Principal Adverse Impact on Sustainability Factors-

Principal Adverse Impact on Sustainability Factors

Financial market participant Norron AB, 549300797MRPM953BJ78
Publication date: 2023-02-28

Summary

Norron AB, 549300797MRPM953BJ78, considers principal adverse impacts of its investment decisions on sustainability factors.

The present statement is the consolidated statement on principle adverse impacts on sustainability factors of Norron AB.

This statement on principle adverse impacts on sustainability factors covers the reference period from 1 January to 31 December 2022.

Norron’s investment universe includes multiple organisations and thus various kinds of adverse impacts on sustainability factors. Norron therefore considers a wide range of environmental and climate indicators, as well as indicators related to social conditions and employee matters, respect for human rights and issues regarding corruption and bribery. As a first step to limit the adverse impacts on sustainability factors, Norron uses exclusion criteria that applies to all funds. Furthermore, Norron makes an assessment of the principle adverse impacts on sustainability factors for investments made within the funds, with the exempt for when data related to these factors is not available. Norron primarily uses first-hand data from the portfolio company, but also uses information from third-party resources in case the investee company does not provide sufficient data. In the aim to influence existing portfolio companies to reduce their adverse impacts on sustainability factors, Norron applies an engagement approach that builds on active ownership in line with Norron’s principles for shareholder engagement.

This statement does not include data for these sustainability indicators, but will be published on 30 June 2022 at the latest. Only then will the statement include explanations for the adverse impacts on sustainability factors, including the measures taken and planned, as well as targets for the next reference period.

Description of the principal adverse impacts on sustainability factors

Norron prioritises the following indicators for principal adverse impacts on sustainability factors. This statement does not include data for these sustainability indicators, but will be published on 30 June 2022 at the latest. Only then will the statement include explanations for the adverse impact on sustainability factors, including the measures taken and planned, as well as target for the next reference period.

Indicators applicable to investment in investee companies

Adverse sustainability indicator

Metric

Impact 2022

Impact 2021

Explanation

Actions taken, and actions planned and targets set for the next reference period

Climate and other environment-related indicators

Greenhouse gas emissions

1. GHG emissions

Scope 1 GHG emissions

First data published on 30 June 2023 (at the latest)

n/a

Adverse impacts for this sustainability indicator are considered

Scope 2 GHG emissions

First data published on 30 June 2023 (at the latest)

n/a

Adverse impacts for this sustainability indicator are considered

Scope 3 GHG emissions

First data published on 30 June 2023 (at the latest)

n/a

Adverse impacts for this sustainability indicator are considered

Total GHG emissions

First data published on 30 June 2023 (at the latest)

n/a

Adverse impacts for this sustainability indicator are considered

2. Carbon footprint

Carbon footprint

First data published on 30 June 2023 (at the latest)

n/a

Adverse impacts for this sustainability indicator are considered

3. GHG intensity of investee companies

GHG intensity of investee companies

First data published on 30 June 2023 (at the latest)

n/a

Adverse impacts for this sustainability indicator are considered

4. Exposure to companies active in the fossil fuel sector

Share of investments in companies active in the fossil fuel sector

First data published on 30 June 2023 (at the latest)

n/a

Adverse impacts for this sustainability indicator are considered

Companies with extraction of coal, gas and oil (fossil fuels) that exceeds 5% (of turnover) are excluded.

5. share of non-renewable energy consumption and production

Share of non-renewable energy consumption and non-renewable energy production of investee companies from non-renewable energy sources compared to renewable energy sources, expressed as a percentage of total energy sources

First data published on 30 June 2023 (at the latest)

n/a

Adverse impacts for this sustainability indicator are considered

6. Energy consumption intensity per high impact climate sector

Energy consumption in GWh per million EUR of revenue of investee companies, per high impact climate sector

First data published on 30 June 2023 (at the latest)

n/a

Adverse impacts for this sustainability indicator are considered

Biodiversity

7. Activities negatively affecting biodiversity-sensitive areas

Share of investments in investee companies with sites/operations located in or near to biodiversity-sensitive areas where activities of those investee companies negatively affect those areas

