1. We create Responsible Returns
Identifying companies performing well
Products & solutions
Responsible Investment & Governance
Annual Report 
2011

2. Dear reader
Asset management is all about value creation, and Our products with specifically integrated ESG
we believe that responsible value creation is what approach have delivered performance and value in
makes all the difference. Economic growth and terms of ESG. Our focus on solutions for our
profitability can only be sustainable when clients has resulted in a number of partnerships we
businesses behave responsibly and look beyond believe will lead us to develop more comprehensive
the immediate present by giving appropriate client solutions.
consideration to environmental, social and
governance (ESG) aspects in their operations. We are also continuously building our knowledge
and competence, writing white papers and
Nordea’s1 commitment to being a responsible thematic reports, in the areas we consider to have
asset manager has deep roots in our corporate an impact on our ability to deliver value creation
culture and business model. We believe that this for our clients from financial, environmental,
innate responsible perspective constitutes a social and governance perspective.
valuable distinguishing edge. It makes us steer
clear of risky short-term behaviour and helps us Enjoy reading!
anticipate influential trends and – most of all – it
strengthens our position as a reliable, trustworthy
partner, capable of creating sustainable value for
clients in a rapidly changing world.
2011 has been a year of concrete achievements.
We have engaged and successfully completed
engagements with a number of companies verified
for violation of international labour and human-
rights-related norms. We have also visited a
number of companies in which we invest in Asia,
Europe and Africa and managed to exert influence
regarding their approach to managing key ESG Sasja Beslik
risks in their operations. Head of Responsible Investment & Governance
1. Throughout the report Nordea is used as a reference to Nordea’s
fund companies and Nordea Investment Management. Processes and
practices described in this report cover our role and responsibility as an
asset manager.

3. In 2007 we signed the Principles for Responsible
Investment and developed our own Responsible
Investment framework. In 2010, a new strategy
and policy was adopted and we have taken further
steps on our journey in 2011.
We create Responsible Returns
Since the first Responsible Investment (RI) policy Products & solutions
was launched in 2007, all funds managed by During 2011, we have launched unique RI funds
Nordea are screened for companies verified for where ESG is part of the product’s DNA. These
violation of international norms regarding funds are in the forefront of RI developments.
environmental protection, human rights, labour
standards and business ethics. The results of the Knowledge & competence
screening, conducted twice a year, are reviewed Nordea has a dedicated Responsible Investment
and assessed by Nordea’s RI committee. The and Governance team, comprising 7 employees.
committee decides on the level of engagement with The team has long experience within the area and
companies verified for violations. Moreover, was awarded “Best team within the ESG sector in
Nordea does not invest in companies involved in Sweden” by Financial Hearings in 2010.
the production of illegal weapons2.
Sasja Beslik, who heads the team, was awarded the
Analysis & engagement title of Young Global Leader 2011 by the World
The core of our RI strategy is in-depth environ- Economic Forum. The title means that Sasja will
mental, social and governance (ESG) analysis and for five years serve as an ambassador of a global
engagement activities. Throughout our ESG network aiming to influence international
analysis companies’ overall management practices companies to increase their social responsibility.
regarding key ESG issues are assessed together
with their governance structure for these issues. The team also cooperates with several well
Based on the analysis, companies are selected for established external partners and participates in
proactive engagements dialogues. The focus is on international and local initiatives to further expand
transferring knowledge and active participation in and spread its knowledge.
the development process.
2. Illegal weapons comprise biological weapons, chemical weapons,
non-detectable fragments, blinding laser weapons, anti-personnel mines
and cluster munitions.
RESPONSIBLE INVESTMENT & GOVERNANCE 2

4. We consider acting responsibly a prerequisite
for a company to achieve long-term good
returns. Our ESG analysis enables us to
identify companies that operate in line with
our policy and deliver long-term value.
Identifying companies performing well
In 2010, we initiated our in-house environmental, global emerging markets that have the star poten-
social and governance (ESG) analysis and tial to be a global leader in their industry both in
deve-loped our own criteria and methodology. traditional industry and financial terms as well as
Our analysis is based on a positive approach. from ESG point of view.
Throughout the analysis companies’ overall
management practices regarding key ESG issues Among the brightest of these stars is the Brazilian
are assessed together with their governance energy company Petrobras. By most ESG metrics
structure for these issues. The analysis aims to Petrobras is the best energy company domiciled in
identify best company practices and companies emerging markets. It is also by our analysis and
that manage their risks, opportunities and/or numerous external studies, among the most
develop sustainable products. Our in-house sustainable companies compared to western peers,
analysis focuses mainly on Nordic companies, which is a rare feat for an emerging market
since the Nordic region is our home market. For company. Petrobras recently made massive oil
non-Nordic companies we process and assess discoveries in the coast of Brazil. The depth of the
ESG analysis conducted by a number of external reserves presents an engineering challenge that
service providers, our main provider being MSCI someone has compared to the Apollo mission that
Inc. landed man on the moon. At the same time Petro-
bras has been voted to be the most sustainable
Major focus on enhanced RI funds Brazilian company among Brazilian people.
During 2011, the focus of the ESG analysis was on
analysing companies for our enhanced RI funds. ISO standards in Taiwan
The funds have both local, Swedish Stars, and In Taiwan the client is king, especially among the
global focus, Emerging Stars. We have thus electronic companies. Due to specific client
analysed a wide range of companies on the requests, most of the manufacturers supplying the
Swedish market and emerging markets to find global electronics giants have certified their
companies performing well environmentally, operations against various ISO standards. ISO
socially as well as financially. certification in many cases facilitates “engineer-
ing” approach of these companies in measuring
During the year, we have also conducted in-depth and managing their corporate responsibility. This
ESG analysis of our largest Finnish holdings. “let the numbers speak for themselves” –
approach would surely be useful for some of our
Emerging market companies: Best Practice Nordic companies that produce more wordy
Petrobras in Brazil corporate responsibility reporting.
The Emerging Stars Fund makes us constantly look
for the actual Emerging Stars, companies from the
3 RESPONSIBLE INVESTMENT & GOVERNANCE

