Case Study | LD Pensions

LD Pensions: The World’s First Future-Fit Pioneer

LD Pensions is committed to playing its part in the transition to a Future-Fit Society, and the release of its first Pioneer Progress Report represents an important step on that journey.

LD Pensions’ Long-Standing Commitments

As a Danish pension asset owner, LD Pensions has long focused on the ESG elements of its portfolio. However, last year the organization rebuilt its sustainability strategy around the Future-Fit methodology, with a view to embedding elements of this approach into every one of its investment mandates. First out of the blocks was a €160m mandate to build a portfolio incorporating the Future-Fit Positive Pursuits, seeking to invest in companies which contribute positively to our collective transition to an environmentally restorative, socially just, and economically inclusive future.

“It is imperative that as universal owners, our management strategy accounts for the seismic shifts our economy is facing.” Kristoffer Birch, Head of Equities, LD Pensions.

Building on this philosophy, LD Pensions is also focusing on minimizing the negative impacts associated with its investments through engagement with portfolio companies. By utilizing company insights from investment managers, and the direct access to company leadership which such managers afford, LD Pensions is able to communicate and drive its preferred approach. The investment managers are therefore critical elements in this strategy, and so each new mandate considers the willingness of the manager to utilize the Future-Fit methodology and engage with portfolio companies on related environmental and social impacts.

As an example, LD Pensions has initiated a pilot project with Future-Fit Accredited Partner Nordic Sustainability. This will enable LD Pensions’ asset managers to offer selected companies a “start-up package” of specific tools and consultancy assistance built around the Future-Fit approach, equipping them to understand and respond to their most pressing systemic risks and opportunities.

LD Pensions’ Pioneer Progress Summary

LD Pensions’ first progress summary is built around the Future-Fit Business Benchmark’s suite of 23 Break-Even Goals, focusing on those which are of ‘critical’ and ‘high’ priority, and taking the form of a structured narrative summary. Of particular focus are the goals “Business is conducted ethically” and “Financial assets safeguard the pursuit of future-fitness”. A rationale is provided as to why LD Pensions has assessed these goals to be of the highest importance, with further information focusing on the level of data awareness, a statement of intent around each goal, and the actions that will be taken to improve performance.

In addition to the focused narrative on the two most critical goals, the report also provides a high-level assessment of the relative importance of the remaining 21 goals to LD Pensions. The complete assessment is additionally shown mapped against Future-Fit’s sector-specific “Finance Industry Heat Map”, with an explanation as to where the organization’s priorities diverge from the industry norm.

By adopting this approach, LD Pensions has taken a huge leap forward in demonstrating how asset owners can start to understand and take responsibility for the impacts they finance, and it has laid a radical challenge to its peers to do likewise. In publishing its own Pioneer Progress Report, LD Pensions is walking-the-walk – undertaking the very analysis it wishes of its portfolio companies and taking responsibility for its role in their impacts. It is also laying out a clear framework for engagement and a route to core business improvement which it wishes to help finance.

If this approach was to be mirrored by all asset owners, the impact would be enormous. Not only would the consistency and transparency of ‘ESG’ data increase rapidly, but the true corporate leaders would be more easily identifiable, and we could all be more confident of which businesses were actually making the right changes, rather than just ticking the right boxes.

Why Pioneer Reporting?

Incremental gains in corporate behaviour are not enough to drive the rapid and radical transformation we need to solve the critical challenges facing society. Future-Fit’s open source, science-based approach has been co-created to hand control back to business, by enabling any organization to understand how far away it is from a well-defined extra-financial break-even point, and to focus on closing the gap. Pioneer reporting is a logical extension of this approach, equipping any business to explain to stakeholders – in a concise, comparable way – where it is on the journey, where it’s heading next, and why.

A business’s first Progress Summary can be wholly narrative, focussing on its highest priority issues, with quantitative metrics following in due course. Thus, any business can quickly start to communicate its commitment to future-fitness, adding more detail as it builds it understanding, management and measurement of the underlying indicators.

The Pioneer program is open to any business seeking to become truly responsible, regenerative and resilient in an increasingly uncertain world. If you’d like to explore how becoming a Future-Fit Pioneer could benefit your organisation, please reach out to us today.

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