Annual report 2021 KLP Group, Sustainability and KLP

KLP’s purpose is to provide secure and competitive pension savings in a way that contributes to the realisation of the United Nations Sustainable Development Goals (SDGs) and the Paris Agreement’s climate goals. Our ambition is to be among the leaders in our sector for corporate responsibility.

Corporate responsibility is integrated into KLP’s corporate governance and is a key aspect of our corporate strategy. All business areas and subsidiaries have a duty to operationalise this through the development of their own goals and initiatives for corporate responsibility. In this sustainability report, we give an account of how KLP engages in the field of corporate responsibility and sustainability, the topics we have focused on particularly in the past year and the results we have achieved. 

Our sustainability reporting rests on KLP’s core values:

: KLP is as open and transparent as possible, because we think this makes our endeavours more influential and effective. We are therefore open about both our positive and negative impacts.

: KLP reports clearly and in ways that are understandable for our stakeholders. We define clearly and explain what we mean by the terms we use.

: KLP will report responsibly and present our results accurately, focusing on the areas that are material for KLP.

: KLP considers openness an important contributor to and a precondition for further development in the financial sector. We therefore seek to report in a way that is comparable with other entities, and we base our reporting on best practice and existing standards.

As a pensions provider and investor, we work with a broad range of topics and issues relating to corporate responsibility. KLP has drawn up two materiality matrices linked to corporate responsibility. These matrices will help us to systematise topics and prioritise between them. One matrix considers materiality for KLP as a pensioncompany, while the other looks at KLP as a responsible investor. For KLP, all aspects included in the matrices are important. However, those in the dark green boxes are those we have paid particular attention to in the past year. 

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KLP’s most important stakeholders are our owners and customers, which consist of municipalities, county municipalities, and the healthcare sector in Norway. Their values and priorities are therefore decisive for KLP’s priorities. We are in constant contact with mayors and other local politicians, municipal administrators and health trust executives to obtain input for our work and our priorities. Of equal importance, our owners help set KLP’s course through their representation in all our governing bodies.

In the spring of 2021, we also conducted a stakeholder analysis among our owners, focusing on corporate responsibility and sustainability. Our objective was to get a snapshot of what our owners want of us, as a pensions provider and corporate citizen, and whether they perceive endeavours in the field of sustainability to be valuable and important. Among our main findings was that sustainability and responsible asset management are extremely important for our owners, and something they consider natural that KLP should engage in. KLP’s primary focus should always be our main purpose, which is to provide high-quality pension services. They also pointed out that KLP has great insight and data that the municipal sector could make greater use of.

KLP aims to be an engaged and responsible owner. This is stated in KLP’s corporate strategy and corporate responsibility strategy, as well as its asset management strategy and associated investment principles. This is also embedded in key guidelines, such as the 

Guidelines for KLP as a Responsible Investor

KLP and the KLP Funds’ Voting Guidelines

Our strategies and guidelines are based on international norms and conventions intended to promote human rights and decent working conditions, reduce harm to the climate and the environment, and contribute to sustainable development. We have committed to doing so through the 

OECD Guidelines for Multinational Enterprises 

As a responsible investor and owner, we utilise the following tools in our work:

We integrate sustainability factors in our investment analyses and decision-making processes.

We try to influence companies, business sectors and markets to engage in sustainable value creation through the exercise of active ownership.

We exclude companies that violate our criteria and that show neither a willingness nor an ability to change.

Together, these measures give us considerable leeway in our efforts to prevent, limit and halt adverse effects or reduce material risk. In the 

 you can read more about how KLP has worked as a responsible investor in 2021 (Norwegian only).

By monitoring our investments, we identify and assess the risk of KLP’s guidelines being breached. Monitoring is wide-ranging, since our portfolio comprises a wide range of investments in a large number of companies in many countries and business sectors. Risk assessments are made in line with our guidelines and exclusion criteria and are based on information from a wide selection of sources, including government authorities, the media, company disclosures and dialogue with company representatives. Nevertheless, there is a risk that KLP, through its investments, could contribute to the violation of fundamental rights. In those instances where we uncover a risk that KLP’s guidelines and fundamental rights are being breached, we consider how we can minimise or eliminate the risk through a variety of responses.

KLP has engaged with companies on various topics in relation to human and labour rights in 2021. Prioritised areas among other topics have included labour rights for migrant workers, the right to organize, and scrapping of ships, as well as human rights in war and conflict situations. Among the companies KLP has followed up on these topics are;

Telenor regarding the company's telecom operations in Myanmar and implications on human rights due to the military coup.  It is an on-going dialogue due to implications of the sale as Telenor is waiting for the final confirmation.  

Yara regarding their production in Belarus and the risk of human and labour rights violations. During the dialogue Yara concluded not to extend the contract. 

Top Glove regarding alleged forced labour in Malaysia. During KLP's dialogue with Top Glove, sanctions against Top Glove were lifted.

Amazon regarding employees' lack of right to organize and thus violation of employee rights.

Follow-up of a total of 18 hotel chains in Qatar in connection with an extensive increase in hotel development because of the 2022 World Cup.

Follow-up, as well as advising, of a total of five companies in connection with shipwrecking in Alang, India due to the risk of violations of human and employee rights.