5. Our favourite companies in Taiwan include Delta market with well performing companies. The focus
Electronics, who demonstrate a thorough under- is slowly shifting from risk management to
standing in their implementations of many best capturing opportunities. It all started with
case practices related to corporate responsibility corporate management of environmental impact,
and who are well geared to capitalise on the followed by including social aspects such as
sustainable development. Among other things, human rights and labour rights. Environmental
they have ISO9001 and ISO14001 certified all of and social risks still need to be addressed, but the
their production facilities and are proactively focus is shifting. Companies are now increasingly
working with standardisation authorities in integrating their commitment to sustainable
developing other related standards. business development with group visions, mission
statements and strategies.
Corporate Governance in Singapore
Traditionally, stock market operators are cautious Conclusions from Finnish analysis
in increasing transparency requirements as they An overwhelming majority of the large Finnish
assume that companies seek listing in places companies manage their ESG risks reasonably
where there are theleast regulatory constraints. well. Many companies have worked with environ-
More modern, ESG integration point of view says mental issues for decades and, while most efforts
that since ESG issues are increasingly material, are in compliance with law, the top-tier compa-
stock market operators cannot afford big incidents nies are showing signs of integrating sustainable-
at their watch as it would scare away potential development-related issues in their strategies and
investors. With regard to this, the Singaporean with this, are capturing market segments that have
stock exchange operator, SGX, enforced new grown from sustainable-development-related
corporate governance listing requirement for all trends.
listed companies.
However, Finnish companies tend to lack interna-
These changes do not take the Singaporean listing tional peers where social issues are concerned.
requirements anywhere near western standards; Relationships with labour unions tend to escalate
we do however, applaud SGX for taking a decisive into strikes too frequently, the health & safety
step in the right direction in increasing corporate performance leaves considerable room for
transparency and accountability and making it improvement, and only recently the companies
easier for responsible investors, such as ourselves, have been able to work together with government
to increasingly invest in Singapore. and local communities to prevent the adverse
impact of unnecessary corporate restructuring and
Conclusions from Swedish analysis related lay-offs.
The Swedish market is in terms of ESG a mature
Analysis dialogues 2011
• Atlas Copco • Handelsbanken • Oriflame Cosmetics • SSAB
• Axis Communication • HM • Outotec • Stora Enso
• Boliden • Husqvarna • Outokumpu • Swedish Orphan
• BP • Intesa Sanpaolo • Rautaruukki Biovitrum
• Campari • KB Financial group • Samsung Fire&Marine Insu- • Tele 2
• Chroma ATE • Kepco rance • Tieto
• Delta Electronics • Kuala Lumpur • Samsung Electronics • Trelleborg
• DS-Norden Kepong • SCA • TSMC
• Enel • Kulim • Scania • Unicredit
• ENI • Lassila&Tikanoja • Securitas • Wartsila
• Getinge • Lundin Petroleum • Shell Production & • Wihlborgs
• Golden Agri • Neste Oil Development Company • YIT
Resources • Nordea • Sime Darby • ÅF
• G&S Engineering • Nibe • Snam Rete Gas

7. Church of Sweden about Swedish Stars
“Church of Sweden has worked with Responsible Investment (RI) for many years. We place great
demands on our external asset managers who commit to integrating environmental, social and
governance-related aspects into their investment decisions. Nordea has been managing parts
of our buffer capital since the autumn of 2011 through Swedish Stars. The asset manager picks
both companies that are leaders in sustainability and companies that have lofty ambitions. We
believe in that combination. Nordea’s RI team possesses impressive competence, and we plan to
jointly engage with companies in the portfolio through shareholder dialogues.”
Anders Thorendal,
Treasurer & Chief Investment Officer, Church of Sweden
The Swedish Municipal Workers’ Union about Emerging Stars
”Kommunalarbetarförbundet was looking to investment in emerging markets. When Nordea
presented Emerging Stars we felt that it fitted perfectly with our ethical policy and guidelines.
After having participated to a study tour in Asia with the investment team we are very satisfied with
the investment process in terms of both the high responsible investment standards as well as the
business case. ”
Anders Bergström,
National treasurer/Third vice president, Kommunalarbetareförbundet

