Responsible investments

DIP believes that companies, which practise social responsibility, will be most successful companies longer-term. Accordingly, social responsibility is a key element when DIP invests the members’ funds.

In DIP’s work with responsible investments, we focus on how the companies, which we invest in, deal with corporate management as well as their influence on among other things human rights, employees’ rights, climate, environment, tax and anti-corruption.

DIP’s work with responsible investments is based on UN Global Compact’s 10 principles about human rights, employees’ rights, the environment and anti-corruption as well as the six UN-supported principles about integrating responsibility in investment decisions – also called Principles for Responsible Investment (PRI).

DIP also works on implementing the UN Guiding Principles on Business and Human Rights outlining principles for companies’ responsibility to respect human rights as well as OECD Guidelines for Multinational Enterprises outlining principles for responsible conduct among other things in relation to human rights, the environment and tax. 

DIP's policy for responsible investments

  • DIP must pursue a responsible investment policy.
  • DIP must follow the laws and international conventions which Denmark has acceded to.
  • DIP only invests in government bonds issued by countries which Denmark has not financially sanctioned, and that acts socially responsible.  
  • DIP believes that exercising social responsibility contributes to a company’s success.
  • DIP assesses that the biggest impact on companies, which do not comply with the pension fund’s expectations about responsibility, is obtained through dialogue with the company.
  • DIP takes a positive approach to active ownership, and if dialogue proves useless, the consequence will be divestment.

DIP's tax policy

  • The purpose of the pension fund’s investment management is to ensure that the members can obtain the highest possible pension benefits. We manage sizeable funds and are aware that our investments are of importance to the society that we are a part of - both now and in future.
  • As a Danish institutional investor, the pension fund acts responsibly in terms of tax, and when we invest abroad, we are aware of payment of local tax according to legislation in the country concerned. Any double taxation issue that may arise when investment returns cross borders are handled according to the double taxation agreements between Denmark and the countries concerned.
  • As a Danish institutional investor, the pension fund acts responsibly in terms of taxation, and when we invest abroad, we are emphasize the importance of paying local tax according to legislation in the country concerned. Any double taxation issue that may arise when investment returns cross borders is handled according to the double taxation agreements between Denmark and the countries concerned.  
  • As a Danish pension fund, DIP ensures that pension return tax is paid from the entire return on all investments.  Besides pension return tax, the pension fund pays VAT and payroll tax as well as tax on pension benefit payments.
  • The greater part of the pension return tax is paid from the return added to the individual pension deposits. Payments from the pension schemes are taxed as income, and accordingly the members of the pension fund contribute to the social system from establishment of the pension scheme until the last pension benefit payment. It is the pension fund's policy to make this contribution in a proper and efficient way within the defined legal framework.

Active ownership

DIP exercises active ownership towards all listed companies in the portfolio. The purpose of exercising active ownership is to encourage the companies to comply with DIP’s policy for responsible investments, minimize risks and promote the companies’ long-term value creation.  

Active ownership is carried out by way of engagement with companies and through proxy voting on the companies’ annual general meetings. The consultancy firm Hermes EOS is responsible for the engagement with selected companies on behalf of DIP. Hermes EOS also handles proxy voting at annual general meetings with companies in our portfolio where we have a right to vote.

Hermes EOS is an international company with thorough knowledge of many of the companies in DIP’s portfolio. Hermes EOS represents more than 40 investors, of which five are Danish. When Hermes EOS engages with a company, it does not only represent DIP’s equity interest but also the other investors’ equity interests. This increases the significance of the engagement. 

The engagement with the companies can go on for several years before a clarification about the companies’ willingness to make changes is obtained. If engagement does not result in satisfactory action by the company, and the investment no longer is considered being compatible with DIP’s policy for responsible investments, the outcome is divestment. Divestment will be effected with consideration to the market terms.

When DIP enters into investment cooperations with others, we do not necessarily have a controlling interest, and consequently divestment can only be effected in agreement with the other investors. If an agreement cannot be reached, DIP must strive for continued engagement with the company but also try to influence the other investors and the investment manager.

Engagement with a company is as a rule strictly confidential as it often fosters a more constructive outcome. However, examples of engagement with companies can be found below:

https://www.hermes-investment.com/dk/blog/eos-case-studies/

Report from Hermes EOS about their dialogue with companies, Q1 2017

Engagement objectives and plan from Hermes EOS, 2017-2019

Engagement with companies Q1 2017

Voting report at annual general meetings Q1 2017

2016 Annual report from Hermes EOS - annual voting and engagement report DIP 2016

Climate

DIP focuses on whether the companies in the portfolio contribute to climate change as well as how structural transitions to renewable energy affects the companies’ business concept.

The Paris agreement (COP21) from December 2015 about keeping global temperatures below 2C and endeavor to limit them to 1.5C has increased international focus on reduction of carbon dioxide and transition to renewable energy. The restructuring of energy generation after COP21 is expected to result in declining demand and prices on coal as well as increasing demand on renewable energy. In that relation, DIP has decided not to have companies in the portfolio where more than 50 percent of the turnover derives from mining of coal.

DIP also focuses on identifying investments within renewable energy with an attractive yield potential. The portfolio includes e.g. wind farms and biofuel plants.

DIP supports the organisation CDP which works for creating transparency about companies and other players’ emission of carbon dioxide. DIP is also a member of Institutional Investors Group on Climate Change (IIGCC) which is an European network organization for institutional investors. The purpose of IIGCC’s work is to create investment-related framework conditions for handling risks and possibilities resulting from climate change.  

Human rights

DIP focuses on whether the companies in the portfolio have implemented a robust management system which prevents a potential negative impact on human rights.

DIP is working on implementing the UN Guiding Principles on Business and Human Rights, and in the long term our work with human rights must be based on the structures defined by these guidelines.

Investments in government bonds

DIP only invests in government bonds issued by countries which Denmark has not financially sanctioned, and who are considered to comply with or striving to comply with internationally acknowledged principles for good governance, democracy, human rights, environment and anti-corruption.

DIP has an exclusion list with companies and countries which DIP will not invest in. Countries, which fall within above-mentioned categories, are on this exclusion list. If a new country is entered on the exclusion list, DIP must not invest further in government bonds issued by the country. When the market terms allow for it, DIP must sell the government bonds. 

Investments in companies producing weapons

According to international principles, DIP does not invest in companies producing cluster bombs and land mines. 

Network

DIP is part of below-mentioned networks and organisations through which we in different ways work for responsible investments. 

PRI 

The world’s largest network focusing on responsible investments. As a member of PRI, the pension fund commits itself to incorporate responsibility in its investments.  

Dansif 

A networking forum for professional investors, consultancy firms and others who are committed to responsible investments in Denmark. In Dansif, the members exchange knowledge on responsible investments. Dansif organises events about subjects within responsible investments. DIP has an active role in Dansifs event committee. 

CDP 

CDP works to create transparency about companies and other players’ emission of carbon dioxide. 

Institutional Investors Group on Climate Change (IIGCC)

IIGCC is an European network organisation for institutional investors. The purpose of IIGCC’s work is to create investment-related framework conditions for handling risks and possibilities resulting from climate change.