Annual Report 2022KLP Group, Sustainability, KLP

The financial income from managing the pension funds in the common portfolio amounts to NOK -7.6 (49.8) billion, corresponding to a return of minus 1.1 per cent. Over the year, the buffer fund decreased from NOK 126.0 billion to NOK 102.2 billion. The investment result is thus NOK -20.0 (15.1) billion.

KLP aims to deliver long-term, competitive returns in the customer portfolios, and stable returns in the corporate portfolio. This is achieved by spreading funds across different investment types and geographical areas.

The investments in the common portfolio are distributed between the different categories of financial assets as shown in the table below:

* The figures presented in the table show net exposure, whereas the official figures from the statement of financial position are presented gross. Differences may therefore arise between the figures in this table and the financial statements.

The return was minus 1.1 per cent, below the guaranteed return of 2.3 per cent. The shortfall amounts to NOK 20.0 billion. The company has built up solid buffers in good years to allow for poor returns in weaker years. The Board of Directors is therefore able to cover the shortfall by transferring money from the buffer fund.

In order to stabilise payments into the pension scheme, KLP usually transfers some of the surplus return to the premium fund. Even though 2022 ended with a shortfall in returns, it was decided to transfer NOK 2.6 billion from the buffer fund to the premium fund. This stabilises the need for payments into the pension scheme in 2023, even though the profits for 2022 viewed in isolation do not allow for this. Higher interest rates were an important factor in this allocation.

The risk result is an expression of how mortality and disability have developed in the insured population in relation to the assumptions used in the annual setting of premiums.

The risk result for 2022 totalled NOK 558 million. Of this, the risk result linked to longevity showed a surplus of NOK 929 million. While mortality was lower than normal during the pandemic years, the figures for 2022 show that it has picked up again. This explains the good result associated with longevity. The risk result for survivors shows a surplus of NOK 3 million, while the result from disability cover showed a deficit of NOK 373 million. The disability deficit is due to a significant increase in disability provisions from 2021 to 2022.

KLP achieved an administration result of NOK -17 million in 2022, a reduction of NOK 52 million from 2021. Intensive systems development and price increases contributed to the weak performance.

KLP enjoys economies of scale from its high market share in public-sector occupational pensions, and can thus continue to provide good service at competitive prices.

The corporate portfolio, which is invested in bonds, property, shares in subsidiaries and other strategic equity investments, achieved a return of 2.8 (3.4) per cent in 2022. Returns from real estate investments and fixed-income bonds are the main contributors to this.

The customer result for the year was NOK -19.3 billion. This is covered by a transfer from the buffer fund of NOK 20.0 billion to cover the year’s shortfall in returns.

KLP’s portfolio of public-sector occupational pensions is split into different pension schemes and risk groups. One of these pension schemes ran a risk deficit of NOK 93 million, so the risk surplus from the other pension schemes that was transferred to the premium fund amounts to NOK 651 million.

Over and above the year’s profits to customers, NOK 2.6 billion has been allocated from the buffer fund to the premium fund. This is based on a broad assessment that higher interest rates taken in isolation reduce the need for buffers, while an increase in premium payments to the pension scheme is expected in 2023 as a result of the expected increase in pensions. The Board considers that it is appropriate to use some of the buffer fund to finance the expected increase in premium payments in 2023. A total of NOK 3.2 billion will be transferred to the premium fund.

The year’s total comprehensive income of NOK 897 million is allocated as follows: NOK 576 million to equity contributions and NOK 464 million to other retained earnings, while the risk equalisation fund will be reduced by NOK 142 million on the back of negative returns from the fund and cover for the risk deficit in one of the pension schemes.

The Board of KLP considers that the income statement and the statement of financial position for 2022 with notes, statements of cash flows and of changes in owners’ equity, provide good information on the operation through the year and the financial position at the end of the year. The accounts have been drawn up on the assumption of a going concern and the Board confirms that the conditions for this are in place. The Board of Directors considers the risk to the company’s business to be reasonable. The company financial statements for KLP are presented in accordance with the Norwegian Annual Accounts Regulation for life insurance companies. The consolidated financial statements have been presented in accordance with international accounting standards (IFRS/IAS), as approved for use within the EU/EEA.

2022 was marked by several negative factors, particularly the economic consequences of geopolitical unrest. The financial markets were weak and inflation affected claims costs. Nevertheless, the company maintained its position as the market leader in the market for public-sector enterprises. The departure rate was generally low in all segments.