8. We believe that companies with strong ESG
potential and performance are interesting
from an investment perspective, which is
why we are developing products and
solutions of the future.
Products & solutions
In our ongoing work with development of products approach. This approach combines financial and
and solutions we focus on three core characteris- ESG parameters in order to find the best compa-
tics we consider to add long-term value; know- nies from both perspectives. The ESG analysis
ledge, proactiveness and innovation. By continu- contributes to identifying companies that are
ously seeking knowledge about ESG issues developing their businesses and risk management.
impacting companies, we are able to identify
potential material risks and hidden opportunities Identifying companies with a positive trend
for our investments. Proactiveness in our Nordea has in its research methodology decided to
app-roach means that we use various tools, for seek out companies that have adopted a systematic
example engagement activities and field visits in approach to managing key ESG risks and opportu-
order to secure that our funds live up to high ESG nities. Furthermore, we want to identify companies
standards. Knowledge and proactiveness are key that from an environmental and social perspective
factors for innovation. will be the stars of tomorrow. We have therefore
prioritised identifying companies that have a
“Best practice” as a strategy positive trend and the ones that have identified
The core focus of our activities in 2011 concerned sustainability as a platform for growth.
innovation. We have launched one unique RI fund,
Emerging Stars and re-launched Swedish Stars
where we have applied our “delta” analysis
Our approach to external funds
In our process of selecting external funds and
managers, we place emphasis on managers having
investment processes addressing RI in an adequate
manner. As a signatory to the PRI, we encourage
our selected funds and managers to actively
support these principles.
We report on our screening and active ownership 36 % of our funds managed externally is
activities regularly and request feedback using a managed by fund manager that has signed PRI .
“comply or explain” approach.
7 RESPONSIBLE INVESTMENT & GOVERNANCE

9. Emerging Stars & Swedish Stars
Selecting companies to invest in
In Emerging Stars and Swedish Stars we only invest in companies performing well from an environmental,
social, governance and financial perspective.
Step 2: Analysis of financial aspects
Step 1: Analysis of ESG aspects
Step 3: The portfolio is constructed
through an integrated approach
Step 4: Ongoing evaluation of companies
performance with a focus on ESG aspects
Performance Emering
Stars & Swedish Stars
Emerging Stars 110527-120217
The diagrams shows the perfor-
mance for Emerging Stars since
the launch in May and the
performance in Swedish Stars
since the re-launch in February
2011.
Swedish Stars 110228-120217
RESPONSIBLE INVESTMENT & GOVERNANCE 8

10. South Africa India
• The first stock exchange in the • Reporting consists of lot of
world to require mandatory policies and cases studies, not
integrated sustainability much targets and goals
disclosure in 2010 with the so • National Stock Exchange of
called King report of corporate India proposes to initiate
governance awareness programmes for
• Sustainability indices encou- listed companies on ESG
raged ESG disclosure since reporting
2004
9 RESPONSIBLE INVESTMENT & GOVERNANCE

11. ESG aspects in the emerging
markets within Emerging Stars
General in Emerging Markets
• Governments wield comparatively stronger influence over
companies’ CSR behaviour compared to western counter-
parts.
• ESG implementation and transparency are well below
Western standards at the country level, but at the company
level the implementation rates can be as high as that of
Western companies.
• GDP per capita is a poor predictor of CSR behavior. Some
comparatively poor countries have strong ESG initiatives in
place, some comparatively wealthier nations might have
weak practices.
• Reporting on policies and systems are more common to be
in place than performance numbers and related measures
and targets.
China Korea
• The least companies reporting • Most active among • Sustainability indices
among Asian peers Asian companies in encouraged ESG
• China tops list of ESG-related reporting, we estimate disclosure since 2009
corporate incidents and allega- that around 50% of the • Korea Exchange is
tions, where most of the large companies have planning to provide CSR
incidents are heavy manufactu- dedicated CSR person- guidelines for listed
ring and mining-related nel companies
• Sustainability indices encour- • Environmental issues
aged ESG disclosure since generally well governed,
2008 most problems related
to governance and
social issues
responsible investment & governance 10

12. Sector risks in Swedish Stars
The core elements of our ESG research and analysis are constructed to provide insight and understanding
regarding:
1. Overall governance structure regarding management of relevant ESG aspects
2. How companies address and manage key ESG risks and opportunities in their business operations
3. How companies develop sustainable products and services in order to strengthen overall develop­
ment of their business activities
Below we present a selected number of sectors which we invest in within Swedish Stars, and what risks we
analyse within these sectors.
Industry
• Environmental: product innova-
Financial tion and business development
• Social: working conditions,
• Environmental: investment or indirect complicity in relations
credit lending to companies to clients
or projects • Governance: purchasing and
• Social: investment or credit sales
lending to companies or
project, responsible lending
• Governance: risk
management Consumer dicretionary
• Environmental: Climate
mitigation and adap-
tion, Pollution, Resource
Management, Waste
Materials Management
• Social: Child and forced
• Environmental: clean labour, Workers rights,
production, energy intensive Working conditions
sector, water management
• Social: community involve-
ment, use of security forces,
working conditions
IT/Telecom
• Governance: purchasing
• Environmental: clean production, energy consumption
and sales, license
• Social: protecting privacy, working conditions
• Governance: expanding in countries with high risk for
bribes and corruption
11 RESPONSIBLE INVESTMENT & GOVERNANCE