First data published on 30 June 2023 (at the latest)

n/a

Adverse impacts for this sustainability indicator are considered

Water

8. Emissions to water

Tonnes of emissions to water generated by investee companies per million EUR invested, expressed as a weighted average

First data published on 30 June 2023 (at the latest)

n/a

Adverse impacts for this sustainability indicator are considered

Waste

9. Hazardous waste and radioactive waste ratio

Tonnes of hazardous waste and radioactive waste generated by investee companies per million EUR invested, expressed as a weighted average

First data published on 30 June 2023 (at the latest)

n/a

Adverse impacts for this sustainability indicator are considered

Indicators for social and employee, respect for human rights, anti-corruption and anti-bribery matters

Social and employee matters

10. Violations of UN Global Compact principles and Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises

Share of investments in investee companies that have been involved in violations of the UNGC principles or OECD Guidelines for Multinational Enterprises

First data published on 30 June 2023 (at the latest)

n/a

Adverse impacts for this sustainability indicator are considered

11. Lack of processes and compliance mechanisms to monitor compliance with UN Global Compact principles and OECD Guidelines for Multinational Enterprises

Share of investments in investee companies without policies to monitor compliance with the UNGC principles or OECD Guidelines for Multinational Enterprises or grievance/
complaints handling mechanisms to address violations of the UNGC principles or OECD Guidelines for Multinational Enterprises

First data published on 30 June 2023 (at the latest)

n/a

Adverse impacts for this sustainability indicator are considered

12. Unadjusted gender pay gap

Average unadjusted gender pay gap of investee companies

First data published on 30 June 2023 (at the latest)

n/a

Adverse impacts for this sustainability indicator are considered

13. Board gender diversity

Average ratio of female to male board members in investee companies, expressed as a percentage of all board members

First data published on 30 June 2023 (at the latest)

n/a

Adverse impacts for this sustainability indicator are considered

14. Exposure to controversial weapons (anti-personnel mines, cluster munitions, chemical weapons and biological weapons)

Share of investments in investee companies involved in the manufacture or selling of controversial weapons

First data published on 30 June 2023 (at the latest)

n/a

Adverse impacts for this sustainability indicator are considered

Companies involved in the production or distribution of controversial weapons are excluded.

Indicators applicable to investments in sovereigns and supranationals

Environmental

15. GHG intensity

GHG intensity of investee countries

First data published on 30 June 2023 (at the latest)

n/a

Adverse impacts for this sustainability indicator will be considered for investments in sovereigns and supranationals

Social

16. Investee countries to social violations

Number of investee countries subject to social violations (absolute number and relative number divided by all investee countries), as referred to in international treaties and conventions, United Nation principles and, where applicable, national law

First data published on 30 June 2023 (at the latest)

n/a

Adverse impacts for this sustainability indicator will be considered for investments in sovereigns and supranationals

Other indicators for principal adverse impacts on sustainability factors

Emissions

4. Investments in companies without carbon emission reduction initiatives

Share of investments in investee companies without carbon emission reduction initiatives aimed at aligning with the Paris Agreement

First data published on 30 June 2023 (at the latest)

n/a

Adverse impacts for this sustainability indicator are considered

Anti-corruption and anti-bribery

15. Lack of anti-corruption and anti-bribery policies

Share of investments in entities without policies on anti-corruption and anti-bribery consistent with the United Nations Convention against Corruption

First data published on 30 June 2023 (at the latest)

n/a

Adverse impacts for this sustainability indicator are considered

Description of policies to identify and prioritise principal adverse impacts on sustainability factors

In 2021-12-08, the board established a policy for sustainable investments that forms the basis of the work to reduce adverse impacts from Norron’s investments. In addition to the policy for sustainable investments, there are exclusion criteria that applies for all funds. The board holds the responsibility to ensure that the work is in line with the company strategy while implementation in terms of strategies and processes is the responsibility of the CEO. Moreover, the Investment Manager is to evaluate and select investee companies with respect to the policy for sustainable investments, which includes identifying and prioritising the principle adverse impacts on sustainability factors for each respective fund. The compliance function controls that the organisation conforms to the established strategies and processes.