The profit before tax was NOK 9.8 (397.7) million. The insurance result (premiums minus claims paid) for events occurring in 2022 was NOK 444 million, up from NOK 17 million. The improvement in profits comes despite two major claims during the financial year and increased reserves relating to Covid-19.

The larger of these claims, a fire in a waste management facility, is estimated at NOK 513 million. The other claim was also a fire in a waste management facility, with an estimated cost of NOK 80 million. The total accounting effect for the company from these two claims, after re-insurance, is NOK 98 million. Payments for claims filed earlier decreased by NOK 104 million for all segments combined, corresponding to 5.4 per cent of the provisions at the beginning of 2022. Most of the settlements are still related to occupational injuries, despite the increase in reserves connected with Covid-19. Claims submitted as a result of adverse reactions to Covid vaccinations are handled by the Norwegian System of Patient Injury Compensation (NPE).

A total of 17 (23) claims were reported in the range between NOK 5 and 25 million. These represent total payments of NOK 186 (190) million.

The company’s total claims ratio increased slightly as a result of the two major claims in 2022, and came to 80.8 per cent overall. If we disregard reserve adjustments to claims occurring before 2022, the claims ratio was 85.8 per cent: 91.9 per cent for the public sector/corporate market and 77.8 per cent for the retail market.

The financial result for 2022 was weak, and was heavily influenced by general international market movements. The rapid rise in interest rates resulted in a negative return on the company’s interest-bearing investments. Net financial income at year-end was NOK -97.6 (254.8) million, representing a return of minus 1.7 (5.0) per cent. The equity portfolio returned minus 12.6 (24.6) per cent in 2022. At the end of the year, the company’s investments in interest-bearing funds had a return of minus 5.7 (0.0) per cent, while long-term bonds returned 3.3 (3.2) per cent. The return on real estate investments was 5.2 (10.5) per cent, after a write-up of NOK 7.3 million.

The company’s cost ratio has been decreasing for several years, and stood at 14.5 (15.8) per cent in 2022. This is on a par with the market as a whole.

The company’s financial position is good with a solvency capital requirement (SCR) of 204 per cent at the end of the year, down from 224 per cent at the end of 2021. The reduction is due to increased deductibles and reinsurance premiums for 2023.

KLP’s banking business is handled by the KLP Banken Group, which comprises KLP Banken AS, KLP Kommunekreditt AS and KLP Boligkreditt AS, with KLP Banken AS as the parent company. Through its banking business, KLP offers mortgages and other banking services to municipal and county authorities and companies working for the public sector. KLP’s banking operations achieved their best-ever accounting result in 2022.

KLP Banken is intended to be a direct bank for customers seeking a long-term and predictable partner. This is how it aims to be the preferred bank for retail customers who are members of KLP’s pension schemes and find the bank’s services and values attractive.

The Bank aims to provide products and services on competitive terms, to help companies that have chosen KLP as their pension provider to be viewed as attractive employers.

KLP Banken’s presence in the market for loans to the public sector encourages competition and benefits the target group of municipal and county authorities and enterprises related to the public sector by providing access to favourable long-term financing. The Bank provides guidance to customers in financing and municipal funding. The bank also manages lending financed from KLP’s common portfolio.

At the end of 2022, the banking group’s total lending amounted to NOK 120.8 billion, an increase of NOK 3.1 billion for the year. Of the outstanding loans, NOK 42.3 billion was financed by the banking group and the remainder by KLP. The lending was split between NOK 26.1 billion in mortgages to private individuals and NOK 94.7 billion in loans to public-sector enterprises.

The banking group manages mortgages on its own account in KLP Banken AS and through KLP Boligkreditt AS. It also manages mortgages for KLP. In 2022, the bank paid out NOK 8.7 (9.9) billion in new mortgages. In line with the owners’ wishes, the company focuses on offering favourable terms to young members in the municipalities. The mortgage portfolios taken together had a growth of NOK 1.1 (1.5) billion in 2022. The slightly reduced growth is mainly due to lower credit growth in the residential mortgage market.

KLP Banken AS offers credit cards to retail customers as part of its retail banking service. Outstanding balances on credit cards were stable through 2022. Unused credit, on the other hand, was down. This is due to a general reduction in the market for unsecured credit and the removal of inactive users. The number of active credit card customers shows a steady increase.