13. We engage to change. Nordea initiates
engagement dialogues to change behaviour and
to enhance business performance by addressing
business practices used by the companies we
invest in.
Our engagements & dialogues
Nordea prioritises engagement with companies largest holdings. This is carried out by in-house
identified as being involved in verified breaches of expertise, our external engagement service
international environmental, human rights, labour provider Hermes Equity Ownership Services or
rights and business ethics-related norms. As of through cooperation with other stakeholders.
December 2011, Nordea is engaged in 12 norm- During 2011 we have met about 50 Nordic and
breaching companies worldwide. We also priori- global companies. It is our practice to engage in
tise proactive engagement dialogues with our direct face-to-face dialogues with companies.
Responsible Investment activities; the committee has an important role to
- Internal governance play in ensuring that Nordea Asset Management
structure follows the intention of the policy.”
The RI committee was “Part of the RI committee’s responsibility is to
formed in 2007, when review our engagement process and on-going
Nordea adopted its first engagement dialogues. During 2011, we have
policy for Responsible successfully completed two engagement dialogues;
Investment, and consists of this clearly shows that we can influence company’s
representatives from differ- behaviour by being an active and responsible
ent units within the organisation. The responsibil- owner” Allan Polack comments.
ity of the committee is to decide on the policy and
strategy framework, as well as the level of engage- “Furthermore, we clearly see that our engagement
ment with companies and whether a company for RI aspects is shared by our clients - in our
should be excluded from the investment universe. dialogue with them we see a constantly increasing
awareness of the responsibility of the investor in
“For Nordea it has been important already from the global financial market.”
the beginning to have a clear governance structure
for the management of RI aspects. Even thus the Allan Polack, Head of Nordea Asset Management and
Responsible Investment & Governance team is Chairman of the RI committee
responsible for the day-to-day management of RI
RESPONSIBLE INVESTMENT & GOVERNANCE 12

14. Focus area – Environment
Environmental norms establish a commitment first Corporate Social Responsibility (CSR) report
aimed at upholding the world’s ecosystems and specifically addressing its approach to overseas
biodiversity in the face of economic development. operations. Following our discussion concerning
The business reference states that companies in the CDP survey, the company also notably
sectors facing great environmental risk should be improved their answers in this year’s survey.
sure to have enhanced policies and practices in
place to handle this. Another company has appointed a Chief Sustain-
ability Officer and conducted an external audit of
Lack of transparency a problem its current sustainability practices and reporting.
Nordea is engaged with companies that are failing The company has committed to implementing the
in their environmental responsibilities by lacking findings from the external audit and is now in the
in their remediation work. Some companies are process of developing and implementing new
unwilling to disclose information and lack trans- sustainability policies and practices. In our
parency as to how operations are managed from an dialogue with this company we have also
environmental perspective. We have encouraged questioned the board’s lack of involvement in
these companies to improve their disclosure on sustainability aspects. Our aim is now to influence
environmental policies and practices. One the company to appoint a board member with
company has been provided with best practice sustainability expertise.
examples for its own sustainability reporting and
concerning the company’s participation in the
Carbon Disclosure Project (CDP) survey. Our Ongoing engagements:
engagement with one of the companies took a Chevron, CNOOC, Vedanta Resources, Royal
significant step forward when they published their Dutch Shell and Lukoil
Focus area – Human rights
International human rights norms aim to protect needs of the indigenous people. The business
people from political, legal and social abuse. The reference requires companies to adopt human
business reference states that companies should rights policies and ensure that they take into
support and respect the protection of these norms account the right to self-determination. Compa-
and ensure that they are not complicit in activities nies should also require all business partners to do
involving human rights abuses. likewise.
Western Sahara Controversial sourcing of phosphate rock
Western Sahara has been on the UN’s list of In recent years several companies have been
Non-Self-Governing Territories since the 1960s. criticised and alleged to have acted in breach of
Western Sahara was invaded by Morocco in 1975 international norms by exploiting natural resourc-
and has been occupied ever since. Sourcing es in Western Sahara. Nordea has been engaged
natural resources from this occupied area contra- with several companies in this area; all of them
venes the right to self-determination unless have been involved in sourcing of phosphate rock.
carried out with full respect for the interests and However, we are also investigating companies
13 RESPONSIBLE INVESTMENT & GOVERNANCE

15. involved in sectors such as shipping, fisheries and illegal coercive methods to recover loans. ICICI
oil and gas. Bank has now improved procedures for audit and
training of its recovery agents. It has also signifi-
Positive results – Controversial sourcing cantly increased the board’s supervision of this
Nordea’s engagement with the Mosaic Company issue. Actions taken by the company have been
was successfully terminated in June 2010. Mosaic effective in curbing violent behaviour among the
disclosed that they have discontinued their bank’s recovery agents, and we therefore success-
purchase of phosphate from Western Sahara, fully completed our dialogue with the company in
which also was independently confirmed. The the end of 2010.
company has acknowledged the human rights
issues involved with importing phosphate from Completed engagements
Western Sahara. Our engagement with the ICICI Bank (ended 2010) and TransCanada
Australian company Wesfarmers was successfully (ended 2011)
concluded in 2009. The company decided to
invest in a new facility, enabling it to use a wide Operations in controversial regions
range of suppliers from areas other than Western In our dialogues with companies failing to respect
Sahara. human rights we have urged them to improve their
human rights policies as well as their practices for
Completed engagements how to implement and follow-up on these policies
The Mosaic Company (ended 2010) and within their own organisations as well as within the
Wesfarmers (ended 2009) supply chain. As a result, one company has
strengthened its supply chain control procedure.
Positive results – human rights
Nordea has been engaged in a dialogue with ICICI Ongoing engagements:
Bank since the beginning of 2008. The company is Cemex SAB de CV and Nissan Motor
known to have employed recovery agents who used
Focus area – Labour rights
Work is part of people’s daily life and is vital for a regarding organised labour which should also
person’s dignity, well-being and personal devel- apply to all subsidiaries. In one dialogue, we
opment. International norms set standards which conducted a two-day on-site visit to investigate
encompass freedom of association, the right to how the company in practice managed staff-relat-
collective bargaining, forced labour, child labour ed issues. We have also addressed how overall ESG
and discrimination. The business reference states issues are managed across global operations,
that companies should ensure that their labour particularly in developing markets. particularly in
policies are based on ILO conventions and that developing markets.
they should actively inform their employees of
labour rights. Ongoing engagements
The AES and Wal-Mart Stores
Violation of trade union rights
Most of Nordea’s engagements in this area are Positive result – labour rights
with companies which are known violators of trade Nordea has been engaged in a dialogue with
union rights. In our dialogues we have expressed Hankook Tire since the end of 2009. The company
the importance of developing coherent policies had been violating labour laws and trade union
responsible investment & governance 14