KLP’s investment strategy is to have a diverse investment portfolio that reflects the global economy. However, our basic philosophy is not merely to select only the best. Instead, our endeavours in the field of responsibility and sustainability are intended to contribute to a steady improvement in the level of corporate responsibility in the business world and thereby reduce the risk of violations in an international market.

We have adopted criteria for the kinds of companies we will not invest in. Our investment universe is screened against these ethical guidelines to identify companies that fulfil our exclusion criteria. We communicate regularly with companies about various challenges and follow up on incidents and cases. If we discover that any of the companies we are invested in commits serious and/or systematic violations of our ethical guidelines, and they show no willingness or ability to adopt more sustainable practices, we exclude them. This helps to reduce the risk to which we are exposed. 

Stakeholders can report suspicions of wrongdoing via the reporting channels and complaints mechanisms that have been established by the companies in which KLP invests. Complaints relating to fund and investment services are, however, reported directly to KLP. Customers who are unhappy about the outcome of the complaint’s procedure are entitled to pursue the matter by filing a complaint with the Norwegian Financial Services Complaints Board.

KLP is completely transparent about how we vote at general meetings of shareholders, which companies we are talking to on which issues, and which companies have been excluded on what grounds. 

KLP aimed to vote at 95 per cent of general meetings in Norway and abroad.

KLP aimed to follow up 240 companies in 2021.

KLP voted at 98 per cent of the general meetings of shareholders in non-Norwegian companies and thereby reached its target. KLP voted at 85 per cent of general meetings in Norwegian companies, which is less than the 95 per cent target. This may, in part, be explained by a shortage of capacity in the department responsible for active ownership during the period. Occasionally, insufficient notice was given of a company’s general meeting, which resulted in KLP being unable to cast its vote in time. In some cases, companies have been too late in sending out documentation. In these cases, KLP has subsequently met with the company concerned to explain our expectations with respect to general meetings.

At the close of the year, KLP had followed up a total of 294 companies on issues relating to environmental, social and governance (ESG) issues. These include human rights in areas of war and conflict, shipbreaking (“beaching”), tax and transparency, labour rights in China and the Gulf States, environmental damage, sustainable aquaculture, climate risk and the rights of children. KLP has followed up these matters through direct dialogue with companies and through investor alliances of which KLP is a member.

Case: Why KLP excludes companies operating in the West Bank

In 2021, we decided to exclude a further 16 companies from KLP’s investment portfolio due to their links to Israeli settlements in the West Bank. These settlements are deemed to violate international law, pursuant to the rules on occupation in the Hague Regulations and the Fourth Geneva Convention.

We performed a thorough assessment after the United Nations High Commissioner for Human Rights published a list of companies with operations linked to the Israeli settlements in the occupied Palestinian Territory. Our conclusion was that the excluded companies’ association with the Israeli settlements in the occupied West Bank constituted an unacceptable risk of contributing to the violation of human rights in situations of war and conflict.

The companies excluded operated in the banking, construction, infrastructure, and telecommunications sectors in the West Bank. The banks have been excluded because they contribute to the development, expansion, or maintenance of the settlements through the provision of financing. Construction companies were excluded on the grounds of their deliveries of materials and infrastructure. Telecommunications companies were excluded because telecoms services are deemed to be a fundamental infrastructure. KLP had investments worth NOK 275 million in these companies at the time the decision to exclude them was taken. 

In the longer term, climate change and the impoverishment of nature and the environment will affect KLP’s opportunities to create a good return on the pension assets we manage. We have worked systematically on climate risk over several years to enable us to analyse, manage and report climate risk as a financial risk. At the same time, we have a responsibility to minimise the impact we have on the climate, the environment and nature – directly through our own activities and indirectly through our customers, partners, suppliers and investments. We set specific targets for those areas where we have a materially negative impact or the potential to have a positive impact. Consideration for the climate, the environment and nature are included in our corporate governance and decision-making, choice of suppliers and investments.

Climate goals and climate-friendly investments

KLP’s biggest impact on the climate and the environment comes through our investments. The 

describe how KLP takes account of the climate and nature in all our investments and how we follow up with the companies in which we invest. We use the approaches described in the chapter 

. By screening companies against our guidelines and following up through dialogue, we reduce the risk of having a negative impact on the climate and the environment.

If the world is to keep global warming below 1.5C, global emissions must reach net zero by 2050. Thus, KLP has a goal of aligning our investments to this target and reach net zero in our portfolio as well. We have developed our own roadmap, which describes how KLP will assess each individual investment against an emission pathway compatible with the 1.5C target, and how we will work towards and measure our contribution to the goals set out in the Paris Agreement. In the roadmap, we develop the 

, which shows the share of our investments that have emissions in line with the 1,5C target. 

Huge investments are needed if the world is to reach the Paris Agreement’s climate targets and succeed in transitioning to a low-emission society. One important aspect of KLP’s climate goals is to increase our climate-friendly investments. Climate-friendly investments are those which contribute directly to emission reductions or otherwise contribute to the green transition in Norway or around the world. We distinguish between two different categories of climate-friendly investments:

 – These are investments involving zero or almost zero emissions from operations (not including Scope 3 emissions). The category includes renewable energy, sustainable forestry, and zero-emission transport. These are the same zero-emission investments that are 100 per cent Paris aligned in KLP’s climate goals. 