Through 2022, total deposits from retail customers increased from NOK 11.6 billion to NOK 12.1 billion. Deposit growth is thus somewhat lower than the previous year, which is also related to market developments in this area. The number of active deposit customers in the retail market is over 47,000, of whom 69 per cent are members of the pension schemes.

KLP Banken AS also offers deposit products to municipalities and businesses. At the end of 2022, deposits from these customers came to NOK 1.7 (1.3) billion, which is 12 (10) per cent of total deposits. The bank’s total deposits increased from NOK 12.9 billion to NOK 13.8 billion in 2022.

The KLP Group’s lending to the public sector is managed by KLP Banken AS. On the banking group’s own account, loans to public borrowers are registered in the subsidiary KLP Kommunekreditt AS. KLP Banken AS also enters into loan agreements for the public sector on behalf of KLP. Total loans to public-sector borrowers and enterprises stood at NOK 87.1 (84.1) billion at the end of 2022, an annual growth of NOK 3.0 (3.7) billion. Of this, lending for own account amounted to NOK 19.1 (17.7) billion. New loans amounting to NOK 8.6 (11.2) billion were paid out in 2022 to the public sector by companies within the KLP Group.

The KLP Banken Group result before tax and other comprehensive income was NOK 180.5 (116.1) million. Of this, NOK 107.7 (87.6) million came from the retail market and NOK 72.8 (28.5) million from the public sector. The return on the bank’s equity was 7.0 (4.8) per cent before tax.

The change in profit is mainly due to rising interest rates and improved lending margins through the second half of the year. Increased fee and commission income, lending growth and reduced costs from changes in the value of financial instruments also had a positive effect.

The banking group’s current capital requirements including capital buffers are 17.0 per cent capital adequacy. The requirement includes a Pillar 2 supplement of 1.5 per cent. We also maintain a buffer of at least 0.5 per cent over the actual capital requirement for Pillar 1 and Pillar 2 risks, so the bank’s capital target is 17.5 per cent. At the end of 2022, capital adequacy was 20.7 (18.7) per cent.

KLP is pleased with developments in KLP Kapitalforvaltning AS. KLP Kapitalforvaltning AS is the Group’s asset management operation within securities and fund management. It had a total of NOK 641 billion under management at the end of 2022. The majority of the assets are managed on behalf of KLP and the subsidiaries in the KLP Group. KLP Kapitalforvaltning AS also offers fund products to members and other external investors.

Assets under management decreased by NOK 28 billion in 2022 because of the negative trend in market values. Net new subscriptions to KLP’s securities funds from investors external to the Group and retail customers amounted to NOK 13 billion. KLP Kapitalforvaltning AS manages a total of NOK 134 billion for customers outside KLP.

The fund structure was changed in 2022 to allow all of the funds to introduce share classes. This reduced the number of funds from 56 to 43, with a total of 127 share classes. The introduction of share classes leaves the company better placed to compete in the fund market.

Of all Norwegian fund managers, KLP funds had the highest net new subscriptions in the retail market for funds in 2022.

KLP Kapitalforvaltning AS made a profit before tax of NOK 5 (56) million in 2022.

Under the Norwegian Financial Institutions Act, KLP is subject to the Solvency II regulations. Under these rules, a solvency capital requirement is calculated from the total risk exposure the company has within insurance risk, market risk, operational risk, etc. With effect from 01.01.2022, the securities adjustment fund and supplementary reserves were replaced in the public-sector occupational pension rules by a merged buffer fund covering all customers. The buffer fund can be used to reduce the solvency capital requirement, all of which must be covered by regulatory capital. Solvency II divides the regulatory capital into three tiers according to loss-absorbing capacity. Regulatory capital in tier 1 is not subject to any when it comes to covering any losses in the business. The difference between the fair value of the company’s assets and liabilities is classified as regulatory capital in tier 1. For assets that are recognised at a different value in the accounts, the value is adjusted to represent fair value in the Solvency II balance sheet. For KLP’s insurance obligations, there are no observable market values. These are therefore calculated using a best estimate based on actuarial assumptions. There is also a risk margin to reflect the capital costs that would be incurred by a third party in assuming the obligations.

The buffer fund decreased from NOK 126.2 billion to NOK 102.2 billion through the year, but remains at a solid level.

