The Council on Ethics’ proactive engagements address complex sustainability challenges and systemic risks and contribute to improving companies’ awareness and management of these risks.
Many sustainability challenges are extremely complex, dynamic and extensive. Sector- and system-wide shortcomings cannot be solved by one company or investor alone, but require different stakeholders to act together to mitigate negative impacts and foster a more sustainable approach. At the same time, individual companies have a responsibility to understand and act on their role in these shared challenges. In line with its long-term perspective, the Council on Ethics’ stewardship engages in emerging and intensifying sustainability challenges, with the ambition to encourage a positive trajectory on company-, sector and system-level.
These focus areas are all highly complex, often aggravated by sector-wide shortcomings and weak regulation. The overall playing field is typically not controlled by investors or companies (alone), and can be uneven, unpredictable and/or unfair. Simple, black-and-white solutions are rarely available for many of the systemic challenges, and the most critical and impactful measures vary.
Accordingly, the Council’s proactive work can therefore take many different forms, from supporting research and building awareness about a focus area, to multi-stakeholder roundtables or company-specific dialogues. The Council on Ethics typically strives to act in collaboration with others and includes investor collaborations and other kinds of cooperation and partnerships.
The aim of company-specific dialogues is to persuade companies with high exposure to a challenge to focus more closely on the issue at hand, including improving risk management and transparency. This helps to ensure that companies contribute positively rather than negatively on relevant sustainability challenges and also makes them more resilient and enhances their sustainable value creation.
How does the Council on Ethics select its focus areas?
The Council’s choice of focus areas for its proactive engagement is based on a materiality analysis, from a double materiality perspective. The analysis takes into consideration the impact on the environment, people and societies; financial risks and opportunities; as well as the potential for the AP Funds and the Council to influence positively. The selection process incorporates a broad-based assessment of a wide spectrum of sustainability challenges and internal and external stakeholder feedback. It also takes into account the Council’s norms-based, reactive dialogues, in relation to which proactive engagement can broaden the scope of our stewardship work and more deeply address the issues where persistent incidents suggest deep-rooted and sector-wide challenges. The five focus areas do not represent a conclusive picture of the Council’s proactive work: other developments and related engagement opportunities are continuously monitored and will be acted on where relevant.