 – These are investments that contribute to a reduction in emissions and the development of new technologies, or that help sectors that would find it hard to reach zero emissions to reduce their emissions and become more sustainable. This is achieved through green lending and bonds, green buildings, and infrastructure. 

That KLP’s investments are 100 per cent Paris aligned

That KLP’s investments reach net zero emissions by 2050

That KLP increases its climate-friendly investments by NOK 6 billion per year

Companies must meet strict requirements if they are to operate in line with the goals of the Paris Agreement. This is also clear from KLP’s Paris Alignment Percentage (PAP). Expanding the measurement horizon from one to two years means that carbon intensity must be reduced by more than seven per cent per annum over two years, instead of over one year. The market has also developed, changing the weighting such that sectors with a high PAP have become a smaller percentage of the portfolio, while sectors with a low PAP have gained ground. The reduction in KLP’s PAP is therefore attributable to companies not doing enough in relation to the goals of the Paris Agreement and to changes in the market. 

I 2021, KLP invested over NOK 12 billion in climate-friendly investments in Norway and around the world and reached the target by a good margin. Investments included renewable energy projects, renewable energy funds, a new forestry fund, two investment partnerships for sustainable infrastructure worldwide, and four new green buildings. The new green buildings are in Trondheim and Copenhagen and constitutes a significant share of new investments. When disregarding these, climate-friendly investments increased by around NOK 7.2 billion.

To improve our reporting, we changed the reporting routine for climate-friendly investments in 2021 and adjusted the definition of certain indicators. This is explained in more detail in the notes 

In line with the proposed criteria in the EU’s taxonomy, KLP has changed its definition with respect to green buildings. There is still uncertainty concerning the criteria and what buildings  will meet the taxonomy’s specifications. We have therefore sorted our properties by energy class and included those that meet energy class A, since these buildings are certain to meet the taxonomy’s criteria (the 15 per cent most energy-efficient buildings in the country). If we include buildings with the energy classifications A and B, the market value comes to NOK 20.6 billion, which corresponds to 23 per cent of the portfolio’s value and 22 per cent measured in in square meters. 

Case: Collaboration to develop a green infrastructure fund

In 2021, we searched for opportunities to boost investment in green infrastructure, in the form of long-term debt. When we did not find an investment product that was sufficiently green, the solution was to develop one ourselves, in partnership with Macquarie Asset Management. 

The investment collaboration will focus on long-term investments in accordance with the EU taxonomy, such as solar, wind and hydropower, as well as sustainable energy storage. The investments will be made within a framework that makes it possible to show and verify that they contribute to the fulfilment of international climate goals

As one of the Nordic region’s largest property companies, KLP aims to help create meeting places where people thrive and can realise their potential. We seek to reduce the property sector’s carbon footprint and have a long-term perspective with respect to our properties. For this reason, we strive to reduce our energy consumption and improve the way we manage our waste.

To reduce the property portfolio’s energy consumption to 180 kWh per square meter.

To sort more than 65 per cent of our waste at source on average, with a minimum sorting rate of 50 per cent at each individual property in the portfolio.

Carbon footprint KLP’s property portfolio

Emissions from KLP's real estate portfolio decreased from 7,866 tonnes in 2020 to 5,343 tonnes in 2021, which corresponds to a reduction of 32 percent. The reduction is due to a large decrease in emissions from energy consumption (scope 2), and also a reduction in emissions from waste (scope 3). Energy consumption per square meter in 2021 was 161 kWh, which is a small reduction from 2020 and well within the target of 180 kWh per square meter. The sorting rate of waste is at the same level as last year and is still below target.

The infection control measures during the pandemic have affected the activity in the buildings in KLP's property portfolio throughout the year, which, among other things, has contributed to lower energy consumption and less waste, but this is expected to increase somewhat as society reopens.

KLP has a responsibility to help limit the extent of climate change and for contributing to the world achieving its climate targets. At the same time, climate change and the transition to a zero-emission society represents a financial risk for KLP that must be managed.

We have worked systematically with climate risk since 2017. We strive to identify and assess various different outcomes when we evaluate whether KLP’s strategy is robust in the face of climate-related change. Climate risk is a challenging field because it is difficult to determine with any precision whether a risk will be high or low. In addition to being a consequence of physical changes in the climate, climate risk can also arise as a result of new political policies, technology and market developments, constraints on access to resources and intangible changes in values and attitudes. All of these factors affect KLP and what is expected of KLP. However, this does not solely imply financial risk, but also represents opportunities.

To be able to analyse, manage and report on climate risk as a financial risk, we have worked systematically since 2017 to strengthen our competence in this area and steadily improve the way we integrate climate risk into our asset management strategy and established risk management processes. Competence enhancement is achieved particularly through KLP’s in-house efforts to identify and analyse climate risk, and through partnerships with third parties.

With regard to working on climate risk our goals are to: 

increase our knowledge about climate risk within the company and among KLP’s external stakeholders.

develop scenarios and climate risk data to assess material risk factors and opportunities.

integrate climate risk in established investment and risk management processes in a more systematic way.

influence companies in which KLP is invested to develop good climate risk management processes and set climate goals in line with the Paris Agreement.

increase the volume of climate-friendly investments by NOK 6 billion per year.

We structure our climate risk reporting in accordance with the recommendations of the Task-Force on Climate Related Financial Disclosure (TCFD). The TCFD recommends reporting on how climate risk is integrated in 1. governance, 2. risk management, 3. strategy, and 4. metrics and targets. 