16. rights at its plant in Hungary. In our first meeting address the contentious issues.
with the company they acknowledged that they Completed engagements
lagged behind peers and indicated willingness to Hankook Tire (ended 2011)
change their behaviour. The company has now
taken positive steps forward and is engaging its
workers and their representatives in a dialogue to
Focus area – Business ethics
Corruption is considered to be one of the greatest transparency regarding bribery and corruption.
obstacles to economic and social development. It The company engaged has been provided with best
also distorts competition and impedes the devel- practices examples on anti-corruption policies
opment of fair market structures. For companies to and structures. Since we started our engagement
be able to handle these issues they need to develop the company has established a set of relevant
effective anti-corruption policies and manage- guidelines on ethics and anti-bribery and created
ment systems. a website to encourage employees as well as
suppliers to engage in whistle-blowing. The
Corruption – institutionalised phenomenon company has now committed to increasing its
In some countries the lack of good business ethics transparency on sustainability issues, and a further
practices is institutionalised. We have therefore explanation on its compliance system will be
addressed the issue on a policy and industry level included in the next CSR report.
in addition to engagement with specific compa-
nies. This has been conducted by participating in Ongoing engagements
local industry forums to promote increased Hyundai Motor
Exclusion Active ownership
• Nordea believes in positive means of engage- Nordea is exercising active ownership through
ment by which we actively contribute to engagements and dialogues. During 2011, Nordea
improvement of company’s management of was engaged in 15 norm-breaching companies
key environmental, social and governance worldwide.
practices.
• We also believe that exclusion is seldom
2011 2010 2009 2008
Engagements
15
& dialogues
constructive and long-term oriented. Direct
16
divesting from companies with poor manage-
14
ment practices is used as a last resort.
10
• We exclude companies when violations are
severe and when companies are unwilling to
change or improve their behaviour. Nordea
does not invest in companies which are
involved in the development, production and
maintenance of illegal weapons.
15 RESPONSIBLE INVESTMENT & GOVERNANCE

17. We believe that understanding of business
conditions in the companies we invest in is one
of the key elements influencing positive change.
Field visits are one way to learn more.
Global outreach
Nigeria oil spills. Furthermore, after our dialogue the
In February the Responsible Investment & Governance company communicated that they have initiated
team conducted a field visit to Nigeria. The purpose of the phasing out of gas-flaring practices and plan to
the visit was to meet with Royal Dutch Shell, a company phase out all flaring by the end of 2014.
accused of violating environmental norms.
Singapore, Indonesia and Malaysia
Shell Production and Development Company In May the Responsible Investment & Governance team
(SPDC) has a long and complex history on conducted a field visit in Southeast Asia. The purpose of
environmental issues in the Niger Delta. Oil the visit was to meet with companies and other
operations started in 50s and have over the last 50 organisations involved in the palm oil industry.
years evolved in all parts of Niger Delta and have
due to several interrelated reasons caused severe Palm oil is the world’s most prolific vegetable oil
environmental impact in many areas. SPDC and the demand for it has surged in recent years.
conducts third party verification Our dialogue with Along with the demand, palm oil production has
SPDC started with thorough analysis of SPDC’s expanded and the industry’s management
technical capacity to maintain, replace as well as practices of environmental and social issues have
safeguard 7,000 km of pipelines in a very difficult become increasingly scrutinised and inevitably
and demanding environment. questioned.
Our initial findings gave us a good understanding The challenges that the industry faces were well
of key issues needed to be addressed in our expressed by the companies and organisations we
meeting with the company, which mainly was met during our visit. The major sustainability risks
pipeline integrity in terms of lack of access, and issues are not derived from the established
maintenance and investments as well as its plantation; it is rather from when companies
gas-flaring practices. After our dialogue, SPDC expand into new plantation areas. When expand-
committed to conduct 3rd party verification of its ing the companies’ face several issues, such as
pipeline integrity status which is a source of the logging without proper permits, expanding on
most severe environmental damage in Nigeria. prohibited peat land and virgin forests, corruption
A review will be conducted in stages and will be etc. In these situations the companies need to
completed by the end of 2012. manage challenges related to the rights of indig-
enous people to their land, the risk of destroying
This is a big step forward in order to examine and the habitat of many species as well as climate
later mitigate pipeline integrity and prevent future change issues etc.
RESPONSIBLE INVESTMENT & GOVERNANCE 16

