Sustainability-related disclosures

Statement on principal adverse impacts of investment decisions on sustainability factors

Nearly all economic activities may potentially have adverse sustainability impacts. At Velliv, we seek to minimise the principal potential adverse impacts our investments may have on sustainability factors such as climate, environmental and social factors.

We do this by continuously monitoring our investments, screening them for potential adverse impacts on the world we live in. The screening is based on international conventions and principles of corporate social responsibility, as well as established standards for coal and oil sands, for example.

Responsible engagement (active ownership) is an important element of Velliv’s responsible investment work. The aim of responsible engagement (active ownership) is to promote the long-term value creation in the companies we invest in, to the benefit of our customers – and promote environmental and social concerns. This means that if a company does not comply with Velliv’s established standards we, often along with other investors, attempt to influence the company to amend its behaviour.

Based on the results of our screening, Velliv can make enquiries and request an explanation/report from companies involved in serious controversies regarding issues with an adverse impact on sustainability. Part of this dialogue can also take place through the asset manager investing on Velliv’s behalf. If the dialogue does not produce noticeable results in the way the companies act, it may ultimately lead to exclusion from Velliv’s investment universe. Velliv additionally exercises responsible engagement (active ownership) by voting at the annual general meetings of the companies we invest in.

We are also in continuous dialogue with our external asset managers to understand and minimise risks in our investments, including sustainability risks, and to take maximum account of the environment and society. Some of our monitoring of the asset managers takes place through regular follow-up and checks on the asset managers’ management of ESG-related risks, compliance with Velliv’s exclusion risk, exercise of responsible engagement, etc.

We publish an exclusion list of the companies we have deselected as an investment option. The exclusion list is published on our website.

At Velliv we are attentive to the carbon footprint of our investments, and we wish to minimise the adverse impact of the carbon emissions of our investments on the climate and the environment. We regularly report on the carbon footprint of the portfolio, which is included in the VækstPension Aftryk product as well as in Velliv’s listed portfolio for the other pension products. See more in Velliv’s climate report here.

As the underlying data develops, we will also report on a range of additional indicators of the adverse sustainability impacts our investments may have. Find out more about our work on responsible engagement work here

Velliv’s responsible investment and engagement policy describes Velliv’s approach to managing any potential adverse sustainability impacts of our investment activities.

Our objective in Velliv is to produce optimum return, taking maximum account of the environment and society when investing on behalf of our customers. This philosophy is also crucial to our savings products VækstPension Aftryk, VækstPension Aktiv and VækstPension Index, and when you invest through our balanced funds in LinkPension. Each of these savings products promotes environmental and social characteristics, but sustainable investment is not their objective. The products are classified as Article 8 products under the EU Disclosure Regulation.

Read more about the environmental and social characteristics of the products, the investment strategy underlying them, the share of sustainable investments and the policies underlying them in the sustainability document relating to each product:

• VækstPension Aftryk
• VækstPension Aktiv
• VækstPension Index.
• LinkPension Aktiv
• LinkPension Index
• VækstOpsparing Aftryk
• VækstOpsparing Aktiv
• VækstOpsparing Index

All information is provided for the Medium risk (Mellem risiko) profile. When you set up or change a savings product, the information you receive will depend on the risk profile you have chosen.

Methods, data and limitations

At Velliv, we measure, analyse and assess how we are doing in promoting the environmental and social characteristics of our investments and products. To this end, we need sustainability-related data on investments and methods to help assess this data.

Methodology to measure sustainability characteristics

To assess how the investments in our products promote environmental and social characteristics, we measure, among other things, the extent to which the investments contribute to one or more of the UN Sustainable Development Goals. We do so on the basis of the SDI AOP taxonomy for the contribution of listed investments to the UN SDGs.

Methodology to measure the share of sustainable investments

In determining the share of sustainable investments, we follow the EU definition of a sustainable investment.
This means we measure against three criteria to determine whether an investment can be defined as sustainable. The criteria are:

1. Sustainable contribution through the economic activity
2. Do no significant harm to other environmental or social objectives
3. Follow good governance practices

The sustainable contribution criterion:

We use the UN Sustainable Development Goals and the EU Taxonomy to assess whether an economic activity contributes to environmental and/or social objectives.

To measure contributions to the UN SDGs, we use the SDI AOP Taxonomy for listed investments. Velliv has decided that only investments where more than 50% of the revenue contributes positively to the SDGs will be included in the calculation of the share of sustainable investments. Furthermore, the share of sustainable investments in the unlisted assets is assessed according to the purpose of the investments, and thus investments in renewable energy, certified forest, and certified real estate are included.

Finally, green and social bonds and impact investments are included.
To measure the compliance of activities with the EU Taxonomy, we use reported data from Sustainalytics when available.

The 'do no significant harm' criteria:

To measure whether investments have a material negative impact on other environmental or social objectives, we have chosen to use the principal adverse impacts (PAIs) defined by the EU as a basis. Our primary focus is on the investment not being involved in coal or oil sands, the investment not being involved in controversial weapons, and the investment not violating the UN Global Compact principles or the OECD Guidelines for Multinational Enterprises.

The good governance practices criterion:

Finally, we assess the ability of investments to comply with good governance practices, which include both employee relations and human rights considerations, and how well environmental issues and corruption are managed. To measure good governance practices, we use data from a range of data providers, including ISS ESG and Sustainalytics.

Data from external sources

We use data from external suppliers and fund managers to measure the environmental and social characteristics, as well as the sustainable contribution, 'do no significant harm' and good governance practices criteria. The external data providers include ISS ESG, Sustainalytics and SDI AOP.

We continuously check the data we receive to ensure data quality. We obtain additional data if needed.

We have recognised and tested systems that process the ESG data provided in accordance with the business processes and working procedures applicable to the area, which are based on the same principles as apply to financial data. In areas where we do not yet have data, we do not report any values.

Limitations in relation to methods and data

The extent and quality of available sustainability data continues to vary. This is a natural consequence of the regulatory timetable to ensure data availability in this area. At Velliv, we currently have data primarily on listed companies, and to a lesser extent on unlisted investments.

We expect that both the volume and quality of available data will improve in years to come, when there will also be increased reporting requirements in this area. In addition, we expect that improved access to data as well as experience in the field in general in the industry will mean that methods and approaches need to be adapted. The available data, Velliv's adopted methodologies and the implemented system support allow us to continuously monitor and assess the promotion of environmental and social characteristics as well as the development of the share of sustainable investments. Thus, the limitations do not affect the fulfilment of the sustainability characteristics we promise to the customer.

Monitoring and due diligence

At Velliv, we continuously monitor whether investments are in line with our Responsible Investment and Active Ownership Policy. If data, analyses or screening show that there is a discrepancy, we will enter into dialogue or exclude the investments. More information on our active ownership work and access to our exclusion lists is available on the Responsible Investment and Sustainability page.

Investment selection is primarily done through external managers. To ensure that the selection is in line with Velliv's positions and policies in the area, the qualities, methods and processes of the managers are assessed on an ongoing basis.

The specific due diligence process of the selected managers depends on the asset class and investment approach. For unlisted investments (Alternative Investments and Real Estate), which are characterised by low data availability and illiquidity, the ESG due diligence process is long-term and relies to a greater degree on subjective assessments of the manager's capabilities, methodologies, processes and historical and actual investments. A due diligence investigation of listed asset managers is increasingly based on quantitative aspects such as ESG ratios and CO2 exposures and forward-looking scenario analyses.