KLP’s starting point is that climate risk must be handled in accordance with the ordinary allocation of roles and established strategy and risk management processes. Through the year, the board of directors works on strategic issues to determine KLP’s overarching goals and strategies. The board also approves the overarching group strategy and other group-wide strategies, such as strategies for asset management and corporate responsibility, which both address climate risk as a prioritised topic. Furthermore, climate risk is addressed in the board’s treatment of risk. Several risk-related matters are also tabled for discussion at board meetings and are dealt with in more detail in the board’s risk or audit committees. In sum, therefore, climate-related issues are discussed numerous times a year at board level, and the board is continuously involved in KLP’s efforts to identify climate risk and raise the company’s competence on this issue. It is also involved in how the company plans to work with respect to climate risk in the years to come.

Group management is responsible for implementing the adopted strategies and managing climate risk. Each year, group management reviews and makes decisions on how the company is to implement the strategy adopted by the board of directors. An important aspect of this work is to increase the extent to which climate risk is integrated in KLP’s risk management and control functions. As part of this, a review of all board-approved guidelines was performed in 2021. The objective was to explicitly incorporate references to climate risk and sustainability risk, to make it plain that these types of risks must be prioritised and to allocate responsibility for this more clearly.

2. Management of the climate as a risk factor

Guidelines for Risk Management and Internal Control

, all material risk factors must be taken into consideration. We consider climate risk to be a material risk factor and are working to analyse and to integrate this to a greater extent in our established risk management and investment processes. The Financial Supervisory Authority of Norway (FSAN) has put climate risk on the agenda in connection with its monitoring of the financial sector. Going forward, we expect new and more specific requirements with regards to climate risk to be included in key regulations to which KLP is subject. For the third year in succession, climate risk was part of KLP’s ORSA report to the FSAN in 2021. In this report, we give an account of our approach to climate risk and the results of our climate analyses on the property portfolio as well as investments in listed companies and bonds.

In 2021, we began working with the firm of analysts that supplies the analysis model KLP uses in connection with ORSA. The objective is to update the model to include climate risk. In this connection, KLP has aligned itself with the climate risk scenarios created by the 

Network of Central Banks and Supervisors for Greening the Financial System

 (NGSF). We have also looked to the NGSF, among others, to keep track of developments in the methods and data used to perform climate risk analyses. 

KLP has updated its climate risk analysis for listed companies and bonds on the basis of the scenarios published by 

 project. According to this study, KLP’s risk exposure is in line with the outcome of previous studies KLP has performed since 2018.

Climate risk analyses must gradually improve if they are to be usable as the basis for decision-making. Nevertheless, we are working to integrate climate risk more systematically into various parts of the organisation, based on the analyses we perform and the understanding of climate risk that we and the business sector develop.

KLP works with third parties like investors, research communities and multilateral organisations to develop better data and knowledge about climate risk. One example is the “Climate Futures” research project in which KLP participates.  

3. Climate risk as part of the business strategy

According to the analyses of KLP’s investments in listed companies and bonds that have been performed, the total risk exposure seems to be relatively low. Furthermore, KLP’s broadly composed investment portfolio successfully diversifies the risk – as it is intended to – in terms of climate risk as well. However, the analyses contain a high degree of uncertainty. We believe therefore that they do not so far provide sufficient credibility to draw conclusions about whether, in reality, KLP’s asset management strategy effectively manages climate risk. Nevertheless, we assume that KLP’s asset management strategy could have a positive impact on its climate risk exposure.

As it stands today, the most important priority relating to climate risk is to constantly improve our climate risk analyses and increase our understanding thereof in-house.

Through KLP’s goal of aligning its investment portfolio with the Paris Agreement’s 1.5C target, we will work to influence companies in the portfolio to make changes in line with the needs defined by the Intergovernmental Panel on Climate Change (IPCC). We hope that KLP’s influence in this respect can help to reduce climate risk exposure in companies and markets.

In line with the TCFD’s recommendations, we measure annual emissions and carbon intensity in our listed shareholdings and bonds investments. These indicators enable us to compare how well KLP’s investments are doing against a representative index (figures in brackets itn the table). For more information on how these results are calculated, please see the notes  

To reduce emissions and combat climate change, having good reporting systems in place is crucial. We believe that companies’ current emission reporting gives a relatively slim foundation for assessing climate risk. Going forward, emission data should be seen in the context of other indicators, as part of a broader assessment of different kinds of climate risk. KLP currently reports on emission indicators based on the TCFD’s recommendations. However, we feel that they do not necessarily provide a good expression of climate risk. Hence, we will also consider whether there are other and better ways of quantifying and reporting climate risk.

The investments’ climate profile (indicators recommended by TCFD)

Share of sustainable activities – reporting under the EU Taxonomy

The EU’s classification system, also known as the EU taxonomy, is the EU’s new mechanism for determining whether an economic activity may be performed in a sustainable manner, and what is then required.

In addition to criteria for what constitutes sustainable activities, the taxonomy imposes requirements on financial institutions like KLP to report on the percentage of their lending and investments associated with sustainable activities.

