The work of the Ethical Council
The guiding principle for the work of the Ethical Council is to make a difference. The AP Funds do this by acting as long-term, committed and responsible owners who exert influence on companies the world over to improve their efforts in relation to environmental and social issues.
The First, Second, Third and Fourth AP Funds have been given the same assignment by the Swedish Parliament; that is, to achieve high returns at a low level of risk. In so doing, the Funds must exercise ethical and environmental consideration without compromising the overall objective of attaining a high return. On the basis of this assignment, the Funds have formulated a set of core values – “to act in accordance with the principles on engagement, action, and change, with the aim of making a difference.”
Engagement to make a difference
The Ethical Council sees its mission as encouraging companies, on the basis of the business they conduct, to address relevant sustainability issues, to have in place fit-for-purpose guidelines and to have management systems to enable the business to be operated in as responsible a way as possible, wherever in the world they may operate. The basis of the Ethical Council’s engagement in these issues is the AP Funds’ shared understanding that well managed companies, over time, generate higher returns and lower risk.
The number of areas in which responsible investors could engage is considerable, and constantly growing. These involve not only industry-wide problems but also serious incidents at individual companies. Engagement in all areas and all companies is neither possible nor effective, which is why priorities have to be set.
The Ethical Council operates both preventively and reactively. Problem areas and incidents are surveyed and analysed systematically by the Ethical Council, which then selects a number of focus areas and companies. These areas and companies are chosen on the basis of the Funds’ mission and core values, but the Ethical Council’s chances of making a difference are also taken into account. Areas in which a large number of other organisations are pushing for improvements may be rejected in favour of areas that have not yet attracted as much attention from the investment community. The choice of focus area is therefore not a statement that other areas are in themselves less important. On the contrary, it is the result of a deliberate strategy to place the Ethical Council’s resources where they are thought likely to produce the most benefit.