The solvency capital was increased by NOK 1.0 billion with the payment of the planned and advertised annual owners’ equity contributions. Of the profit for the year, NOK 576 million goes to owners’ equity contributions and NOK 463 million to other retained earnings. The risk equalisation fund was reduced by NOK 142 million to NOK 4,643 million.

KLP’s mutual status and creditworthy owners provide assurance that the company can meet its future obligations. The Financial Supervisory Authority of Norway has agreed that KLP’s recall rights established in its Articles of Association can be classified as supplementary capital in an amount equal to 2.5 per cent of the company’s premium reserve. Today’s approval applies up to 31.12.2023. Because the capital is not paid-up, it ranks as tier 2 or supplementary capital. Capital in tier 2 may not exceed 50 per cent of the capital requirement. As KLP’s premium reserve grew through the year, the supplementary capital increased by NOK 0.8 billion to NOK 13.0 billion. The company thus has more capital than can be used in the calculation, as 50 per cent of the capital requirement amounts to NOK 7.3 billion.

The solvency requirement for KLP went up slightly in 2022 to NOK 14.5 (14.3) billion. The eligible solvency capital increased by NOK 1.0 billion to NOK 46.2 billion. Without applying transitional rules, the company’s capital adequacy is 318 (316) per cent. Taking account of the transitional arrangement for technical provisions, capital adequacy is 318 (345) per cent. Capital adequacy is thus well above the internal target of 150 per cent and the regulatory requirement of 100 per cent. For the Group, the solvency margin is 288 (287) per cent.  KLP’s financial strength is rated at A2 by Moody’s Investor Service, with supplementary information on expected stable ratings.

Monitoring and management of risk is a prerequisite for good wealth creation and security for pension assets. Identification, assessment and management of the risk factors, both to insurance and to financial management, are therefore key aspects of KLP’s business. The risk profile is monitored within the individual operational entities and is assessed both by company and combined at Group level.

KLP carries out an annual ‘Own Risk and Solvency Assessment’ (ORSA). The self-assessment conducted in 2022 concluded that the company’s risk management and solvency were good.

KLP’s principal activity is public-sector occupational pension provision. This industry is characterised by predictability and, to a limited degree, by individual events that may affect results significantly. Developments in the incidence of disability and life expectancy affect the risk profile.

KLP uses the K2013 mortality assumptions (tariffs). These were in line with observed mortality rates in the insured population up to and including 2009, as well as the expected future increase in longevity based on Statistics Norway’s projections. In recent years, Statistics Norway has updated its expectations for life expectancy. From 2021, KLP has strengthened its assumptions about longevity for men.

KLP uses even stronger assumptions on longevity in the pension scheme for nurses and the pension scheme for hospital doctors because the people insured in these schemes have greater observed longevity than other groups. The margins in the longevity assumptions are considered to be satisfactory.

New disability tariffs were introduced from 1 January 2021, in line with updated risk history.

In the field of non-life insurance, the pricing of insurance risks is based on historical claims information, the risk of major claims and reinsurance costs. The company has a large proportion of long-tail business, a factor which, together with a large proportion of business exposed to large claims, contributes to a higher insurance risk than the market generally. This is reflected in a high solvency capital requirement. In order to mitigate this risk, further growth is sought within the retail market and the small-and medium-sized business market. Over time, this will have a stabilising effect on risk and results.

The reinsurance programme limits the company’s own expense per claim event.

KLP guarantees an annual minimum return on the management of its customers’ pension assets linked to public-sector occupational pensions. To provide this guarantee, KLP charges an interest guarantee premium. The interest guarantee premium is priced on the basis of KLP’s solvency, the investment risk that KLP assumes, and the general trend in interest rates. The interest guarantee premium is priced anew each year, which helps to limit the risk associated with the return guarantee.

Each year KLP works out a strategy for how the pension assets are to be invested. The investment strategy emphasises exploitation of the company’s risk-bearing ability within a framework that dictates stability and the long-term view in asset management. Limits are defined for various financial risks such as credit risk, counterparty exposure, foreign exchange risk, use of derivatives and liquidity risk. A credit policy is also laid down for the Group, and credit limits for total exposure to individual counterparties are set by the Group’s Credit Committee.

The financial risk is continuously monitored to ensure the risk is matched to the risk capability within the limits set in the investment strategy. A major goal and priority in the management of the fund is to maintain the company’s capacity to take financial risks over time.