The EU has adopted a simplified reporting arrangement for the first few years, to take account of the Taxonomy’s complexity and the substantial gaps in the data that financial institutions like KLP must use to assess their investments pursuant to it. Under the simplified reporting arrangement, companies must first report on the percentage of activities 

 by the Taxonomy (i.e. have been given criteria for that type of activity). Later, companies will have to report on whether activities are 

 the taxonomy regulation. The Norwegian authorities have also encouraged companies to report on their performance in 2021, even though the regulations have not yet come into force in Norway.

Because the regulations are relatively new and the data from companies is lacking, it is not yet possible for KLP to produce any precise report pursuant to the EU’s taxonomy. However, our own analyses and use of indicators provided by our data supplier may give an indication:

 We estimate that 20–25 per cent of KLP’s securities investments may be 

 by the Taxonomy. This figure indicates that far from all activities have been or will be given criteria. We have also made a rough estimate of the percentage of investments that could be 

 the taxonomy regulations. Here, the indication is that just under 5 per cent of KLP’s investments 

 with the taxonomy regulations. This estimate is supported by research carried out by the EU on the European bond and share market.

 KLP lends primarily to municipalities and entities owned by municipalities, which are not covered by the reporting requirement and can therefore not be covered by the taxonomy regulations. However, lending to private individuals with security in real property is covered by the taxonomy regulations. These loans account for 21 per cent of KLP’s lending.

 All revenue from the letting of property will be covered by the Taxonomy. As a result, all of KLP’s investments in real property, and associated revenues, will be covered.

 KLP’s revenues from non-life insurance premiums may be covered by the Taxonomy. Here, KLP is participating in a working group to clarify how the taxonomy regulations should be interpreted in light of specific Norwegian conditions. 

Regardless of reporting challenges, the EU Taxonomy represents a paradigm shift for the financial sector. The scientifically based and official definition of what is and what is not sustainable has long been sought after, and the Taxonomy will be a guiding star for KLP and the rest of the financial sector into the future.

KLP is responsible for reducing the impact we have on the climate, the environment and nature. For this reason, we are working to reduce the footprint from our own operations. The document 

How KLP reduces its environmental impact 

sets out how KLP must work to reduce its environmental impact. It will also help KLP’s employees when they are making assessments relating to the environment and sustainability in their daily work. 

Procurement is a particularly important area with respect to KLP’s environmental impact. 

KLP´s Principle for responsible supplier conduct

 describes how we have clear requirements and expectations to our suppliers. We have also developed a questionnaire to obtain information from our suppliers about how they are working with respect to the climate and environment, and what goals they have set. This information is used to weight corporate responsibility in the procurement process, so that this can be assessed as a separate component. KLP gives priority to environmentally certified suppliers which report on their greenhouse gas emissions.

To halve greenhouse gas emissions from our own operations by 2030, compared to emissions in 2010 

To prioritise environmentally certified suppliers ahead of other suppliers

In addition, we have adopted goals relating to energy consumption, air travel and waste sorting. We also have several goals relating to procurement. These include assessing sustainability in all procurement processes, giving priority to suppliers which report on their greenhouse gas emissions in climate accounts, and calculating the emissions relating to our largest procurements.

The corona pandemic and ongoing infection control measures continued to affect the business and how we worked also in 2021. KLP has mainly maintained a home office scheme and restrictions on business travel, but in periods with fewer local and national restrictions, we have also softened our guidelines. In total throughout the year, however, there were fewer employees in the offices and less travel activity, which has led to lower energy consumption, less waste and increased source sorting, and fewer flights.

This has also led to a continued reduction in emissions from our own operations, which has been reduced by 29 per cent from 2020. The reduction is due to a reduction in scope 3 emissions, and that the ongoing pandemic has led to lower waste volumes and less travel. Compared with 2010, the reduction has reduced emissions by as much as 87 percent, but it is likely that emissions will increase as society reopens.

At the same time as pension assets are invested to generate a good return, they are also a force that contributes to innovation and social development. KLP has several portfolios that are systematically helping to make a difference in the transition to a sustainable society and building the society of the future. Examples of what we do are:

We contribute to social development by granting loans to Norwegian municipalities, county municipalities and entities owned by municipalities. This enables our owners to perform the tasks they have been given and helps to maintain and develop Norway.

We enable the emergence of new jobs by investing in seed funds, which finance start-ups or entrepreneur-backed companies. KLP also helps to finance ideas in the so-called pre-seed phase, where it is often even more difficult to obtain funding.

We contribute to the construction of renewable energy generating facilities in Norway and abroad. This is crucial if we are to achieve the 1.5C target and ensure that tomorrow’s energy system is sustainable, given that the world needs more energy to meet the needs of a growing population and new business sectors. This is part of KLP’s climate-friendly investments, which you can read more about 

We invest in renewable energy and the banking and finance sectors in low-income countries through KLP’s portfolio of impact investments. In low-income countries, people often lack access to essential goods and services. Our contribution promotes sustainable development in these countries and gives people access to clean energy and financial services, such as loans and savings accounts.

Another important role that KLP plays in society is to contribute to social development through the data, insights and competence we have as the municipalities’ and health sectors’ own pension fund, as well as the municipalities non-life insurance company. KLP aims to be the pension expert that takes the best care of our customers. We help to increase knowledge about pensions and support local councils’ efforts to promote good health and prevent damage to property.

