We monitor and screen our investments on a continuous basis and engage in dialogues with companies. Our dialogue with the companies takes place both proactively and reactively:
PFA engages in a proactive dialogue with selected companies, where we seek to influence the company to change its business model and/or practices in order to reduce the company’s sustainability risks before they materialize.
Hence, the relevant companies have not acted in violation of PFA’s Policy for Responsible Investments and Active Ownership. Instead, PFA engages with the companies on sustainability-critical issues which PFA believes are relevant for strengthening the companies’ long-term value creation and thereby the returns to PFA’s customers. Proactive dialogues can take the form of in-depth and long-term dialogues with individual companies on multiple ESG issues or be more thematic in nature and target multiple companies. The latter can be expressed, for example, by PFA engaging in a specific dialogue on joining the Science-based Targets Initiative (SBTi) with the companies that contribute the most to the investment portfolio’s carbon footprint.
Reactive dialogue takes place on the basis of breaches or suspected breaches of the international norms, standards and principles on which PFA’s Policy for Responsible Investments and Active Ownership is based. The purpose of such reactive dialogue is to clarify the specific controversy and get the companies we invest in to implement policies, strategies and concrete processes so that similar incidents are avoided in the future.
Reactive and proactive dialogues can either be driven by PFA or take place in collaboration with others.
In 2024, PFA entered into dialogue with a total of 133 companies – including proactive dialogues with 86 companies and reactive dialogues with 47 companies – either run directly by PFA, in collaboration with like-minded investors or by an external advisor.
PFA has set a goal to engage in climate dialogue with at least 50 of the largest greenhouse gas emitters in our portfolio and to engage in dialogue with 50 companies on nature-related issues by 2025. You can read more about our efforts concerning the green transition
here.
PFA generally does not consider exclusion and divestment to be a constructive and long-term solution, as investors thereby renounce the opportunity to influence companies. Rather than divestment, PFA therefore wants to exercise active ownership in order to create improvements – basically, we would rather be invested in a transition than wait for it to happen. PFA’s possible divestment or exclusion of companies is based on an assessment of whether it is possible to change the company’s behaviour sufficiently and thereby reduce the exposure to sustainability risks that could negatively affect the value of the company. In addition, we exclude climate-related high-risk activities, controversial weapons and companies that systematically and regularly violate international norms, standards and principles on which PFA’s Policy for Responsible Investments and Active Ownership is based.
Voting at companies’ annual general meetings is the most direct and regulated tool that shareholders possess in terms of influencing a company’s management. PFA follows the management of the companies it invests in and, through the use of our voting rights as a shareholder, contributes to ensuring a value-creating and sustainable course in the companies in question. We vote at general meetings for listed Danish and foreign companies in the products ‘PFA Invests’, ‘PFA Flexible’ and funds that PFA manages in ‘You Invest’. In particular, we prioritise translating our ownership into influence, e.g. by submitting and/or voting for shareholder proposals, voting against board members, via physical attendance or publishing voting rationales at the general meetings where the importance of our engagement is greatest.
As an active owner, PFA can wield influence through dialogues, shareholder proposals and proxy voting. We are not afraid to escalate efforts with the companies in which we are invested and will always seek influence instead of divestment. Essentially, we use our investments to influence companies through:
- Dialogue, which can either be proactive to improve ESG risk management or reactive in response to controversies or breaches of international norms.
- Shareholder proposals, which can be submitted alone or in cooperation with other shareholders – and publishing the reasons for this – is another way in which PFA can push for improvements in a specific ESG area.
- Voting at general meetings, e.g. by voting in favour of shareholder proposals, voting against agenda items of board members and the company’s management, attending physically and asking questions at the general meeting, informing the company’s management about PFA’s voting rationales and publishing them before/after the general meeting to encourage like-minded shareholders to vote in line with PFA.
Few dialogues are the same, which is why escalation through e.g. shareholder proposals or voting against the company’s board members in case of lack of progress will always be based on an individual assessment. If, despite several escalation measures, the effort ends with a
divestment because there is no prospect of improvement through PFA’s efforts as an active owner, it is beyond our control who takes over the ownership and there is a risk that it will be less progressive investors. PFA’s approach to escalating our efforts as an active owner therefore builds on the notion that the greatest opportunity for influence is through dialogue, shareholder proposals and voting. While a divestment can send a signal to the company and the market, it also means giving up on the possibility of wielding direct influence.