Negative impacts of Norron’s investments, directly through the investee company or indirectly through its value chain (upstream and downstream), can include:

Negative impacts on the environment and climate. For example, severe environmental damage through emissions to air, water or land; greenhouse gas emissions; biodiversity loss; and deforestation.
Negative impacts on labour rights, human rights, or children’s’ rights. For example, violations of labour rights as prescribed in the eight ILO Core Conventions; and violations of human rights as stipulated in the Universal Declaration of Human Rights, the European Convention on Human Rights, the EU Charter of Fundamental Rights and the UN Convention on the Rights of the Child.
Negative impacts through financial crime or other criminal activities. For example, corruption; money laundering; and terrorism financing.

Norron applies the following exclusion criteria:

Pornography
Production: 0% of turnover
Distribution: maximum 5% of turnover

Tobacco
Production: 0% of turnover
Distribution: maximum 5% of turnover

Cannabis
Production: 0% of turnover
Distribution: 0% of turnover

Alcohol
Production: maximum 5% of turnover

Controversial weapons
Production: 0% of turnover
Distribution: 0% of turnover

Conventional weapons
Production: maximum 5% of turnover
Distribution: maximum 5% of turnover

Oil, gas and coal
Extraction: maximum 5% of turnover

Norron also exludes companies where there is significant risk of corruption or financial crime, and companies where international standards have been violated (for example, human rights, labour rights, children’s rights or environmental norms).

By applying these exclusion criteria, Norron reduces the exposure to principal adverse impacts on sustainability indicators.

Norron has chosen to consider two additional indicators for adverse impacts on sustainability factors:

Investments in companies without carbon reduction initiatives
Lack of anti-corruption and anti-bribery policies

Norron reports on the indicator ”investments in companies without carbon reduction initiatives” as Norron has set scientific climate targets verified by the Science Based Targets initiative. This entails measuring the proportion of investments within the funds that have targets verified by the SBTi. Norron’s own objectives are:

A minimum share of 50% of the bond portfolio will consist of investments with a verified scientific target by 2026
A minimum share of 52% of the equity portfolio will consist of investments with a verified scientific target by 2026
All Norron’s holdings will have verified scientific targets by 2040

For Norron, it is of utmost importance that the companies we invest in take an active approach to reduce their climate impacts and want to contribute to the attainment of the Paris Agreement. Although a target is no guarantee that the objective will be met, it signals that the company has a clear ambition and understanding for the question at hand. Committing to the SBTi also requires consistent reporting that allow for follow-up.

Norron reports on the indicator “lack of anti-corruption and anti-bribery policies” as this is an important parameter in our assessment on compliance with good governance practices and minimum safeguards for the sustainable investments. The target is that all Norron’s investmens will have such a policy in place. We understand that smaller companies may not have a policy at the time of investment. If that is the case, Norron will actively work on influencing the company to establish such policy.

For Norron, it is of significant importance that all companies we invest in take the risk of corruption seriously and take measures to mitigate the risk of corruption. A policy works both as a statement and a tool to do this.

The Investment Manager primarily uses data from the portfolio company’s annual and/or sustainability report, together with the complementing sustainability questionnaire published by the company, if available. In addition, the Investment Manager uses data from Norron’s ESG questionnaire that is sent out annually to all portfolio companies with the aim to collect comparable data from all investments.

To follow up the climate objectives of the investments, the Science Based Targets initiative’s database is used, and to measure the share of Global Compact signatories, the Global Compact database is used.

When assessing whether an investment contributes to one of the fund’s sustainable objectives and to one of the SDGs, a qualitative and quantitative analysis is made using the company’s external communication and other publicly available information (ratings, audits etc.).

To ensure data accuracy and quality, the Investment Manager primarily uses first-hand data provided by the company. In case enough data is not provided, estimates from third-party sources may be used, but should be avoided to greatest possible extent. All handling of data is done in the portfolio management system.