The responsibility for risk management and asset allocation is borne by two different units in the Economics and Finance division. The Risk Management and Allocation section draws up the strategy and bears the overall responsibility for administration and risk management. The section directs KLP’s management strategy through mandates and ensures that asset management stays within limits set by the Board of Directors. The Investment and Asset Management section implements the strategy and bears the operational responsibility, including liquidity management and allocations within the specified limits. An independent control unit, the Risk Analysis and Control section, headed by the CRO (Chief Risk Officer) is responsible for monitoring and reporting whether the management of the company’s assets is being conducted within the limits set, applicable mandates and guidelines provided by the Board.

KLP has good liquidity, with substantial holdings of liquid securities that can be realised at short notice. There are also high net cash flows into the company in the form of quarterly payments from customers. These payments are intended to cover commitments that only fall due several years into the future. The true liquidity position thus amounts to more than the balance on the current account, which is the definition of cash and cash equivalents in the cash flow statement.

KLP’s operational risks are associated with undesirable events resulting from failures in internal working processes, employee error, dishonest acts and criminality or external events. All processes along the value chain are exposed to various types of operational risk. KLP has developed procedures for identifying, monitoring and taking necessary measures to reduce the risk of undesirable events. It is a general management responsibility at all levels to identify and follow up those deviations that occur.

Group management conducts an annual review of significant operational risks to the business. The Board of Directors annually reviews the risk assessments and documentation on management and control measures established together with a total risk overview. Procedures have been established for independent controls and reporting at various levels. Tasks and functions are distributed so that conflicts of interest are avoided and responsibilities made clear.

The company’s independent Internal Audit function carries out assessments of actuarial, financial and operational risks. Following consultation with the Board and Group senior management, assessment and testing are conducted in areas that are material and exposed to risk in the interests of satisfactory management and control. The result, with any recommendations on necessary measures to be taken, is presented to Group senior management and the Board and is followed up. This is further described in KLP’s annual report in the section on ‘Risk management and internal control’.

The Compliance function in KLP assists Group senior management, the Board and the company’s employees in ensuring compliance with regulations and ethical standards. The head of the Compliance function reports to the CEO and its reports are discussed by the Board. The function takes a preventive approach through advice, implementation and culture-building, and carries out control activities to maintain a good compliance culture. A more detailed description of the company’s adherence to good corporate governance is given in the annual report, in the section on NUES and in the description of risk management and internal control in KLP.

Human rights are a high priority for KLP as an investor, employer and purchaser. KLP’s operations are covered by the Norwegian Transparency Act, which entered into force in 2022. The purpose of the Act is to promote respect for fundamental human rights and decent working conditions in connection with the production of goods and the provision of services. KLP fulfils its responsibility to promote fundamental human rights and labour rights as a responsible investor and in its work on sustainable procurement. In 2022, KLP improved the process for sustainable purchasing and also gathered information and data from the company’s major suppliers. The Board confirms that due diligence assessments have been carried out in accordance with the Transparency Act. A more detailed account of KLP’s due diligence work can be found in the company’s report in accordance with the Transparency Act in the section on “Human and labour rights” in the sustainability accounts in the Annual Report.

Sustainability work in the finance industry is governed by all of the new regulatory requirements relating to sustainability risk and reporting, mainly driven by the EU. The most important regulations are the EU taxonomy, the Sustainable Finance Disclosure Regulation (SFDR) and the new Corporate Sustainability Reporting Directive (CSRD). The EU taxonomy and the Disclosure Regulation entered into force in the EU in 2022, but the entry into force of the Sustainable Finance Act, which introduces these rules in Norway, was postponed until 2023. KLP reports in accordance with the requirements in the company’s sustainability accounts and on klp.no.

The rules need to be developed and improved over time, and they will not reduce sustainability risk for financial operators on their own. KLP does nevertheless see the need for the EU to help to standardise sustainability reporting in the finance industry through the new Sustainability Reporting Directive. This will also help ensure that investors like KLP have access to more and better data from our investment universe.

KLP aims to be an attractive and flexible employer who provides good development opportunities in an inclusive working environment KLP therefore strives to provide a good physical and psychosocial working environment characterised by job satisfaction, with flexible working arrangements wherever possible, and effective involvement of the health and safety function and the employee representatives in the development work. These are important prerequisites for good quality work, better results for the business, greater competitiveness, customer confidence and individual enthusiasm for work.

