Q1 2022 Interim Report KLP Group, Sustainability and KLP

• KLP aimes to vote at 95 per cent of general meetings in Norway and abroad throughout the year. 
• KLP aimes to follow up 240 companies in 2022. 

KLP decided to freeze the first shares in Russia in 2014 due to the political risk. As a result of the invasion and war in Ukraine, KLP decided in February to exit Russia and to exclude 22 Russian companies. We are working to divest our investments in these companies. The sale of companies listed on the Moscow Stock Exchange will be carried out when the stock exchange opens and in line with what the sanctions regulations allow.

At the end of the first quarter, KLP had voted at 98 per cent of the general meetings of foreign companies, and at 90 per cent of the general meetings of Norwegian companies. This is somewhat below the target, but the voting season has just begun, and the target applies to an overall assessment of the voting season.

KLP was in dialogue with 49 companies on topics related to ESG, including human rights in conflict areas, indigenous rights in mining, employee rights in supply chains to meat producers, salmon producers on risks related to climate and biodiversity, deforestation in Brazil and election committees on board composition.

• To increase KLP’s climate-friendly investments by NOK 6 billion per year

In the first quarter, KLP's climate-friendly investments increased by more than NOK 2.1 billion. A large proportion of the new investments were in renewable energy, including in a new Nordic renewable company. The company will have activities throughout the Nordic region related to energy production, electrification and energy efficiency. We also increased our investment in the fund Climate Investor One, which invests in renewable energy in developing countries. Three new green loans were also granted from the KLP Bank.

The value of KLP's investments in fossil energy has increased since last quarter of 2021. This is largely due to the fact that the market value of these investments has increased, and not new investments. As a share of KLP's investments, the increase is relatively small, and has increased from 1.8 to 2 per cent.

• To halve greenhouse gas emissions from our own operations by 2030, compared to emissions in 2010
• To reduce the property portfolio’s energy consumption to 169 kWh per square meter. 

The long awaited reopening of society has affected the business in the first quarter of the year. KLP has introduced a hybrid office scheme, and although some employees work from home, there is a large increase in employees in the offices. With more activity in the office premises, and also as a result of a cold winter, energy consumption has increased. Restrictions on business travel due to covid-19 have also been removed, which led to increased travel activity in the first quarter. The level is still far lower than it was before the pandemic, and KLP continues to focus on reducing unnecessary flights.

Energy consumption in KLP's real estate portfolio in the first quarter was low compared with previous years, but this may also be related to infection control measures that have been introduced.

To increase lending to purposes of this type. 

Comments on performance in the first quarter

In the first quarter of the year, KLP's lending to municipalities and county municipalities increased by a net 251 million. Net green loans decreased by NOK 9 million, but three new green loans totaling NOK 8.1 million were issued. Two of these went to Innherred Renovasjon IKS and their project with an improved recycling rate. The last loan went to Byglandstunet AS, and the loan will be used for the installation of photovoltaic systems.

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

KLP's seed investments increased by NOK 33 million in the first quarter. These are increased investments in funds KLP has already invested in, and not investments in new funds. Among other things, it has invested more in a CoFounder fund, with which KLP collaborates on KLP Trykktanken. By the first quarter of 2022, KLP had invested in 13 different seed funds.

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

KLP made no new investments in banking and finance in developing countries, and the change from the previous quarter is due to a decline in market value.

To achieve a sickness absence rate of less than 4 per cent. 

In the first quarter of 2022, the total sickness absence was 4.9 percent. This is a small increase from the previous quarter, and may be related to the fact that more people have had covid-19 and influenza. Absence due to illness in the first quarter of last year was lower than usual, and one reason was probably the infection control restrictions that reduced the incidence of other illnesses.

