Our sustainability work is core to delivering Alecta’s overall mission: to maximize the value of collectively agreed occupational pensions for both our corporate and private customers. We strive to support the companies we invest in by contributing to efficient and value-creating core business, managing risks and legitimacy issues and to have a positive impact on society.
The majority of our assets are managed in-house, but we cooperate with some carefully selected external managers to manage capital mainly within real assets. We are an active investor, basing decisions on fundamental analysis.
When managing our beneficiaries’ capital, sustainability is translated into ESG (environmental, social and governance factors). As a long-term investor ESG factors can be financially material, and therefore we consider ESG in all our investment decisions and in our asset management, from both a risk and an opportunity perspective. Our Responsible Investment Policy is aligned with our investment strategy.
As an active investor with carefully selected assets, we believe in engagement and stewardship to promote long-term value creation. For us, stewardship includes regular dialogue with companies on material aspects, including ESG, voting in shareholder meetings and collaborating with other owners.
Alecta is a member of the Net-Zero Asset Owner Alliance and committed to an investment portfolio that aligns with the Paris Agreement 1.5°C ambition and we aim to achieve net-zero by 2050. We regularly stress-test our portfolio, and the findings feed back into the conversations that we have with the companies in our portfolio.
Our main goal is to ensure that we generate as much value as possible for our customers. Actively considering how companies manage social and environmental risks and opportunities is essential to fulfilling that fiduciary duty. We are convinced that companies that are both well-managed and well-equipped to manage the transition to a net-zero emissions economy offer more value, stability, and resilience.
As a pension company we need to be able to deliver returns to our customers many years into the future. Our view is that investee companies that have integrated environmental, social and governance (ESG) factors into their strategies and business models are better positioned for value creation and are more resilient in crisis. Therefore, for us sustainability is not at odds with delivering strong financial returns, we believe that it will safeguard returns over the long term.
Alecta’s Responsible Investment Policy and principles for shareholder engagement reflects our view that stewardship is a critical part of being an active investor. The policy is approved by our board of directors. The Swedish Corporate Governance Code has been a useful reference.
The value of this policy is twofold: it makes it easier to show stakeholders what behavior they can expect from us in the market, and it steers our stewardship work. The policy is supplemented by more specific guidelines and targets, and we have processes in place to assess ESG as part of the pre-investment analysis and during holding.
For us, in line with our active investor strategy, stewardship is primarily about our engagement and dialogue with investee companies rather than divestment. We want to understand a company’s potential and then support it on its path to net zero – so long as the company has a trustworthy plan, clear milestones that they are meeting and engaged leadership. Beyond this, we exercise our voting rights and collaborate with other organizations that share our aims.
To get a sense of where we are on our net-zero target, we stress-test our portfolio against climate scenarios. We build up our portfolio-level analysis from information about the carbon emissions of each investee company. Where companies seem to not be on track, or where we have concerns regarding climate or other ESG aspects, we take our analysis and questions directly to the company. Alecta publishes an annual Climate report in accordance with TCFD.
Our strategies and procedures for ensuring that we deliver on our mission over the long term includes diligent governance principles. Alecta’s Board of Directors has adopted a Responsible Investment Policy with the underlying principle that the companies must follow international conventions and agreements. The conventions cover environment, human rights, labor law, corruption and controversial weapons as well as initiatives such as the UN Global Compact, the Paris climate agreement and the OECD Guidelines for Multinational Enterprises.
Alecta’s in-house ESG team supports the asset management in strengthening and further developing the ESG approach in a relevant way for different asset classes in the investment portfolio. Including processes, data and systematic follow-up.
Alecta takes ESG aspects into consideration in every investment decision, supported by analysis adapted to the respective asset class.
Alecta has a global equity portfolio of about 100 holdings and a corporate bond portfolio with equally few issuers. We evaluate companies with regards to corporate culture, management and foremost their business model. We believe short-term business decisions with large negative impact on customers, employees, owners or society at large are detrimental to shareholder value.
Our ESG analysis is focused on both risks and opportunities. In the fundamental analysis, applied to all our equity holdings, ESG considerations are an integral part both before investments and during our holding period. We use external and internal research to inform our investment decisions.
Each investment, new and existing, is scrutinized with the help of external ESG research. It includes a relative rating of each company within their respective sector, as well as an absolute measurement of their ESG risks. The rating is based on company performance within areas such as climate- and waste management, corporate governance, management of employees and human rights.
Voting and engagement
As an active owner, Alecta influences the companies it invests in, through participation in the nomination committees. Since the mid-1990s, in line with the Swedish corporate governance praxis, Alecta has been actively engaged in nomination committees of Swedish listed companies where we are among the largest shareholders. Our activities are guided by the ambition that the Board of Directors has a strong pool of expertise, and diverse and dynamic composition.
Alecta’s ambition is to vote at the AGM of every holding company. Voting decisions are disclosed annually after the AGM season. Voting and engagement are described in the annual Ownership policy.
We engage proactively and reactively with our holding companies on a variety of topics, including climate, remuneration, human rights and other ESG aspects.
Each decision to invest in a new company is preceded by a specific screening carried out by an external research provider, which assesses whether the company is complying with international conventions and norms. Alecta refrains from investing in companies which violate the conventions. All equity and credit holdings are screened quarterly to identify companies that are in breach with international norms. In case of reported severe incidents in a holding, Alecta will engage with the company to learn more and to understand how the company is addressing the issue. If the dialogue fails to achieve the desired result within two years, Alecta will sell its holding. Any given year, we engage with a few companies in our portfolio on more severe incidents, but the majority of our dialogues on ESG are proactive.
Alecta does not invest in companies that violate the international conventions that Sweden is a signatory to and before each new investment, a review is carried out by an external party.
Alecta does not invest in companies whose business, directly or indirectly, includes controversial weapons. These are weapons that, because of their effect, cannot be used under international law, either because they affect civilians and soldiers indiscriminately or because they cause unnecessary suffering. These include anti-personal landmines, biological weapons, chemical weapons, cluster munitions, incendiary bombs, laser-blinding weapons and weapons containing non-detectable fragments.
We see the climate transition as a defining sustainability issue, and carbon is the fossil fuel that has the greatest negative impact on the climate. Alecta refrains from investing in or financing companies with more than 5% of their turnover from the extraction of thermal coal and companies with more than 5% of their turnover from energy production based on thermal coal. Alecta also refrains from investing in or financing companies with more than 5% of their turnover from the extraction of unconventional oil and gas.
Alecta does not invest in companies whose core business involves gambling activities or the production of tobacco.
Investments are not made in companies domiciled in jurisdictions that are included in the EU's list of non-cooperative jurisdictions6 with reference to tax and transparency. We also expect that the companies we invest in will not exploit these jurisdictions for tax planning purposes.
We do not engage in direct financing of countries that violate human rights and democracy, have widespread corruption or are on the UN, US and EU sanction lists.