The process of measuring and reviewing how the fund promotes social and environmental characteristics holds certain limitations, as some companies do not publish all the data required to conduct a complete analysis. Additionally, the basis of the analysis can vary between companies as there is currently no common standard for the reporting of all data. The Investment Manager is aware of these limitations and takes them into consideration when making a qualitative and quantitative analysis of each investment, which is to be documented. The reporting standards that are to be implemented will help facilitate this analysis, as many of the fund’s holdings will be required to report in accordance with certain standards. However, the Investment Manager considers that the current limitations do not hinder the ability to promote environmental or social characteristics in the fund, nor the aim to contribute to the SDGs and the achievement of the 2030 Agenda.

When first-hand data from the company is not available, estimates from third-party sources may be used. The Investment Manager is aware that the estimates may be inaccurate and therefore uses these with caution. The Investment manager always discloses the sources used in the analysis and reporting of data.

Engagement policies

As part of the duties of an Investment Manager, an important element is to represent the funds in ownership issues related to share ownership in Norron’s investee companies. In every shareholder engagement, the Investment Manager is responsible for protecting the interests of the fund’s shareholders. Moreover, Norron considers that an active management philosophy maximises the sustainable and economic value generated to the shareholders of the funds.

Norron applies an active management philosophy in its quest to generate sustainable and economic value creation for its fund shareholders. The ownership strategy is to follow a productive owner and engagement strategy, maintaining a continuous dialogue with the companies we invest in. By doing so, Norron can follow up and influence the sustainability work of the investee companies to ensure that it contributes to achieving the sustainability characteristics of the funds. Ongoing interactions take place in the form of meetings with company representatives, conferences and workshops, meetings with third party analytics, case studies, and voting at general meetings on material matters.

As investors, Norron works together with the portfolio companies and follows a sincere owner and engagement strategy, maintaining a continuous dialogue with the companies we invest in. By doing so, we can follow up and influence the sustainability work of the investee companies to ensure that it meets the requirements and expectations of Norron. Norron’s employees also participate in different sessions with the aim of increasing awareness and knowledge on the sustainability work of the portfolio companies.

Norron has a process for how work with the portfolio companies is to be structured. This includes gathering information about companies, documenting company interactions, screening against sustainability criteria, managing incidents in portfolio companies and designing and implementing an internal sustainability analysis. All sustainability data that we hold is stored in an ESG database. That way we can monitor the sustainability progress and risk of the portfolio companies in an efficient and structured manner. Additionally, we can easily identify the principal adverse impact factors for sustainable development in the funds.

Companies that Norron invests in are analysed both prior to an investment and during the holding period. The analysis is built on the information that is gathered on an ongoing basis and on external analysis. In the ongoing analysis, sustainability factors are considered both for individual investments and on an aggregate fund level. This analysis then lays the foundation for whether an investment should proceed or be liquidated, and what measures may need to be taken in order to achieve the sustainable characteristics of the fund.

In the case an incident occurs in one of the fund’s investee companies, an assessment of the severity level is to be made.

If the incident is of low severity, the incident is to be documented for awareness purposes.
If the incident is of medium severity, the company is to be contacted for monitoring and follow-up.
If the incident is of high severity, the company is to be included on Norron’s ESG watchlist until the company has proven that the incident has been remediated and that there are processes in place to prevent similar future occurrences. In case the company does not take sufficient action in relation to the character and scope of the incident, the investment may be excluded from the investment universe.

References to international standards

Norron is a signatory to the UN Principles for Responsible Investment (UNPRI) and the UN Global Compact, and works in line with the six principles for responsible investment as well as the ten principles for responsible business. These principles form the basis of the management approach and are considered in each investment decision. Norron has a target that all investee companies will become signatories to the UN Global Compact. Thus, Norron regularly follows up the proportion of investments that are signatories to the UN Global Compact and maintains an active dialogue with the companies who are not yet signatories, with the aim of encouraging them to become signatories and align their business with the principles.

Historical comparison

No previous data. A historical comparison will be published for the first time in 2024.

Principal Adverse Impact on Sustainability Factors