THE VELUX FOUNDATIONS’ funds are invested in a diversified portfolio in order to achieve the highest possible returns, which will enable us to maximise our grants to philanthropic purposes.
THE VELUX FOUNDATIONS seek continuously to ensure that our investments do not solely generate prudent financial returns, but also fulfil certain ethical criteria. This is important to us, as we believe that responsible investing makes a positive contribution towards achieving global goals for sustainable development and addressing societal challenges in domains such as human rights, labour relations, the environment, climate and anti-corruption practices.
THE VELUX FOUNDATIONS' financial assets, currently worth approximately EUR 1.8bn, are invested diversely in shares, bonds, property and so forth. The principal aim is to achieve the highest possible returns so as to maximise our grants to philanthropic purposes. We believe that our efforts within responsible investing initiatives are compatible with this principal aim, and we invest our assets in line with this conviction.
Our investment spectrum
We invest diversely across a spectrum reflecting the level of social responsibility of the investments.
Investments on the far left of the spectrum are characterised as ‘Classic’, and their purpose is solely to generate attractive financial returns.
The next two categories, ‘Responsible’ and ‘Sustainable’ are what we term ESG investments, and they increasingly involve social responsibility by taking into consideration what are known as ESG factors. E stands for ‘Environment’, and this factor covers any corporate environmental impacts, such as the risk of local pollution or carbon dioxide emissions. S stands for ‘Social’, and covers issues such as employee rights and corporate local community-relations within a company we invest in. G stands for ‘Governance’, and this factor describes how a company we invest in is controlled and managed, including with respect to executive pay, the risk of bribery, etc. Investments are characterised as ‘Responsible’ if we judge that they take ESG factors into consideration in order to avert harm. This would be the case, for example, if a company avert industrial action throughan employee-centred continuing education programme.
Investments are characterised as ‘Sustainable’ if we consider that they seek proactively to generate value added and unlock potentials by incorporating the ESG factors. This would be, for example, where a company voluntarily uses carbon neutral electricity in its production processes in order to improve its environmental credibility.
Moving further right along the spectrum, we come to the impact investments, which focus on green issues. For these ‘Thematic’ impact investments, environmental sustainability is integral to the business model. In other words, these are companies who supply sustainable products and green solutions.
‘Mission Related’ investments must also tie in with THE VELUX FOUNDATIONS' environmental sustainability mission, and in some cases they may be risky in that they generate returns that are below the prevailing market rate.
On the very far right of the spectrum are the investments that may be characterised as ‘Philanthropy’ in that they represent THE VELUX FOUNDATIONS' philanthropic grants, which generate societal returns, but no financial returns. Investments in the first four categories of the spectrum are all expected to generate returns at the market rate.
We are seeking continuously to move investments to the right of the spectrum, towards the ‘Thematic’ category, while taking care to diversify the portfolio's risk and profile. In addition, we wish to have a small percentage of our investments categorised as ‘Mission Related’. Thus, while our aim is not to move all of our investment capital to the far right of the spectrum, we do seek to avoid investments categorised as ‘Classic’.
We regularly report on performance to THE VELUX FOUNDATIONS' Investment Committee and boards, so that they may follow developments. In addition, we continuously assess opportunities for stepping up the social responsibility of our investments in constant alignment with the principal aim of maximising financial returns.
Extra fokus on combating climate change
THE VELUX FOUNDATIONS maintain extra focus in particular on combating climate change. Our long-term goal is consequently for all the companies we invest in to comply with the Paris Agreement's goal of combating global warming, and we engage in dialogue to that end with any investees with a large carbon footprint or who own fossil fuel reserves. Our hope is thus, through active governance, to influence such companies in the direction of more responsible behaviour as opposed to simply withdrawing our investment in them.
In addition, we are in the process of channelling 10% of THE VELUX FOUNDATIONS' tied-up assets into green, climate-friendly investments which will contribute to combating climate change and increased resource efficiency through, for example, renewables, energy efficiency and the development of new green technologies for the future. Finally, we have signed a Divest-Invest pledge, which commits us, for example, to seek to minimise our exposure to fossil fuels.
A teaching case at Harvard Business School
THE VELUX FOUNDATIONS' commitment to investing for impact is now a case study.