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Xklude Research: Analysis of risk of controversy in the largest Danish investors equity investments

Topdanmark’s and Nykredit’s portfolios have the most controversy

A screening of the stock lists of the largest Danish institutional investors shows that Topdanmark and Nykredit have relatively the most controversial companies in their portfolios. The companies’ stock lists include more controversial cases than other Danish investors. Four out of ten companies at Topdanmark are linked to controversial issues. Both fossil companies and nuclear weapons manufacturers are on the stock lists of Topdanmark and Nykredit.

Topdanmark and Nykredit are at greatest risk of being affected by ESG-related scandals from the listed companies in which they invest. This is shown by a screening conducted by of 17 of the largest Danish institutional investors in Denmark.

The screening is based on 31 different controversial issues, including fossil fuels and companies with aggressive tax structures in tax havens – to nuclear weapons manufacturers and vague policies for dealing with human rights violations.

All controversial issues be views at

The result of the screening shows that Nykredit’s and Topdanmark’s equity portfolios contain relatively the most controversial companies. In Topdanmark, 42 per cent of the companies are connected to one or more controversial issues, while 35 per cent of the companies in Nykredit’s portfolio are.

Among the more controversial investments at Topdanmark the screening shows the oil companies Occidental Petroleum, Total and BP, as well as the supplier to the nuclear weapons industry Airbus.

It is to be noted that TopDanmark only has 132 equity investments due to an investment strategy that focuses on funds and bonds. Nevertheless, 42 percent, equivalent to 55 companies, are linked to controversial issues.

The narrow equity portfolio means that the risk measured in the number of identified and possible upcoming controversies in possible events is less than for other investors. However, the relative risk measured as a share of controversy of all investments is, all other things being equal, higher at Topdanmark than for the other investors in the analysis.

At Nykredit, controversial companies make up 35 percent of the portfolio’s equity funds. For Nykredit, a total of 1729 shares have been screened and 612 companies have been identified as beeing linked to one or more controversial issues.

Most notable in Nykredit’s case is the number of companies in the arms industry. A total of 29 companies in Nykredit’s equity investments are linked to the arms industry. Nuclear weapons companies such as Bae Systems, Safran SA and Huntington Ingalls are in particular looking ethically problematic.  All companies that are excluded by the vast majority of large investors in Denmark and also by many other Nordic investors.

Nuclear weapons are illegal under the UN Treaty on the Prohibition of Nuclear Weapons, which entered into force on 22 January this year. Several NATO countries, including Denmark, have not signed the treaty.

But it has not deterred many international investors from excluding nuclear weapons manufacturers with reference to the treaty.

According to the screening of the Danish investors, the result also shows that there is general consensus to exclude manufacturers and subcontractors to the nuclear weapons industry. In general, the screening of the Danish investors shows that companies that themselves produce or supply components for the nuclear weapons industry are often excluded.

The conclusion is not unambiguous, as investors interpret the companies differently according to scope and context.

Lærernes Pension, Velliv and PBU with the least risk of controversy

The screenings also show that Lærernes Pension, Velliv and PBU have relatively the least risk of controversy in their equity portfolios. 12 per cent of the companies in Lærernes Pensions’ portfolio are linked to one or more controversial issues, while the share of Velliv’s and PBU’s stock lists is 14 and 20 percent of the companies, respectively. The average for all investors’ share of controversial companies is 27 percent of the equity portfolio.

The proportion of companies linked to one or more controversial issues does not reveal anything about the degree of controversy – including whether, for example, it is more controversial to pursue aggressive tax policies than to produce nuclear weapons.

However, looking at the number of controversial cases in which the companies on the stock lists are involved in, it may give an indication of the extent to which the risk of new cases increases as the companies on the stock lists are involved in several cases.

The companies on the stock lists at PBU, ATP, Velliv and Lærernes Pension are on average linked to fewer controversial issues, while Sampension, AP Pension, Nykredit Invest and Topdanmark have invested in companies that are linked to the most controversial issues.

For Topdanmark and Nykredit, both the relative share of controversial companies and the number of controversies linked to companies.

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