KLP aims to keep the rate of sickness absence below 4 per cent on average each year. Sickness absence for 2022 totalled 4.53 per cent, which means that the company is slightly over the target for this year. Like many other businesses, KLP has also seen higher levels of short-term sickness absence during the coronavirus pandemic. In its HSE work, KLP’s main focus has been to stop employees falling ill and help them to return to work more quickly after long-term sick leave. KLP has also worked to improve understanding of mental health issues, and has run seminars for managers and employees on “mental health concerns us all, and the workplace can be a safe place”.

No serious occupational accidents were reported in 2022.

7.3 per cent of the workforce left the company in 2022, an increase of 0.9 percentage points from 2021 and 1.16 percentage points above the average for the last five years.

KLP scores highly on job satisfaction and loyalty in employee surveys. In 2022, KLP conducted quarterly surveys with fewer questions. This made it easier to keep track of developments and adjust improvement measures along the way. This year, KLP focused its follow-up work on young employees who score somewhat lower than the others. KLP has gained greater insight and implemented concrete measures to improve this.

KLP strives for gender and pay equality and has taken steps to increase women’s pay as a percentage of men’s. In 2022, women’s earnings averaged 83 per cent of men’s across the whole of KLP. The main reason for the difference is that KLP has a preponderance of men in the highest paid positions, and higher salary levels in general in the professions where this is most apparent.

In 2022, KLP had 40 per cent women and 60 per cent men on average across all management levels. In more responsible professional roles, KLP has 28 per cent women. KLP has launched a number of measures to increase the proportion of women in the highest paid positions. These relate to things like recruitment processes, employer branding and leadership development. This has resulted in an increase in female candidates and hires in management and other senior positions. KLP is also a sponsor of the “Women in Finance” charter, which aims to increase the proportion of women in executive positions in the finance industry in Norway.

KLP aims to be an inclusive workplace where all employees feel that they are respected for who they are, regardless of gender, age, ethnicity, religion, beliefs, disability, sexual orientation, gender identity, gender expression and other vital attributes. KLP works with FRI (the National Association for Lesbians, Gays, Bisexuals and Transgender People) to run the course on “Pink Competence”. The aim is to enable people to talk confidently about sexual orientation and gender expression in the workplace. KLP is also a member of the network for LGBT in the workplace, which consists of employers who want to work together for an inclusive work environment.

KLP ensures that all employees have the same opportunities to take on exciting tasks and develop their careers, regardless of age. KLP has a goal to increase the retirement age for senior employees and has implemented measures to raise awareness of this in the organisation, by publicising policies and providing information and training. The average retirement age for old-age pensioners and AFP has remained stable in recent years, with an increase in 2022 from 64.6 years to 64.8 years.

KLP has apprenticeships and internships linked to the IA agreement (inclusive working life). KLP also aims to step up its efforts for employees with disabilities, partnering with a newly established recruitment agency in 2022 which places employees with disabilities.

More detailed information on Gender Equality and Diversity can be found in KLP’s Sustainability Report for 2022, in the section on “KLP as a workplace and employer”. Policies for gender equality and diversity are reflected in KLP’s articles of association, internal guidelines and instructions to the Nomination Committee in accordance with legal requirements, including the composition of the Board, management and control bodies, and their sub-committees. These set out goals for gender equality and diversity, and describe how measures have been implemented and what effect they have had during the period.

KLP’s aim is to offer its employees good, market-matching salary and employment terms and conditions. The subsidiary KLP Kapitalforvaltning AS operates in markets where part of the salary is based on profits achieved and therefore offers salaries that are partly performance-based to employees who have direct responsibility for profits. In accordance with the regulations, payment of this remuneration is spread over several years and is partly linked to the growth in value in selected securities funds, because KLP as a mutual company does not have its own exchange-listed equity instruments. Performance-related pay has not been introduced elsewhere in the Group.

KLP’s impact on the external environment and climate comes directly from its own activities, indirectly through partners and suppliers, and through investments in companies and property. KLP has a responsibility to reduce this impact. At the same time, climate change and damage to nature and the environment could affect KLP’s ability to generate a good return on pension savings in the longer term. A more detailed account of how KLP deals with the external environment and climate in its investments can be found in the Sustainability Accounts.

