Folksam, Ilmarinen, PFA Focus on Water Management

    Stockholm (NordSIP) – In the age of climate change, water resources management and water security are increasingly important commercial issues for companies. Not only are there reputational risks from local tensions over water access and rights, regulatory scrutiny is also intensifying. However, water management is often overshadowed by carbon emissions in the climate agenda.

    To respond to this issue, the Nordic Engagement Cooperation (NEC) initiative, announced it had expanded its engagement activities by joining Sustainalytics’ recent Localised Water Management engagement (LWM) theme.

    Localised Water Management

    In embracing this new engagement focus, Folksam, Ilmarinen and PFA – the three members of NEC – align themselves to this initiative’s four main goals. First, they want to increase corporate awareness about the benefits of adapting water management practices to local risks and realities. Second, NEC hopes to encourage concrete opportunities for companies linked to the same catchment to find corporate and other partners for joint efforts. A third expectation is that the engagement will contribute to tangible impacts on the ground. Finally, it is hoped that LWM will allow the NEC members to become credible stakeholders in integrated responses to water crises.

    The assessment of LWM is also linked to five key performance indicators (KPIs): wanted governance and disclosure; risk and impact assessment; water quantity; water quality; and integrated water resources management.

    The LWM engagement focuses specifically on companies that are dependent on water from the Tiete river basin in Brazil and/or the Vaal river basin in South Africa. Reportedly, NEC has already identified two target companies for LWM engagement in 2020 and will find another two during 2021. LWM engagement will run for three years.

    “As a responsible investor, Folksam Group is pleased to conclude yet another productive year with our peers in the Nordic Engagement Cooperation,” says Emilie Westholm, Head of Responsible Investments, Responsible Investment at Folksam. “Partnering with other investors is a core component of Folksam’s efforts to support portfolio companies on ESG issues, and we therefore look forward to continuing our partnership with NEC in the years to come.”

    2020 Engagement Successes

    Beyond LWM, the annual NEC report also reviewed its other existing norms-based and proactive engagement. NEC resolved two of its ten ongoing engagement initiatives, with Enbridge and Danone.

    The norms-based engagement with Enbridge focused on the violation of indigenous people related to the Dakota Access Pipeline (DAPL), which runs from North Dakota to Illinois in the USA and poses pollution and heritage risks to the Standing Rock Sioux tribe. According to the report, “for NEC to conclude this engagement, Enbridge was expected to use its leverage to enable a reconciliation dialogue between Standing Rock, and the developer and operator of the pipeline, Energy Transfer LP. Furthermore, the company was expected to adopt a human rights policy and establish a due diligence process to align with international norms on indigenous peoples’ rights across its operations, as well as on security and human rights.”

    Danone was one of four companies that NEC has proactively engaged on the issue of disclosures aligned with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD). According to Westholm, Danone beat Glanbia, Kerry Foods and Tyson Foods because it was further along in its climate transition journey.

    In order to comply with TCFD recommendations, a significant level of work is required. Some companies that we engage with are not as far along the path in terms of action on climate change, including setting targets and understanding emissions across the entire supply chain,” Westholm told NordSIP. “Danone is an example where a company was able to accomplish some of this work due to earlier board buy-in on the importance of climate change and TCFD-aligned disclosure. We saw that this translated to a higher level of ease by the company when approaching other aspects of the recommendations.”

    “Danone has met the engagement objectives for the TCFD disclosure project and as such, that dialogue has concluded. Engagement with it on other environmental factors would be separate to this project and need to be reviewed further.  However, from our dialogue, we observed that beyond the scope of the engagement, the company has been taking a holistic approach to their management of environmental risks/impacts,” Westholm concludes.

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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