18. During 2011 we have conducted proactive engagement
dialogues with companies on the ground in Africa, Asia,
Europe and the Nordic countries.
Singapore, Indonesia and Malaysia
• ESG challenges related to the palm oil industry
triggered our field visit to Asia
• Companies operating in this relatively high risk industry
need to have solid management systems in order to
address the diverse range of ESG challenges they face
Palm oil can, however, be sustainably produced. the Roundtable on Sustainable Palm Oil (RSPO).
But for this to be a reality, companies need to have The RSPO standard address main parts of key
solid management systems that address not only issues, thus companies striving to RSPO certify
the above challenges but also the risks related to their plantations are going to the right direction
established plantations, as well as migrant work- from our point of view.
ers, hazardous chemicals, heavy machinery etc.
South Korea & Taiwan
And this has sometimes been managed in very In October the Responsible Investment & Governance
remote locations. Since the middle of 2000, team together with a group of institutional investors
companies can certify their operations against the conducted a field visit in South Korea and Taiwan. The
environmental and social standard developed by purpose of the visit was to meet the key holdings and
17 RESPONSIBLE INVESTMENT & GOVERNANCE

19. Cambodia
• There have been several reports indicating poor
workingconditions at H&M’s supplier in Cambodia
• We recommended the company to improve its cooling
system and improve the access to drinking water
Africa
• Royal Dutch Shell has been alleged to violate
environment-related international norms
• We recommended the company to conduct 3rd party
verification of its pipeline integrity status in Nigeria,
which the company committed to do and complete
the process by the end of 2012
the most important prospects in the Emerging Stars For Korean companies, the role of government and
Fund. the related regulators is significant. Many of the
companies we met cited direct government
During the visit we met over ten companies and influence, another regulatory-related reasons as
various other corporate responsibility experts in the main drivers of their corporate responsibility
Seoul and Taiwan. It turns out that global compa- behaviour. In Taiwan, especially among the
nies domiciled in Asia are not that different after electronic companies that we mostly met, the
all. All companies are ultimately driven by external client is the king. Most of the manufacturers
stakeholder pressure. The major difference supplying the global electronics giants have
between Nordic and Asian companies is their undergone the effort to certify their operations
perceived importance of different stakeholders. against various ISO standards. The greatest
RESPONSIBLE INVESTMENT & GOVERNANCE 18

20. surprise for us was that for most of the companies retroactive measures revolve around well-func-
we met, we were the first western investors to ask tioning, externally available whistleblowing
questions related to corporate responsibility and mechanism, which has to be backed up with
sustainable development. We were not expecting stringent processes to handle the incoming cases.
there to be many investors going through the Naturally, transparent reporting on both proactive
effort, but we were surely surprised to be the and retroactive measures is always appreciated.
absolute first ones to do so, especially with the
largest and most global companies. Cambodia
In September the Responsible Investment & Govern-
Italy ance team conducted a field visit in Cambodia together
In December the Responsible Investment & Governance with local Hennes & Mauritz (H&M) representatives.
team conducted a field visit in Italy. Italy is among the The purpose of the visit was to investigate working
worst performing countries in the Corruption Percep- conditions at one of H&M’s suppliers.
tion index. Tax evasion is a prevalent problem and,
most worryingly, the big ticket incidents, at least used to There have been several reports concerning poor
be, all too frequent. With this in mind we wanted to working conditions at one of H&M’s suppliers in
explore risks related to corporate governance and Cambodia, one report for example concerned
business ethics among our largest Italian holdings. almost 300 workers having fainted. During the
visit we discovered that local reports on the
Our findings confirm that corruption is an incidents were incomplete, some pointed at
endemic problem in Italy and ranges from recom- exhaustion while local officials saw the incidence
mendation systems to secure employment, to of fainting as a mass hysterical phenomenon. The
prevalent use of cash in small businesses to enable visit also revealed that there still are issues that
tax evasion. In the business environment, Italian need to be better managed at the Cambodian
law can make corporations liable for the actions of supplier. We specifically recommended the
the individual employee, which gives a strong company to address the following issues: the
incentive for a company to establish at minimum a cooling systems which were not sufficient to keep
code of ethics for employees to mitigate the temperatures at a decent level, working hours at
liability of actions resulting from actions of a peak periods were very long and access to drinking
corrupt employee. water during work hours was limited/non-
existent.
Because of the prevalence of corruption and the
liability legislation, the largest companies have Both H&M and Nordea were satisfied with the
good programmes in place to proactively prevent open and positive approach from the factory’s
the corrupt practices and retroactively monitor Chinese management team. Immediate action in
compliance. The best practices, which would terms of access to drinking water was taken and
definitely benefit Nordic companies as well, the local management initiated a plan to improve
include comprehensive communication, both overall working conditions. Nordea will re-visit
virtual and classroom learning, involving external the factories during 2012 to conduct a follow up.
expertise, engaging top management in the effort
and linking compensation to the trainings. Best
19 RESPONSIBLE INVESTMENT & GOVERNANCE