In line with KLP’s environmental rules, annual environmental targets are set for the areas of KLP’s own operations and purchases where KLP has the greatest impact. In 2022, KLP focused on sustainability goals for the purchasing area, and has worked through the year to implement these. Among other things, KLP surveyed the company’s biggest suppliers on various aspects of sustainability and on their emphasis on sustainability in the purchasing process. KLP aims to include emissions from purchases in the company’s climate accounts, and has made good progress in preparing an emission inventory for KLP’s purchases of IT products and services, as well as some canteen purchases. This will be expanded to include more emission categories in the longer term. As regards the company’s own operations, KLP’s overall goal is to halve greenhouse gas emissions from 2010 levels by 2030. As the climate accounts are extended, KLP will set an updated climate target for its own operations. This is described in more detail in the Sustainability Report.

The public-sector pension schemes are anchored partly in law and partly in collective agreements between the employer and employee organisations. Extensive changes were made to public-sector occupational pensions from 1 January 2020. The objective of the changes was to give better support during working life and provide for greater mobility between the public and private sectors.

New rules on retirement pensions for members with special age limits are still pending. Here, a process has been agreed between the parties with a view to agreeing on a solution before 1 July 2023.

The AFP (contractual pension) system is also about to be fixed by law, changing in 2025 from an early retirement scheme to a lifetime pension benefit, following the pattern from the private sector. A legislative process is expected to continue into the summer of 2023.

The company’s vision is for KLP to be the best partner for the days to come. This shows that KLP takes a long-term view in order to create value for our customers. KLP’s principal product is public-sector occupational pension provision. We set out to provide public-sector enterprises and their employees with secure pension saving that contributes to sustainable development. Everything the company does within the Group is intended to help ensure that it pays to have your pension scheme with KLP. As part of the company’s service, KLP also offers important and necessary additional services to our customers and members, such as banking and insurance. The subsidiaries should strengthen the competitiveness of the core business by contributing to good investment management, strengthening relations with customers with public-sector occupational pensions, enhancing the reputation of the Group, and producing satisfactory returns on the life company’s equity.

KLP’s main goal is to be the best provider of public-sector occupational pensions. KLP aims to deliver secure and competitive pension, financial and insurance services to the public sector, enterprises associated with it, and their employees. KLP’s most important task is therefore to provide pensions with a competitive rate of return over time, the lowest costs and a high level of service. KLP is the pension company for the Norwegian local government and healthcare sector – a profitable community.

KLP aims be a pension provider which differentiates itself from other companies operating in the same markets. KLP’s mutual status provides the best starting point for ensuring that any value added will benefit customers, who are also our owners. When the company runs at a profit, this is used to lower premiums or boost financial strength, or passed on to customers in the form of lower costs. The result is reduced payments to KLP. This leaves more money for schools and hospitals, or other priority tasks that our customers are responsible for.

Public-sector employers can choose between buying public-sector occupational pension provision from a life insurance company or establishing a pension fund. Today, KLP and one other life insurance company are competing to deliver public-sector occupational pensions. There are also 21 health trusts, municipal and county pension funds. The public-sector occupational pension product is regulated through the Basic Collective Agreement between the social partners. Essential elements of the product content and prices are therefore subject to regulations that are common to all providers. This means that all wealth creation benefits customers. KLP therefore take a long-term view, and puts the interests of its customers first.

For many years, part of KLP’s communication strategy has been to publicise the kinds of jobs that exist in the local government and healthcare sector. The aim is to persuade more capable people with different areas of experience and educational backgrounds to consider a job in local government or healthcare.

Managing large assets on behalf of the community carries an obligation. KLP’s management of savings is very important to the company’s customers and owners, but also indirectly to many more people in Norway and abroad. By making capital available, KLP enables companies to grow and create new products and jobs. With this comes increased social responsibility. KLP has committed owners who provide clear direction for how KLP should use the capital responsibly in its investments. Corporate social responsibility is on the agenda for the company every day and in every part of the business.

KLP is a knowledge company with more than 1,000 employees. KLP uses its expertise to work actively to build a strong portfolio of digital courses and seminars on pensions, working life, damage prevention, finance and social responsibility, to improve access to knowledge in these areas.

KLP aims to continue providing public-sector occupational pensions and financial and insurance services to public-sector customers and their employees. The services should be secure and competitive. With good financial strength, profitability and low costs, KLP is well positioned to further develop the business in a way that will continue to create good long-term value for customers, owners and their employees.