Lending to municipalities and county municipalities

KLP’s lending activities are directed primarily at Norwegian municipalities, and county municipalities, as well as other public sector entities. The loans are used for purposes that support local social development and welfare. For many years, we have contributed to the sustainable development of society through the provision of loans to fund projects all over Norway.

Since 2019, KLP has offered green loans in the public sector market. The projects to be financed must have a clearly positive impact on the environment and climate. Such loans may be granted, for example, to investments in the fields of construction, transport, water and sewage services, and waste management. For private customers, we provide funding for energy-saving measures through green home loans.

To increase lending to purposes of this type.

In 2021, KLP’s net lending rose by almost NOK 3.7 billion. Loans were given for a new racket sports hall in Mysen, offering opportunities to play tennis, squash, table-tennis, and badminton; a new multipurpose indoor arena and clubhouse in the Nordstrand area of Oslo; and the clean-up of Hammerfest’s port and harbour.

Case: Pension assets renew the Port of Hammerfest

From north to south, Norway’s ports are an important part of the country’s infrastructure for the transport of goods, for the fishing industry, tourism, and private boating. The Port of Hammerfest is one of the most polluted ports that remain to be cleaned up. During World War II, when the town of Hammerfest was raised to the ground, a great deal of waste and objects ended up in the harbour basin – and remains there still. In addition, a variety of workshops, shipyards and industrial companies have, over the years, discharged more waste into the harbour.

The level of pollution at the port now constitutes a significant environmental risk. Extremely high levels of toxic organic compounds and heavy metals have been recorded on the seabed. These will now be pumped up and properly disposed of on land, under the auspices of Project Clean Harbour. In addition to the extensive removal of pollution, the project will replace the old central docks, expand the port area and ensure that most of the heavy goods traffic is diverted away from the town centre.

KLP is supporting the project through loan financing. In this way, pension assets are helping to create local jobs and facilitate business development in the local community. The Port of Hammerfest is important for the municipality. Many jobs are linked directly to the port or to ancillary businesses. Although Hammerfest’s population is relatively stable, it is still important to create new opportunities in the town, so people do not move away.

KLP wishes to contribute to ensuring that good ideas can be pursued locally and that new jobs are created in Norway. By investing in innovation, KLP will contribute to local value creation and the green transition in Norway. We have established a separate portfolio where we invest in seed funds. Most of these are linked to Norwegian research environments.

To invest NOK 500–1,000 million in seed-capital, thereby contributing to innovation and new business.

Through the year, we have increased our investments in several of the 13 seed funds we are invested in. In total, these investments rose by NOK 147 million net in 2021.

Case: Pension assets resolve challenges in the aquaculture sector

By investing pension assets in entrepreneurial start-ups, KLP is funding the emergence of tomorrow’s business sectors and tomorrow’s jobs in the municipalities. One example is the company C-FEED, which is helping to boost the world’s food production by cultivating a completely natural feed product for the fish farming sector. 

The world needs more food, and the sustainable farming of new fish species could prove to be an important resource. So far, it has been difficult to farm species such as cod, halibut, turbot and tuna because a large proportion of the fry die at an early stage due to a lack of starter feed. Over a period of 15–20 years, the research establishment SINTEF Ocean has been studying copepods. In 2014, the company C-FEED was spun off from SINTEF to commercialise the idea of producing live starter feed for farmed fish, crustaceans, and other marine organisms. With a live starter feed, the fry will have a higher survival rate, and C-FEED has built a facility with the world’s largest stockpile of copepods. From the facility in Vanvikan in Trøndelag, millions of copepods are dispatched to fish farms worldwide. If kept chilled, the eggs have a shelf-life of several months, and the global market potential is huge.

The construction of additional renewable energy capacity, particularly in developing countries, is crucial if we are to achieve the 1.5C target and ensure that the energy system of tomorrow is sustainable. Increased access to energy has a number of beneficial effects on social development and growth and is one of the keys to succeeding in achieving sustainable development in developing countries.

To constantly increase the number of projects and installed capacity.

At the close of 2021, KLP had contributed funding to the construction of 41 new renewable energy projects worldwide. This is an accumulated figure and not all new projects during the year. The power produced by these projects corresponds to the energy needs of almost 9.2 million residents in the various countries, and contributes to the avoidance of 4.8 million tonnes of greenhouse gas emissions. Some of the increase from 2020 can be attributed to subsequent reporting of already completed projects. However, further projects were completed in 2021, including solar power projects in Chile and Portugal, and wind power projects in India and Spain. 

Banking and finance in developing companies

Underdeveloped financial institutions and the population’s lack of access to financial services, such as savings accounts, loans, and insurance coverage, are obstacles to poverty reduction in developing countries. Around 1.7 billion people worldwide still have no access to these fundamental financial services. Through our investments in the financial sector in developing countries, we wish to contribute to economic growth and higher living standards.

To increase investments in the banking and financial sector in developing countries, thereby contributing to economic growth and higher living standards in those countries. 

Banking and finance in developing countries

In 2021, KLP’s investments in developing countries’ banking and financial sectors rose by NOK 47 million net. The increase stems from an increased investment in NorFinance and a rise in the market value of these investments.

KLP aims to be the pension expert that takes best care of its customers. This requires us to help boost knowledge about pensions so that our customers and members can make good choices for the days ahead. We do this, in part, by providing good advice to the individual and by disseminating knowledge about pensions in the media.

