Divesting from companies
Risk-based divestments are where we sell our holdings in a company or decide not to invest in the first place even though the company is in the fund’s benchmark index.
What is a risk-based divestment?
We monitor sustainability risks across all companies in the equity portfolio and equity benchmark index. We may divest from a company if we assess that its long-term market valuation may be adversely affected by its mismanagement of social and environmental issues.
Risk-based divestments are financial decisions. When we divest from a company, we sell our holdings and stop making new investments. The tool is used for relatively small investments where other actions are deemed inappropriate. If circumstances change, we can decide to reverse the risk-based divestments and make companies available for investment.
The decisions are not based on recommendations from the Council on Ethics or governed by ethical criteria, defined as ethical exclusions.
We may decide to divest from a company if:
- It does not have credible plans for reducing its governance and sustainability risks
- The size of the investment is relatively small
- Other tools, such as dialogue and voting, are unlikely to be a success
Divestment is a last resort
Risk-based divestments may also be made as part of our role as a long-term owner and are a last resort in our work on active ownership. Divesting from a company will not necessarily affect how it addresses governance and sustainability risks, so we always try first to steer it in a sustainable and profitable direction through active ownership – dialogue and voting. If this work does not make any progress, we may then decide to divest.
We divested from 49 companies in 2024 following assessments of governance and sustainability risks. Of these, 27 decisions involved companies that entered the fund's benchmark index during the year. We identified companies with significantly heightened risks across a variety of sustainability topics, including potential violations of human and labour rights, insufficient management of corruption risk, and business models highly exposed to environmental risk. Altogether, we have made 575 divestments decisions since 2012. We do not publish information on which companies we divest from, but we are open about the criteria for these decisions and about the types of ESG risk that have led to divestments.
In 2024, we reversed 16 risk-based divestments and made them available for investment. Alltogether, we have reversed 25 risk-based divestments since 2012.
49
Risk-based divestments in 2024
Impact on the fund’s equity returns
We measure the impact of our investment decisions, including risk based divestments, on our returns. The impact on the equity portfolio from the risk-based divestments was 0.05 percentage point in 2024.
Since 2012, risk-based divestments have increased the cumulative return on equity management by 0.65 percentage point, or 0.02 percentage point annually. Risk-based divestments linked to climate change and human rights have increased the cumulative return on equity management by 0.30 and 0.16 percentage point respectively.
Insights into our company investments
Historical information on all of the fund's investments can be found in our holdings list. You can search by country, asset class and sector. The information is updated twice a year and is available since our first investment in 1998.