Senior responsible investment analyst for Norwegian pension fund KLP, Kiran Aziz discusses what foreign investors expect from Latin American companies regard to environmental policies.
Responsible investments are trending in Europe, over the past years pension funds are focusing their capital in greener companies and initiatives. This is the case of KLP, Norwegian largest pension company, mainly owned by the municipalities and state health enterprises.
Terms such as sustainability and ESG (environment, social and governance) are attracting the attention of investors and this reflects directly in Latin American companies. Important stakeholders as KLP are helping to shape the future by using their money to support companies who are align to their sustainable policies.
AgriBrasilis invited Kiran Aziz, lawyer and senior responsible investment analyst for Norwegian pension fund KLP. Ms. Aziz holds a law degree from University of Oslo and Cornell Law School. In her role she monitors and assesses how the investee companies maintain responsible business practices along with dialogue with the boards and managements on ESG matters in the companies. Prior to joining KLP Asset Management, Ms. Aziz was lawyer, lecturer and researcher. She is currently on board for Norwegian Refugee Council which is one of the world’s largest humanitarian organizations for displaced people. She is a member of Global Shapers Community under World Economic Forum.
KLP has US$60 billion in assets under management (AUM) and passively follows the MSCI Index. They invested in almost 10,000 unique investments across 70 countries, including companies in Latin America.
“We seek to integrate ESG factors in our investment activities and active ownership in order to attain more complete information and better risk management. We have three main tools available to exercise our ownership in a responsible manner. First of all pursue active ownership in order to influence companies towards a sustainable value creation. This is the most important tool we have. The second is to vote on the AGM and thirdly we can exclude companies from our investments if a company is associated with gross and/or systematic violations of generally accepted standards of business conduct rooted in the Ethical guidelines.” States Kiran.
KLP is also engaging with companies with activities in Brazil related to trade of agricultural products to make sure they are not related to illegal deforestation of Amazon rainforest. “We are also engaging companies’ largest investors and banks in order to exert pressure on the likes of Cargill, Bunge and Archer Daniels Midland (ADM) so that they do not contribute to devastating environmental damage.” The fund also acts on shore, engaging with Norwegian companies which import soya products from Brazil in order to evaluate this and urge them to do all they can to protect the rainforests.
“Foreign investors have enormous influence over what happens in the Brazilian Amazon. In particular, big banks and large investment companies can play a vital role, providing billions of dollars in lending, underwriting and equity investment.”
KLP has already excluded JBS, the world’s biggest meat company, which plays a critical role within its sector, from its investments due to corruption.
Therefore AgriBrasilis asked Kiran Aziz what do the Norwegian investors expect from the agricultural companies in Latin America.
Kiran Aziz says that KLP sees deforestation and the associated impacts on biodiversity and climate change as systemic risks. Seeing the reduction of deforestation as a key solution to managing these risks and contributing to efficient and sustainable financial markets in the longer term. Deforestation may have a financial impact on investee companies in many ways, by potentially increasing reputational, operational and regulatory risks. Our expectation is that companies producing, trading and using agricultural commodities demonstrate deforestation-free operations and supply chains.
The companies should have a publicly disclosing and implementing a commodity-specific no deforestation policy with quantifiable, time-bound commitments covering the entire supply chain and sourcing geographies. Furthermore, establish a transparent monitoring and verification system for supplier compliance with the company’s no deforestation policy and lastly report annually on deforestation risk exposure and management, including progress towards the company’s no deforestation policy.
“With CO2 emissions rising and biodiversity declining faster than any time in human history, the urgency in promoting sustainable land management to halt biodiversity loss, enhance food security and meet the goals of the Paris Agreement are more important than ever. We have a long-term perspective on our investments and this development will also have an impact for us as investors. Our objective is to deliver competitive returns over time where we rely on sustainable value creation.” Concludes Ms. Aziz.