. Investors have a special relation to company management and can urge the company to improve poor performance. This is a far more effective tool for promoting social responsibility and sustainability than divestment.”
Using the UN Principles for Responsible Investment (PRI) as a benchmark, the report presents various practical examples of how Danish investors have implemented its six principles. Among these, are Nykredit and Sydinvest who engage with companies via GES Investment Services, also a PRI signatory and part of the government’s working group for the report.
Coincidentally, the Danish NGO DanWatch has also released a related report, “Aktivt ejerskab – virker det?” (“Active ownership – does it work?”). It is based on interviews with Denmark’s two largest institutional investors, ATP and PKA, the two largest banks, Danske Bank and Nordea, and with GES Investment Services, which provides advice and engagement services to a number of Danish institutional investors like Nykredit, LD, LD-invest, PFA, Funktionærpension, Jyske Invest, Jyske Bank, Sydinvest and Sydbank.
The report concludes that there are several examples of how Danish and Scandinavian investors’ engagement with companies has had a positive impact. One highlighted case is GES’ engagement with the world’s leading security company G4S, which has contributed to improved labour standards in emerging markets. Another conclusion is that there is a need for more cooperation and coordination between investors in order to increase their influence on companies, as well as more transparency on the engagement activities in order to be perceived as a trustworthy strategy.
Finally, DanWatch concluded that there is a lack of consensus on the definition of engagement. Interviewee Erik Alhøj, Managing Director of GES Investment Services Denmark, challenged a prevailing misinterpretation:
“It is very important to differentiate between dialogue and engagement. Some investors claim that they do engagement – maybe because it has become a buzzword – but in reality they are only conducting dialogue with some of the controversial companies. Company dialogue is in my point of view just a regular part of the analysis before engagement in order to ensure fairness towards the companies accused of, for example, violating international norms. Engagement additionally requires specific goals for necessary changes, concrete suggestions on measures, various instruments to influence the company and continuous follow-up.”
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