Investing for climate transition
All our investments are covered by our ESG policy and three-quarters of our listed equity portfolio is aligned with climate transition objectives established by the EU.
In 2023, the LEO Foundation established a clear approach to sustainability across all its activities. This encompasses a commitment to encourage climate transition, including further development of investment management activities in support of this commitment.
A direct and decisive step towards achieving this ambition was to align our passive listed equity portfolio on Developed Markets and Emerging Market closely with the EU’s Climate Transition Benchmark for investors, which is a framework developed to support the transition to a low-carbon economy.
The Climate Transition Benchmark calls for an aligned portfolio to have at least a 30% lower CO2 footprint compared to the relevant parent benchmark, and a 7% year-on-year reduction of CO2 emissions. In combination with this, a norm-based ESG screen is conducted on the portfolio, to choose the companies with the highest ESG profile with some risk constraints.
With this change implemented, approximately three-quarters of our listed equity portfolio is aligned with climate transition objectives.
Aligning with the EU Climate Transition Benchmark also supports the LEO Foundation’s broader ambition on investments: acting as a responsible institutional investor that generates attractive returns, enabling us to ensure LEO Pharma’s long-term continuation and strategic development, as well as providing a growing basis for philanthropic grants.
Our ESG policy and screening
Responsible investing has been at the core of our investment strategy since 2018, when we established an ESG (Environmental, Social, Governance) policy, based on alignment with the Ten Principles of the UN Global Compact addressing human rights, labor, environment, and anti-corruption.
Since introducing our ESG policy, we have proactively integrated ESG factors into our investment management. This includes adding norm-based ESG screening to the passive portfolio of listed equities on Developed Markets and Emerging Markets, which identifies companies allegedly involved in breach of international norms and standards, for example the UN Global Compact, and other relevant criteria within e.g., controversial weapons, fossil fuel extraction, and tobacco.
Today, close to two-thirds of our financial assets are subject to the standardized ESG screens, while the entire financial portfolio is in alignment with our ESG policy.
All financial assets of the LEO Foundation are managed by external fund managers. Our implementation model includes a requirement for managers to invest in accordance with our ESG Policy while keeping a balanced risk profile, and to actively engage with companies or investment projects on critical issues.
Each of our asset managers reports on material challenges related to the Ten Principles of the UN Global Compact, which are included in the annual ESG reporting to our Board.