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Risk monitoring

We analyse risks relating to environmental, social and governance issues. This is an integrated part of the fund's risk analyses and contributes to an overview of the fund's total risk exposure.

Monitoring environmental, social and governance risks in the portfolio is an important aspect of our responsible investment management. We take a systematic approach to risk monitoring. Our approach means that we perform general assessments before going into specific issues in greater depth. Risk is assessed at the market, sector and company level. The assessments contribute to a greater understanding of risk in the portfolio.

Once risks are identified, they are then analysed, monitored and considered for ownership activity or activity directed at market standard setters. Aggregated risk assessments can lead to adjustments to the portfolio, or restrictions affecting specific markets, sectors, or groups of companies. Over time, we have structured our gathering and use of environmental, social and governance information, and expanded our databases on non-financial data.

COUNTRY and sector risk

We work continuosly to improve our understanding of risk concerning environmental, social and corporate governance issues at the country and sector levels.

In addition to non-financial data at the country or market level, we have corresponding data for different sectors’ exposure to the same risks. This means that we can analyse and assess environmental, social and governance risks at the country and sector levels, as well as look at overlapping risks between countries and sectors. Such assessments facilitate the identification of high-risk areas of the portfolio, either on a stand-alone basis or based on a particular theme, and help us identify companies which warrant further analysis.

SECTOR Analysis

Our general approach to risk monitoring also helps us identify sectors with elevated exposure to environmental, social or governance risks. When doing sector analysis we are concerned with risks that companies may be exposed to, and with the performance of the companies in managing these risks compared to their sector peers. Elevated risk exposure may warrant further analysis of a particular sector.

Company Analysis

We produce company reports looking at corporate governance, environmental and/or social issues. We divide these assessments into three categories.

Material ownership reports

We analyse companies where the fund has a significant ownership share. In these analyses, we aim to identify and evaluate both short and long-term risk exposures.

Incident briefs

We monitor companies and markets using various information systems and global media monitoring to capture incidents that may be relevant for the portfolio. After an initial incident evaluation, companies are chosen for further analysis in an incident brief. The incident briefs are sometimes followed by more extensive company analysis.

COMPANY REPORTS

Sector assessments and incident briefs sometimes uncover a need for further analysis of individual companies. Company reports look in more detail at business drivers and risk factors for the specific company. We assess whether and how environmental, social and governance issues could affect the company.