21. Corporate governance is about safeguarding
shareholders’ interests in the best way possible.
Good long-term development benefits share-
olders, employees as well as other stakeholders.
Corporate Governance
Corporate governance deals with the relationship Engagements in companies began in the early
between shareholders and the companies’ boards 1990s and have since increased successively over
and executive management. From the standpoint the years with the main focus on listed companies
of Nordea, corporate governance shall be and stock markets in the Nordic region.
exercised on the basis of the shareholders’
common interest in good investment returns. Corporate governance guidelines
Nordea’s first guidelines on corporate governance
A long tradition of active ownership
were adopted in 1996. The last revision, the
Nordea is an active owner and has a long tradition
seventh, was adopted in 2009. Long-term value
of handling corporate governance matters such as
creation through engagement and voting is the
voting and engagement with companies. Nordea
generally considers good corporate governance overall aim of our corporate governance activities.
crucial to the creation of value in companies, and
it plays a key role in promoting companies’ In line with our guidelines we believe that the
development towards better results through active following issues are of importance: composition
ownership. We have voted regularly at general and function of the board of directors, share-
meetings since the 1980s and have participated in holder rights, disclosure and transparency,
nomination committees of a large number of listed compensation and range of takeover defences.
companies since the 1990s.
Progress made in Sweden Active ownership
Nomination committees are well established and Nordea is exercising active ownership through
the Swedish nomination committee model helps to: participating in general meetings. During 2011
we have attended 115 general meetings.
• Create a structured and transparent process
governed by the owners.
• Separate and clarify the roles between
115
2011
in the Nordics
General meetings
shareholders and board.
158
2010
• Enable shareholders to create value in the
171
2009 2008
long term when they have more influence on
147
the composition of boards.
RESPONSIBLE INVESTMENT & GOVERNANCE 20

22. Food prices have reached an historic peak,
exacerbating global hunger and poverty. At the
same time, a number of international studies
indicate that financial speculation is contributing
to the volatile and record high prices.
Does financial speculation impact
food prices?
United Nations Food and Agriculture Organiza- supply and demand and therefore fail to provide
tion (FAO) reports that almost 1 billion people in producers with an effective way to hedge their
the world do not have sufficient food to eat. During risks.
2011, the global food price index produced by
FAO reached a historic peak. The high food prices Although the providers of financial products have
have put pressure on the already tight food budgets legitimate objectives; it raise questions as to their
of the world’s poor, and it has as well made it more impact on commodities prices and thus their
expensive to give them assistance in the form of impact on the lives of the world’s most exposed
food aid. populations. With global population now exceed-
ing 7 billion with a continuously high growth rate,
Responsibility of financial industry food supply and food prices is a fundamental
It has been debated in the financial industry and concern and it raises questions about the appro-
political spheres whether financial speculation in priateness of basic food commodities as basis for
agricultural commodities is contributing to financial investment products.
increasing volatility and higher food prices. Rising
transaction volumes on the derivatives markets and Our action
the sharp rise and volatility of food prices have led On the basis of this debate, Nordea has decided
stakeholders to examine the potential responsi- to no longer produce any wrapped investment
bility of the financial sector. products where basic food commodities are
included in underlying assets.
Financial players’ part of the agricultural futures
and options markets has grown significantly over Information presented above are derived from UNC-
the last decade. Those with direct commercial TAD report published in June 2011 and reflects views
interests in food production used to be the main indicating impact financial markets have on soft
participants, but today hold less than 40 % of the commodities.
market compared with 88 % in 1996. Based on
this it cannot be out ruled that agricultural markets
no longer respond to underlying fundamentals of
21 RESPONSIBLE INVESTMENT & GOVERNANCE

23. As the largest asset manager in the Nordic
region we seek to encourage best practice
through active participation in international
initiatives.
International initiatives & participation
Carbon Disclosure Project Water Disclosure Project
Nordea is a signatory to Carbon Disclosure Project Nordea is a signatory to the Water Disclosure Project.
(CDP), a project which aims to collect and spread The project is an initiative run by the Carbon Disclosure
information concerning greenhouse gas emissions and Project and is supported by institutional investors. The
climate change strategies. Nordea uses the information in aim of the project is to collect and spread information
the database in its ESG analysis. CDP is a cooperation concerning water-related risks and possibilities and
arrangement between 551 institutional investors who addresses 300 global companies with water-intensive
together account for over a third of the world’s production and water-related challenges.
investments.
Sustainable Investment Forums Principle for Responsible Investment
Nordea actively participates in local sustainable As one of the first major banks in the Nordic countries,
investment forums, so-called SIFs, which are independ- Nordea on 1 November 2007 signed the Principles for
ent national forums that promote responsible investment. Responsible Investment (PRI). In connection with this our
Nordea became a member of SWESIF in 2008, in policy for responsible investment was launched. This
DANSIF 2010 and was founding member of FINSIF policy shows how we adhere to the six principles. We
when the association was launched in June 2010. report on our activities and progress towards implement-
Nordea is represented on the boards of SWESIF ing the PRI. This report is public and available on the PRI
and FINSIF. website.
During 2011 Nordea has, among other things, partici- During 2011 Nordea has been engaged in PRI
pated in two SIF initiatives; the Broker initiative and the collaborative engagement activities focusing on
Sustainability profile. The Broker initiative involved encour- improving transparency and communication from
aging brokers to incorporate ESG information into their companies both on developed and emerging markets.
company analysis. The other project aimed at improving We have also been engaged in an activity concerning
the financial industry’s RI communication to clients. The sustainable fisheries
result of the project was that all project participants
launched Sustainability profiles describing in detail how
RI is implemented in their specific funds.
Sustainable value creation
Sustainable value creation is a cooperation project involving some of Sweden and Norway´s biggest investors. The aim
of the project is to influence listed Swedish and Norwegian companies in sustainable development and long-term value
creation. Nordea considers it essential for companies to work actively with environmental and social aspects in its
business; we therefore take part in the working team that runs the project in Sweden. During 2011, the survey was, for
20 RESPONSIBLE INVESTMENT & GOVERNANCE RESPONSIBLE INVESTMENT & GOVERNANCE 21
the second time, sent out to the 100 largest companies on the Swedish stock exchange and the results will be
presented in the beginning of 2012.

