Council on Ethics: Engagement Update

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Stockholm (NordSIP) – Tailings dams, created to store the waste products of mining operations, are some of the world’s largest engineered structures. Yet, they are seldom featured in the news, not even in technical magazines. Until a disaster strikes, like the rupture of the Brumadinho dam in Brazil in 2019, unleashing an avalanche of muddy mining waste, killing an estimated 270 people, burying many of them alive. Acknowledging that the catastrophe was not just an isolated occurrence but a warning for the systemic risk that all such facilities represent, the Council on Ethics of the Swedish National Pension Funds (Etikrådet) decided to do something about it. They have been co-leading The Investor Mining and Tailings Safety Initiative, their most extensive project ever, together with the Church of England Pensions Board, ever since.

The project, which won UNPRI’s prestigious Stewardship Project of the Year Award in 2020, is just one example of the large-scale yet specific and focused stewardship efforts described in the Council’s Annual Report, published earlier this week. The report is an engaging reading that might assuage some of the criticism the National Pension Funds have attracted lately for failing to live up to key metrics for protecting the planet.

- Promotion -

Other examples abound. The Council, alongside 540 large asset owners supporting the Climate Action 100+, is systematically working on engaging with more than 160 companies worldwide. Selected because of their significant total emissions (Scope 1–3), these companies are estimated to account for about 80 per cent of the world’s industrial carbon dioxide emissions. Securing such giant polluters’ commitment to reducing their carbon footprint is essential for achieving the goals of the Paris Agreement. The initiative has managed to influence companies like Shell, Total, BP, Repsol, and Petrochina, among others.

Apart from environmental issues, the Council on Ethics is known for their work on promoting human rights. Perhaps the most widely covered engagement initiative lately has been their call for transparency and integrity in the tech sector. In collaboration with experts from the Danish Institute for Human Rights (DIHR), the Council on Ethics has identified reasonable human rights expectations of companies such as Facebook, Google (Alphabet) and Twitter. “We hope that the platform will not only benefit us and other investors but also other stakeholders who are committed to the issues. Facebook has developed new policies and guidelines in line with our expectations,” says John Howchin, Secretary-General of the Council on Ethics.

Even with the best of intentions, affecting significant impact on corporates and governments, nudging them towards more sustainable practices and solutions is never an easy task. Collaboration, like the one exemplified by the Council on Ethics, both within (the Council gathers representatives from four of the Swedish National Pension Funds) and together with other large asset owners around the world, seems like the right recipe for success.

Image courtesy of Etikrådet

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The coronavirus epidemic has further accelerated the rise of ESG into the investment mainstream. As deficits skyrocket, bond investors have an opportunity to engage with governments on climate change, argues Thomas Dillon, Senior Macro ESG Analyst at Aviva Investors.

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