What does Danica Balance Responsible Choice invest in?

Investments in shares are carried out in two ways:

Selecting investee companies
Our ambition is to select companies that are striving to make a positive contribution to the sustainable transition through their products and solutions and through their own business operations. How and to what extent sustainability-related issues are promoted differs from company to company, and this often depends on how far a company has progressed in transitioning its business model. Such investee companies can include those that are focused on improving health, creating greater social equality, or creating better access to education. Focus can also be in the form of promoting sustainable food production, working with renewable energy or climate-change mitigation, ensuring clean water, or working to minimise the consumption of resources in the production of goods or provision of services.

To ensure a sound diversification of investment risk, we may also invest in companies that do not have a specific contribution towards the sustainable transition. But we aim to select companies that adhere to sound sustainability practices and that do not cause significant harm to the environment and society.

Following a carbon reduction-focused index
Investments are placed in a broad range of companies via a share index in order to ensure you a sound spread of risk. These investments follow an EU Paris-aligned benchmark, the framework of which has been set by the European Commission. The objective behind this benchmark is to construct investments that can support the Paris Agreement’s targets of limiting global warming to 1.5°C.

Overall, the companies in the index must have a weighted average carbon intensity that is at least 50% lower than that of the financial market in general and should comprise an equivalent proportion of the most energy-consuming sectors as the general market. The total carbon intensity of the companies in the index must decrease by a minimum of 7% per year, in alignment with the targets of the Paris Agreement. 

This means that the carbon emissions reduction is achieved by selecting the companies that have the lowest emissions across sectors and not merely by selecting companies from sectors that naturally have low levels of carbon emissions. This also means that each company is selected not on the basis of specific carbon emission requirements but by considering the companies as a collective unit that must meet the benchmark's requirements.

This may include so-called green bonds, which can be issued by sovereign countries or by international organisations such as the World Bank. The money from green bonds is earmarked to finance initiatives to improve a country’s environmental or climate footprint. For example, the money is used to finance state expenditure on and investments in wind and solar energy, waste and wastewater management, improved energy efficiency of buildings, climate-proofing of urban settlements, or the green transition of the transportation sector.

These can also be social bonds (which are for example issued by the World Bank) that finance activities aimed at reducing poverty and increasing shared prosperity. Social bonds support improved opportunities for education, better access to food and housing, health initiatives, or increased financial security.     

This covers European companies with high and low credit ratings and companies in developing countries. This can include investment in companies that for example have an ambition to support the green transition, increase the reuse or recycling of materials, or minimise water consumption. How and to what extent sustainability-related issues are promoted differs from company to company, and this often depends on how far a company has progressed in transitioning its business model.

In addition, there can be investments in green bonds or social bonds issued by companies. These bonds are targeted towards the financing of a company’s climate initiatives, for example improved energy efficiency of manufacturing facilities or the development of medicine specifically developed to cure illnesses in low-income countries.

Bond investments can also include companies that do not have a specific contribution towards the sustainable transition. But we aim to select companies that adhere to sound sustainability practices and that do not cause significant harm to the environment and society.

This comprises investments in shares, loans or bonds in projects or companies that are not stock exchange listed. This can include investments in infrastructure funds that focus on green energy, for example wind farms and solar farms in Europe and the USA. It also includes investment in the Swedish company Northvolt, which as one of Europe’s largest producers of batteries for electric vehicles plays a central role in supporting the green transition of the transportation sector. Northvolt also produces batteries that store energy so that electricity produced by wind energy, for example, does not go to waste.