Ethical Council: Three dialogues lead to desired effect

The Ethical Council of Sweden’s First to Fourth AP Funds conducts active dialogue with companies that are associated with breaches of the international conventions signed by Sweden. Its aim is to pressure these companies toward action to prevent similar incidents in the future.
Three of the companies on the Ethical Council’s dialogue list, Grupo Ferrovial S.A. of Spain, PetroChina Company Limited of China and Thales SA of France, have met the goals set by the Ethical Council when the dialogues were initiated, and have thus taken satisfactory action. The cases in question involve infringement of the UN Convention on Biological Diversity, the Basel Convention on Hazardous Waste and the UN Convention Against Corruption.

“This is enormously satisfying and a source of encouragement for our work in the Ethical Council, where we can see that our talks with the companies are truly effective,” says Christina Kusoffsky Hillesöy, Chairman of the Ethical Council.

In each of these cases a representative for the Ethical Council has met with the corporate managements at their head offices in Madrid, Beijing and Paris, a practice that demonstrates the seriousness with which the Ethical Council regards these problems. The Council’s face-to-face talks with the managements in question have pushed the dialogues in a positive direction, and the fact that the companies have subsequently taken measures is proof that investors can exert a real influence through dialogue.

Grupo Ferrovial S.A., through its subsidiary Budimex, was in the process of building a road through a nature reserve in Poland, contrary to the UN Convention on Biological Diversity. Construction has now been stopped and Grupo Ferrovial S.A. has developed its sustainability policy and risk analyses for assessment of environmental risks in connection with infrastructure projects. Together with other investors, the Ethical Council has held constructive talks with Grupo Ferrovial S.A. and expressed its support of the company’s improved sustainability efforts and risk management.

In its discussions with PetroChina Company Limited, the Ethical Council has demanded that the company strengthen its safety and environmental routines and provide an account of environmental and social issues in its sustainability reporting. These steps have been part of an effort to achieve the aims of a dialogue that started after an accident caused a chemical spill in China’s Songhua River.

The Ethical Council, together with another investor in the final phase, has conducted dialogue with Thales SA following accusations that the company had bribed officials in several countries, contrary to the UN Convention Against Corruption. The company has now centralised its sales organisation, developed a robust anti-corruption program and produced a manual to help its employees handle corruption. Thales has also taken a leading role in the European defence industry’s joint initiative against corruption and bribery. Read more about the Ethical Council’s dialogues in the annual report for 2008, which can be downloaded from www.etikradetapfonderna.se.

For more information contact

Christina Kusoffsky Hillesöy, Chairman of the Ethical Council in 2009
E-mail: info@ethicalcouncil.com
Tel: +46 (0)8-555 17 123

About the Ethical Council

The First to Fourth AP Funds (AP1-AP4) are buffer funds in the Swedish national pension system. The four competing AP Funds have a common mission: to invest Sweden’s pension capital so as to achieve the greatest possible benefit for the pension system and generate high long-term returns with a low level of risk. In doing so, the Funds must take ethical and environmental consideration without compromising the overall objective of attaining a high return.

At the beginning of 2007 the Ethical Council was formed to coordinate SRI analysis of environmental and ethical compliance in the foreign companies where the Funds have holdings. The ethical and environmental policies of the Funds are therefore based on the core values of the Swedish Government as expressed through its foreign policy and signing of international conventions. The purpose of the Ethical Council is to combine the four funds’ resources and votes for greater leverage in influencing the foreign companies in which they invest to conduct their operations without violating the Funds’ ethical guidelines for investment.