24. Summing up
• Launch of unique RI fund, Emerging Stars • We have successfully completed two
and re-launch of Swedish Stars. engagement dialogues with companies
violating international norms.
• Launch of external blog “Responsible
Returns”. A blog about our work and global • We have conducted several field visits and
trends within the responsible investment field, engage with companies where their business
http://newsroom.nordea.com/en/responsi- operations take place.
ble-returns/.
• Sasja Beslik was awarded the title of
• Recruitment has been made. The Responsible YoungGlobal Leader 2011 by the World
Investment and Governance team has been Economic Forum. The title means that for five
expanded with three new employees with long years Sasja will serve as an ambassador of a
experience from portfolio management, ESG global network aiming to influence interna-
analysis and communication. tional companies to increase their social
responsibility.

25. The year ahead
We believe that companies’ ability to manage ESG Aside from communication efforts we will
opportunities and risks are powerful proxies and continue the development of our “stars” family of
leading indicators for their overall management products where we deliver state-of-the art ESG
quality – or the lack thereof. We believe that products. Solution-related development for 2012
companies’ ability to link management of ESG will concern cooperation with our Private Banking
aspects of their business to their products and division and creation of a new responsibility
services is one of the key proxies for their future concept for their business activities.
development.
2012 is all about value creation, in a responsible
During 2012 we will revisit one of the key founda- way.
tions of our Responsible Investment and Govern-
ance strategy; communication. We will increase
our efforts related to communication about how
we create responsible returns in Denmark and
Norway, markets where we see increasing client
interest in our products and solutions.

26. Responsible Investment & Governance
Sasja Beslik is Head of Responsible Investment & Governance at Nordea.
Mr Beslik previously served as Head of Responsible Investments at Banco/
ABN AMRO and as a consultant for the World Bank for several projects in
Africa and Asia. Mr Beslik is also chairman of UNEP Finance Initiative’s Water
Work Group.
Helena Hagberg is Director of Responsible Investment & Governance at
Nordea. Ms Hagberg has previously worked with ESG research and corpo-
rate engagements at SwedbankRobur and Banco/ABN AMRO. Ms Hagberg
is former Chairman of the Swedish Sustainable Investment Forum, SWESIF,
and is now deputy board member.
Antti Savilaakso is Director of Responsible Investment & Governance at
Nordea. Mr Savilaakso has previously worked with ESG analysis and
corporate engagement at Responsible Research in Singapore, Dexia Asset
Management in Brussels and ABN AMRO Asset Management in Amsterdam.
Ylva Hannestad is Responsible Investment & Governance analyst at
Nordea. Ms Hannestad holds a Master of Business Economics in Finance
from Linköping University. Ms Hannestad is a former deputy board member of
the Swedish Sustainable Investment Forum, SWESIF.
Thomas Ehlin is Director of Responsible Investment & Governance at
Nordea. Mr Ehlin is a board member of the Swedish Securities Council
(Aktiemarknadsnämnden) and has also served as a member and chairman
of several nomination committees of listed companies.
Jan Särlvik is Director of Responsible Investment & Governance at Nordea.
Mr Särlvik has 15 years experience as portfolio manager and financial analyst
at Nordea. Before joining Nordea Mr Särlvik worked as Treasurer at Fabege
AB and Esselte AB.
Klaus Fridorf is Director of Responsible Investment & Governance at
Nordea. Mr Fridorf joined Nordea Invest in 2008, as Head of Communication.
Mr Fridorf has among other things worked in the Industrialization Fund for
Developing Countries in the Danish Foreign Ministry working with
Communication and International CSR policy.
25 RESPONSIBLE INVESTMENT & GOVERNANCE

27. An ongoing process
2002 2007 2008 2009 2010 2011
Nordea launches first Signs UNPRI and launch Initiates engagements in Signs Carbon Exclude New Strategy Initiates Establish Launch of Initiates
policy on Responsible Disclosure and Policy engagement in-house unique RI engagement
ethical funds Investment new companies Project
com- in new ESG method funds in new
panies companies companies
involved
Nordea has been in cluster
working with gover- munitions
nance issues since
the 1980´s

28. Nordea Responsible Investment & Governance
Annual Report 
2011
Published by: Nordea Investment Funds
Photo: Håkan Flank, Pak Noto, Ewa Baumgartner, Klaus Fridorf, iStockphoto, Getty Images
Graphic design: Lina Johansson Sense Design
Sources: Ethix SRI Advisors, Hermes Equity Ownership Services, UNCTAD report
March 2012