To help boost knowledge about pensions among our customers and members.

In 2021, a total of 6,588 people were given personal advice about pension matters. This is a slight rise from the year before. The number of participants in the “Worth Knowing” educational programme on pensions also increased. The guidance was provided both in person and online. Our newly established Customer and Advisory Centre has carried out many of the online advisory sessions, while most of the in-person advice was given by KLP’s Customer Service Section in connection with visits to customers and owners. 

There were fewer media reports on pensions involving a spokesperson from KLP in 2021 than in previous years.

Efforts to promote health and prevent damage to property

KLP wishes to develop products and services relating to our core business activities that meet some of the sustainability challenges our customers and owners face and which thereby benefit society at large.

We are already seeing a record shortage of skilled and qualified workers throughout Norway. It is important that employees in the municipalities and healthcare sectors have the desire, capacity, and energy to remain in the workforce for as many years as possible. To do so, they must thrive in their jobs and in their lives outside of work. Through KLP’s working-environment-network, numerous municipalities and healthcare entities have developed good initiatives for a health-promoting working environment and a lower sickness absence rate.

In 2021, KLP Skadeforsikring continued its endeavours to reduce property damage among our customers, once again with a particular focus on the challenges associated with fires in municipal housing. A great deal of attention has been paid to waste management in public buildings and to the measures that must be implemented to ensure full compensation in the event of a fire. In 2021, it was decided to continue and ramp up the focus on prevention, not only with regards to accidental damage but also to the need to adapt to climate change.

To support 28 projects regarding health-promoting workplaces at our owners

To hold 50 training courses on the prevention of property damage

Health-promoting and damage preventing efforts

Through 2021, there were 41 on-going projects on health-promoting workplaces. This includes 12 projects that were concluded in May 2021, 12 projects that will conclude in May 2022 and 17 project that were included in the network in March 2021.

KLP stages numerous courses relating to health-promoting workplaces, and the number includes major lunch webinars with many participants, which are held monthly, as well as smaller meetings and courses that are carried out with the individual customer. 

Based on our experiences from the first year of the Covid-19 pandemic, we changed the way courses on the prevention of property damage were held at the start of 2021. Instead of large-scale courses with many participants from different municipalities, as had been the practice before, the courses were staged for individual customers. This also promoted greater interaction and dialogue and made it possible to link relevant professionals in the municipalities to the right resources at KLP. This change led to more courses being organised, but with fewer participant. In 2021 we had 360 course participants, against 820 in 2020. In addition, many courses were switched to a meeting format, and we therefore report the number of activities, not simply the number of courses.

Prompted by many episodes of violence and threats made by students against employees at Karmøy School, the municipality created a scheme to prevent and follow up these challenges. The scheme, called the “Safety Plan” is meant to ensure the safety and wellbeing of all employees. Its purpose is to identify what triggers and what diffuses unwanted student behaviour. The school has collectively drawn up a plan, so the teacher is not left to deal with a challenge alone. This has led to greater acceptance of speaking out about situations that are perceived as challenging. Each member of staff knows that they can get help from other colleagues when an incident occurs. Feedback from students, parents/guardians and employees indicates that this is a good mechanism that helps to make the school day safe for everyone. 

A survey of students, triggers and diffusers

The entire school working collectively to draw up the plan

No teacher being left to deal with the challenge one

Creating greater acceptance for speaking out about challenging situations

Drawing up a plan to “get help” from other teachers when situations arise

KLP will respect fundamental human and labour rights throughout our business and in all activities. This is stated in overarching guidelines and principles which apply to the entire KLP Group. The most important of these are the: 

KLP’s Principles for responsible supplier conduct

. Important areas for our endeavours in the field of human and labour rights is within our own organisation, in procurement, and in investment decisions.

), which comes into force on 1 July 2022, aims to promote businesses’ respect for fundamental human rights and decent working conditions in connection with the production of goods and provision of services, and secure public access to information about how enterprises handle adverse impacts on fundamental human rights and decent working conditions. We provide an account of this in this year’s Annual Report. 

KLP safeguards its employees’ fundamental human rights in a fully acceptable working environment with decent working conditions. At the overarching level, KLP safeguards these important values and rights by entering into collective agreements with employee representatives, as well as through company guidelines and rules. The objective is to highlight our goal of being an employer who safeguards fundamental human rights, privacy and HSE in the workplace, and who gives our workforce decent pay and working conditions.

Through established processes and systematic risk assessments, measurements, and controls, we ensure that this is properly followed up. We assess the risk of human and labour rights abuses in the organisation to be low, but one area on which we have a particular focus is equality and diversity.

KLP strives to be an attractive workplace, with a working environment characterised by equality and diversity, and where everyone feels respected for who they are. Our employees score highly for job satisfaction, have a low rate of sickness absence, work reasonable amounts of overtime and staff turnover is low. The company facilitates plentiful opportunities for development and competence enhancement, and management has a positive dialogue with the employees’ elected representatives and the health and safety service.

KLP’s employee survey comprises questions covering job satisfaction, loyalty, reputation, senior management, immediate manager, cooperation, working conditions, job content, pay and employment conditions, diversity, and learning and development. In addition, we ask questions about how employees have experienced their physical working conditions when working from home. The survey is anonymous.

