Sustainability issues increasingly important
In Enter Fonder’s efforts to generate returns for our customers sustainability issues plays an increasingly important role. We believe that companies that do not take social, ethical and environmental concerns are exposed to commercial and brand risks that investors should be aware of. Therefore, missteps in the sustainability area is highly likely to have consequences on the companies’ share price. Enter Fonder works with a specific model to integrate these aspects in our company research and stock valuation.
Sustainability focus in investment process
Enter Fonder do not invest in companies that violate international conventions on the basis of the UN Global Compact and the OECD guidelines for multinational companies in the areas of environment, human rights, labor rights, corruption and inhumane weapons. For those reasons we do not own securities in companies that manufacture land mines, cluster and atomic weapons.
Ethics and investments
Enter Fonder do not invest in companies that own fossil assets for exploitation (coal, oil, gas) or in companies that produce pornography. We also refrain from investing in companies where more than 5% of sales come from alcohol, tobacco, weapons and gambling, and more than 5% derive from the distribution of pornographic material.
Twice a year, all companies we regularly follow are evaluated based on risks and preparedness in the areas environment, human rights and governance. In this, we cooperate with Sustainalytics. Enter Fonder converts screening reports from Sustainalytics into numeric values (SRI values) and use those values as parameters in our company analysis. The analysis is based on Enters forecasts for future profits, leading to a target price for the share. A company that comes out as attractive in the traditional company valuation may, after input of the SRI value, get a lower value because of the sustainability risks. Since the company’s analysis is risk-oriented there will be no value-enhancing effect of companies with high SRI scores – only negative values have an impact in our company analysis. This way we can connect sustainability factors with investment decisions and our client’s investments.
Active dialogue and interaction
Enter Fonder is a long-term investor and active fund manager. This means that we concentrate our portfolios on relatively few holdings, which creates opportunities for a close and active dialogue on critical sustainability issues. Part of the dialogue is held by our portfolio managers, which ensures that it has a direct and balanced impact on the company analysis. The dialogue aims to supplement and verify the input we receive from Sustainalytics. By raising relevant sustainability issues – both risks and opportunities – incentives are created for increased transparency and prerequisites for sustainable value creation.
How we act on incidents
From time to time sustainability-related incidents occur in portfolio companies. For example, there may be reports of environmental accidents, corruption or workplace accidents where the company’s safety work is questioned. On these occasions, the sustainability value is less useful for making a decision to sell or keep a share, partly because the damage has already taken place, partly because it is initially difficult to assess the extent of the problem and the company’s responsibility.
Enter works on these occasions following the following model:
- Retrieves information about the current event.
- Discusses the issue directly with the company and its management. Continuously follows the issue in order to work for an improvement to take place. Our opinion is that changes in large companies requires time and resources and is therefore persistent in the view of the company’s change process.
- An incident report affects Sustainalytics analysis and thus directly links to Enter’s corporate analysis and investment decisions.
Should Enter, based on its own contacts and the information received from Sustainalytics, come to the conclusion that a company does not take the right measures to improve Enter will not invest in the company in question or alternatively liquidate the existing holding. Any liquidation shall be such that it ensures the interests of unit holders.
Sustainability in all our funds
Our sustainability efforts and the integration of sustainability factors into our company research apply to all of the funds managed by Enter.
Resources and commitment
- We continuously screen our portfolios using Sustainalytic’s screening and receive ongoing alerts in case of incidents.
- Each year, we contact portfolio companies in writing about their sustainability work. The answers are documented and followed up by our managers at regular company visits and meetings with company representatives. Incidents are followed up in direct contact with the companies.
- Enter Funds has joined the Sustainability Profile (Hallbarhetsprofilen.se), a forum created by SWESIF to meet the need to easily and comprehensively get information about how funds apply sustainability criteria in its administration. You can find Swesif’s Fact Sheet “Sustainability Profile” for our funds under the respective fund’s page here on the website.
- We measure and report the carbon footprint of our equity funds every quarter.
Enter Fonder a PRI Signatory
We have, as part of our sustainability efforts, signed UNPRI – United Nations Principles for Responsible Investments. PRI’s principles for responsible investment aims to incorporate and implement the ESG aspects (Environmental, Social and Corporate Governance) in daily work and in investment. We report annually to PRI on how our work progresses and PRI then gives us feedback to develop in our sustainability work. Please take a look at our report to PRI here RI Public_Transparency_Report_Enter Fonder AB_2018
You can read more about the six principles on UNPRI’s website. The principles are:
WE WILL INCORPORATE ESG ISSUES INTO INVESTMENT ANALYSIS AND DECISION-MAKING PROCESSES.
WE WILL BE ACTIVE OWNERS AND INCORPORATE ESG ISSUES INTO OUR OWNERSHIP POLICIES AND PRACTICES.
WE WILL SEEK APPROPRIATE DISCLOSURE ON ESG ISSUES BY THE ENTITIES IN WHICH WE INVEST.
WE WILL PROMOTE ACCEPTANCE AND IMPLEMENTATION OF THE PRINCIPLES WITHIN THE INVESTMENT INDUSTRY.
WE WILL WORK TOGETHER TO ENHANCE OUR EFFECTIVENESS IN IMPLEMENTING THE PRINCIPLES.
WE WILL EACH REPORT ON OUR ACTIVITIES AND PROGRESS TOWARDS IMPLEMENTING THE PRINCIPLES.
Document updated July 23, 2018.