What is a risk-based divestment?
We monitor ESG risks at all companies that are in the fund’s portfolio or the fund’s benchmark index. Investing in companies with a business model that will not be profitable or sustainable in the longer term could affect the fund’s returns. Companies can also have a negative impact on the environment and on society. If a company’s approach to these issues exposes the fund to substantial long-term risks, we may divest from the company.
Risk-based divestments are financial decisions. They are not based on recommendations from the Council on Ethics or governed by ethical criteria. They are made within the general limit for portfolio deviation from the benchmark index.
We may decide to divest from a company if:
- It does not have credible plans for reducing its ESG risks
- The size of the investment is relatively small
- Other tools, such as dialogue and voting, are unlikely to be a success
Divestment is a last resort
Risk-based divestments may also be made as part of our role as a long-term owner and are a last resort in our work on active ownership. Divesting from a company will not necessarily affect how it addresses ESG risks, so we always try first to steer it in a sustainable and profitable direction through active ownership – dialogue and voting. If this work does not make any progress, we may then decide to divest.
We divested from 74 companies in 2022 following ESG risk assessments. We identified companies with particularly high risks in a number of areas, including potential violations of human and labour rights, loss of biodiversity and deforestation, corruption and tax.
Altogether, we have divested from 440 companies since 2012. We do not publish information on which companies we divest from, but we are open about the criteria for these decisions and about the types of ESG risk that have led to divestments.
Impact on the fund’s equity returns
Since 2012, risk-based divestments have increased the cumulative return on equity management by around 0.26 percentage point, or 0.01 percentage point annually. Risk-based divestments linked to climate change and human rights have increased the cumulative return on equity management by 0.14 and 0.05 percentage point respectively, while those linked to corruption have decreased the cumulative return on equity management by 0.03 percentage point, while those linked to water management have had a negligible impact.
View our investments
Historical information on all of the fund's investments can be found in our holdings list. You can search by country, asset class and sector. THe information is updated annually and is available for every year since our first investment in 1998.
Last saved: 14/06/2023