KLP scores generally high in the survey, though there are variations. The survey results show that no material risk occurred in 2021. One of the areas we intend to continue working on is job satisfaction among younger employees.

Managers are given access to their own unit’s results. These are presented to employees, and measures are developed jointly. The survey results are presented and discussed with employee representatives and health and safety representatives, who also have the opportunity to propose measures. In total, this provides a good overview and is an important process for the continuous development of a good working environment at KLP.

KLP aims to be an attractive employer through the development of an active internal labour market, which gives employees the opportunity to develop and find career paths inside the organisation. Through 2021, we have seen a satisfactory rise in the number of both internal candidates and employees who have transferred to new positions in-house. The measures that have been prioritised are, for example, an updated landing page for internal job vacancies, tips and advice on the interview process, and a new and informative video on the application process. We have given an insight into what it is like to work in various positions within the company and have thereby created a greater understanding of both the working environment and the tasks involved.

In 2021, it was challenging to obtain enough qualified external candidates, particularly women, in certain professional areas. To attract qualified applicants, we have staged a variety of promotional campaigns in a wider range of channels, tailored the language and messaging in advertising copy, and created a course on the interview process, which is available at klp.no.

KLP engages in strategic competence management by planning, performing, and evaluating competence initiatives intended to ensure that the company, the individual manager and employee have the competence needed to attain defined goals. We facilitate a number of competence-enhancing measures both internally and externally. Through the application of Lean methods, we ensure continuous improvement processes and implement management development initiatives on issues that are both topical (such as the Covid-19 pandemic) and more strategic in nature. Employee performance and planning meetings (PLUS) are an important venue for discussing past performance and focus areas for the year ahead and for the giving and receiving of mutual feedback. These meetings constitute a good management and leadership tool, and we strive to enhance the benefits they provide and ensure they are performed to an adequate extent. 

Employees who wish to pursue further studies linked to their individual development plan may receive financial support for supplementary training and additional education. To reinforce the message of lifelong learning and that seniors have the same development opportunities as everyone else in the Group, funds have been earmarked for the provision of educational support for seniors.

In general, there is little overtime at KLP, though the situation varies among the different business areas. The slight rise seen in the past two years is largely attributable to the large amount of extra work associated with a major development programme that has resulted in a new and modern pension system. The Working Environment Committee receives quarterly reports showing the overall amount of overtime worked. We have good routines for following up overtime in conjunction with employee representatives. Individual agreements are entered into between the employee, their manager and employee representatives during periods when there is a need for employees to work rather more than normal.

No employee at KLP works part time against their will, and all staff are employed in full-time positions. Part-time working occurs only when the employee wishes it in connection, for example, with parental leave, education or other personal circumstances which cause them to prefer a reduced workload for a period. In 2021, 4.8 per cent of KLP’s permanent employees worked part-time. This is lower than in previous years.

KLP has overarching guidelines for salary and other benefits. To ensure that the guidelines are abided by, the way the compensation scheme is practised is subject to annual internal controls, pursuant to section 15-2(4) of the Financial Institutions Regulations. The Internal Auditing Department presents the results of this internal control process to KLP’s Compensation Committee once a year.

KLP works actively and systematically to promote equality and prevent discrimination and has several goals in this area. 

To achieve a gender balance in management positions and senior professional positions (the highest paid positions)

To work systematically to achieve pay equity

To be a facilitating workplace for workers with disabilities

To ensure that all employees feel respected for who they are, irrespective of gender, religious faith or belief system, functional capacity, sexual orientation, gender identity, gender expression, age or other material factors

In 2021, a risk assessment was performed in consultation with the elected employee representatives on the Equality and Diversity Committee to study the potential for discrimination or other obstacles to equality. The analyses, risk assessment and staff survey show that there was no material risk of discrimination in 

However, we see that improvements to the gender balance and salary balance are advancing too slowly. We have therefore established a partnership with the “Women in Finance” initiative, whose objective is to increase the percentage of women in management and specialist positions in the Norwegian financial sector. Other initiatives within KLP to promote gender balance and pay equity relate to recruitment processes, management development and the identification and development of employees with talent and potential. Due to the Covid-19 pandemic, it has not been practically possible to be a facilitation workplace in 2021. 

One of the areas we will continue to work on going forward, is to increase our endeavours on behalf of employees with disabilities. KLP partners with the organisation FRI (the Norwegian Organisation for Sexual and Gender Diversity) to hold courses for employees and managers, with the aim of providing good advice and perspectives on how to talk respectfully about sexual orientation and gender expression in the workplace. KLP also participates in networks on LGBTQ+ in the workplace, where companies come together to share their experiences and put diversity on the agenda. We have, moreover, obtained insights from interviews and improved conversation guides to ensure a good development perspective throughout the employee’s career, also in their senior years. We have also contributed to the preparation of Finance Norway’s guide to diversity-positive recruitment.

More figures about equality and diversity

Occupational health, safety, and environment (HSE)

KLP engages in systematic HSE activities to ensure a safe and proper working environment, establish good procedures, and achieve better health and wellbeing, reduced sickness absence and the wholehearted commitment of employees. The Norwegian Working Environment Act and Internal Control Regulations are among the most important legislative and regulative provisions that create the framework for HSE at KLP. KLP’s Personnel Handbook and HSE Handbook aim to inform staff of the HSE activities and processes that are of significance for managers and employees.