Our asset management
Each investment decision is a result of an active investment process. Most of our assets are managed in-house. However, we do cooperate with a select group of external managers, mainly within alternative assets.
When managing our beneficiaries’ capital, sustainability is translated into environmental, social and governance factors (ESG). As a long-term investor, ESG factors can be financially material. Therefore, we consider ESG in all our investment decisions and in our asset management, both from a risk and an opportunity perspective. Our Responsible Investment Policy is aligned with our investment strategy.
We believe in engagement and stewardship to promote long-term value creation. That includes regular dialogue with companies on material aspects, including ESG, in addition to voting at shareholder meetings and collaborating with other owners.
Alecta is a member of the Net-Zero Asset Owner Alliance and committed to the Paris Agreement 1.5°C ambition, and we aim to achieve a net-zero investment portfolio by 2050. We regularly stress-test our portfolio, and the findings feed back into the open and honest dialogues we have with the companies in our portfolio.
The long-term perspective is essential in pension capital
Our main goal is to ensure that we generate as much value as possible for our customers, long into the future. Actively considering how companies manage social and environmental risks and opportunities is essential to fulfilling that fiduciary duty.
We believe that companies that are equipped to handle the transition to a net-zero emissions economy and have integrated ESG factors into their strategies and business models, offer more value, stability, and resilience. Therefore, we don't see sustainability as being at odds with delivering strong financial returns – we believe that it will safeguard returns over the long term.
Policies and practices
Alecta’s Responsible Investment Policy and principles for shareholder engagement reflect 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 serves as an important reference point.
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 directs 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.
As stated in our active investor strategy, we see stewardship as being primarily about engagement and dialogue with investee companies, rather than divestment. We want to support each company on its journey towards net zero – which includes a credible plan, clear milestones and active leadership. Outcomes from our dialogues with companies inform how we exercise our voting rights and collaborate with other organizations that share our goals.
To get a sense of our progress towards net zero, we stress-test our portfolio against different climate scenarios. We build up our portfolio-level analysis using information about the carbon emissions of each investee company. Where companies seem to be missing the mark, 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.
ESG approach
Our strategies and procedures to ensure that we deliver on our mission include diligent governance principles. Alecta’s Board of Directors has adopted a Responsible Investment Policy with the underlying principle that the companies we invest in must follow international conventions and agreements. Covering environment and climate, human rights, labor law, corruption and controversial weapons, our conventions reflect in the contents of the UN Global Compact and the OECD Guidelines for Multinational Enterprises.
Alecta’s in-house ESG team supports asset management in strengthening and further developing the ESG approach in relevant ways for the different asset classes in our investment portfolio. This work includes processes for data handling and systematic follow-ups.
ESG integration
Alecta takes ESG aspects into consideration in every investment decision, supported by analysis adapted to the respective asset class. ESG considerations are an integral part both before making investment decisions and during our holding period.
Our ESG analysis takes into consideration both sustainability risks and investments’ impact on sustainability factors. We believe that investees making short-term business decisions with large negative impact on customers, employees, owners or society at large can be detrimental to shareholder value.
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 assessment 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
Since the mid-1990s, Alecta has been actively engaged in shareholder-lead nomination committees of Swedish listed companies. In line with the Swedish corporate governance praxis, nomination committees are composed by the largest shareholders. Our participation is guided by the ambition to ensure that the boards have a strong pool of expertise and a 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 Governance report.
We engage proactively and reactively with our holding companies on a variety of topics, including climate, remuneration, gender diversity, human rights and other ESG aspects.
Norm-based screening
Each investment decision into a new company is preceded by a specific screening process, carried out by an external research provider. This screening determines whether the company is complying with international conventions and norms. Alecta refrains from investing in companies which violate the conventions. All equity and corporate bond holdings are screened quarterly to identify companies that are in breach of international norms.
In case of severe incidents in a holding, Alecta will contact the company to learn more and to understand how the company is addressing the issue. If there is a violation and the dialogue fails to achieve the desired result within two years, Alecta will divest 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.
Exclusions
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 via data from an external party.
Alecta does not invest in companies whose business, directly or indirectly, includes controversial weapons. 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 thermal coal 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 greenfield fossil extraction.
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 jurisdictions 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 rank poorly in human rights and democracy, have widespread corruption or are on the UN, US and EU sanction lists.