• Target 1.4: By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services, ownership and control over land and other forms of property, inheritance, natural resources, appropriate new technology and financial services, including microfinance 

• Target 3.a: Strengthen the implementation of the World Health Organization Framework Convention on Tobacco Control in all countries, as appropriate 

• Target 5.1: End all forms of discrimination against all women and girls everywhere 
• Target 5.4: Recognize and value unpaid care and domestic work through the provision of public services, infrastructure and social protection policies and the promotion of shared responsibility within the household and the family as nationally appropriate 
• Target 5.5: Ensure women’s full and effective participation and equal opportunities for leadership at all levels of decision-making in political, economic and public life 
• Target 5.a: Undertake reforms to give women equal rights to economic resources, as well as access to ownership and control over land and other forms of property, financial services, inheritance and natural resources, in accordance with national laws 

• Target 6.4: By 2030, substantially increase water-use efficiency across all sectors and ensure sustainable withdrawals and supply of freshwater to address water scarcity and substantially reduce the number of people suffering from water scarcity 

• Target 7.1: By 2030, ensure universal access to affordable, reliable and modern energy services 
• Target 7.2: By 2030, increase substantially the share of renewable energy in the global energy mix 
• Target 7.a: By 2030, enhance international cooperation to facilitate access to clean energy research and technology, including renewable energy, energy efficiency and advanced and cleaner fossil-fuel technology, and promote investment in energy infrastructure and clean energy technology 

• Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial service 
• Target 8.4: Improve progressively, through 2030, global resource efficiency in consumption and production and endeavour to decouple economic growth from environmental degradation, in accordance with the 10-year framework of programmes on sustainable consumption and production, with developed countries taking the lead 
• Target 8.5: By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value 
• Target 8.7: Take immediate and effective measures to eradicate forced labour, end modern slavery and human trafficking and secure the prohibition and elimination of the worst forms of child labour, including recruitment and use of child soldiers, and by 2025 end child labour in all its forms 
• Target 8.8: Protect labour rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment 
• Target 8.10: Strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance and financial services for all 

• Target 9.1:  Develop quality, reliable, sustainable and resilient infrastructure, including regional and transborder infrastructure, to support economic development and human well-being, with a focus on affordable and equitable access for all 
• Target 9.3: Increase the access of small-scale industrial and other enterprises, in particular in developing countries, to financial services, including affordable credit, and their integration into value chains and markets 
• Target 9.4: By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies and industrial processes, with all countries taking action in accordance with their respective capabilities 
• Target 9.a: Facilitate sustainable and resilient infrastructure development in developing countries through enhanced financial, technological and technical support to African countries, least developed countries, landlocked developing countries and small island developing States 

• Target 10.2: By 2030, empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status 
• Target 10.4: Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality 

• Target 11.1: By 2030, ensure access for all to adequate, safe and affordable housing and basic services and upgrade slums 
• Target 11.5: By 2030, significantly reduce the number of deaths and the number of people affected and substantially decrease the direct economic losses relative to global gross domestic product caused by disasters, including water-related disasters, with a focus on protecting the poor and people in vulnerable situations 
• Target 11.6: By 2030, reduce the adverse per capita environmental impact of cities, including by paying special attention to air quality and municipal and other waste management 

• Target 12.5: By 2030, substantially reduce waste generation through prevention, reduction, recycling and reuse 
• Target 12.6: Encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle 

• Target 15.2: By 2020, promote the implementation of sustainable management of all types of forests, halt deforestation, restore degraded forests and substantially increase afforestation and reforestation globally 

• Target 17.3: Mobilize additional financial resources for developing countries from multiple sources 

Number of unique companies shows the number of unique companies with which KLP has communicated directly during the year on ESG-related matters and as part of various investor alliances. KLP may engage in several dialogues with a company on a variety of topics during the year. KLP’s follow-up varies in scope, topic and time horizon. This is a form of active ownership, in which KLP engages in a dialogue with companies to clarify how they deal with corporate responsibility challenges and to communicate KLP’s expectations as an investor.  

General meetings of shareholders. KLP makes use of ISS’s services to vote at general meetings in the companies in which we invest. At general meetings of Norwegian companies (domiciled or listed in Norway), KLP votes manually though ISS. At general meetings of non-Norwegian companies, KLP votes by proxy through ISS.  

Number of exclusions shows the total number of companies excluded from investment by KLP at the close of the year, due to violation of the exclusion criteria set out in the Guidelines for KLP as a Responsible Investor.