Responsible investment & governance annual report 2012

Responsible Investment & Governance
Annual Report • 2012

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Contents
Introduction: Responsible investment – sound business strategy and ownership approach
Identifying companies performing well
Engagements – a cornerstone for active investors
PRI initiatives for company engagement
Nuclear weapons policy
Corporate governance activities
Focus Brazil
Focus Mexico
Focus Canada
Emerging Stars & Swedish Stars

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25
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Responsible Investment & Governance | Annual Report 2012
Responsible investment
– sound business strategy and ownership approach
The past couple of years have been shaped by the finan-
cial crisis and growing macro changes all over the world.
The imbalances disclosed have in many ways demon-
strated how critical active ownership is in the financial
sector. The market economies dominating world markets
are today facing significant pressure from civil societies,
clients and interest groups. Questions are being raised
as to whether shareholders should and could continue to
benefit from their ownership right without also assuming
the responsibility that comes with that right.
As investors we are continuously striving for higher
standards regarding transparency, disclosure and ac-
countability for the companies we invest in. We believe
that the industries we operate in as well as our actions
need to move from a culture of formal ownership entitle-
ment to a culture of responsible ownership.
Our activities within the realm of responsible ownership
have increased over the last couple of years, and results
achieved have improved our ability to provide clients
with long-term responsible investment solutions.
Most investment managers act on behalf of millions of
investors, mainly ordinary people, so it does not make
sense to suggest that it is in their interest to invest in a
company that destroys the environment and mistreats its
employees, thereby encouraging the company to con-
tinue what it is doing.
We clearly see some key trends shaping 2013.
Slow and sluggish economic growth and downward
pricing pressure caused by regulatory and fiscal con-
straints will make it increasingly difficult for a number
of industries in core developed markets. Longer term,
growth will be determined by companies’ ability to tap
into new markets targeting underserved demographics
both domestically and abroad. Despite strong focus
on the commercial potential of demographic shifts and
Bottom-of-the-Pyramid strategies, opportunities
remain largely unexplored even in sectors facing strong
headwinds in existing markets.
We believe that companies able to tackle this key issue
will be the long-term winners.
Mass protests in China have risen dramatically over
the past several years, culminating in a number of high
profile protests in 2012 that have put a stop to plans
for new industrial plants. At the heart of Chinese social
discontent are a growing intolerance of corruption and
concerns over the rising inequality. These shifts in policy
focus could result in sweeping structural changes or
simply a wave of high profile prosecutions, so investors
should thoroughly consider investing in companies and
sectors vulnerable to being targeted for corruption. Any
upcoming corruption sweeps could impact investors
in two ways: (i) through an immediate blow to a single
stock or (ii) through longer-term erosion of competi-
tive advantage due to loss of political access. According
to Institutional Shareholder Services Inc. (ISS), more
than 20% of shareholders voted ‘yes’ to proxy proposals
last year involving environmental and social issues, an
increase from 7.6% in 2000 and 9.8% in 2005. As in-
vestors and other stakeholders put pressure on compa-
nies to increase their attention to ESG issues, company
reporting on these issues has been on the rise. However,
in many cases the information provided does not help
investors make insightful decisions about the key mate-
rial risks associated with a business.
Because companies are under pressure to address a wide
variety of issues of concern to various stakeholders, they
are often reporting on issues where they face little finan-
cial impact while ignoring issues that pose significant
risks to their core activities.
Sasja Beslik
Head of Responsible Investment & Governance
Allan Polack
Head of Asset Management
Introduction:

Annual Report 2012 | Responsible Investment & Governance
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Identifying companies performing well
The core of our Responsible Investment (RI) strategy is
in-depth environmental, social and governance (ESG)
analysis and engagement activities. Throughout our ESG
analysis companies’ overall management practices re-
garding key ESG issues are assessed together with their
governance structure for dealing with these aspects.
Based on the analysis, companies are selected for proac-
tive engagement dialogues. The focus is on transferring
knowledge and active participation in the development
process. In 2010, we initiated our in-house environ-
mental, social and governance (ESG) analysis and de-
veloped our own criteria and methodology. Our analysis
is based on a positive approach and aims at identifying
best practices and companies that have implemented
good management policies to address key risks and op-
portunities. Our in-house research team focuses mainly
on analysis of Nordic companies as well as on analysis
related to our enhanced RI funds: Swedish Stars and
Emerging Stars (page 28).
Identifying new stars
The first and one of the most important parts of the ESG
analysis process is to identify issues for each sector and
for the company we are assessing. Our aim is to identify
key issues that are of material relevance for the company
to address, today and in the future. NGOs, external
research providers, unions and media are important
sources of information. We search not only for policies
and management systems but also for concrete actions
and results that indicate that the company has estab-
lished policies and practices to manage the identified key
issues. The company is informed about our rating but
also about what improvements we need to see in order
for us to rate the company differently.
We consider acting responsibly a prerequisite for a company to achieve long-term
good returns. Our ESG analysis enables us to identify companies that operate in
line with our policy and deliver long-term value.

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Engagements –
a cornerstone for active investors
Nordea sees engagement as an active investor and the
opportunity to contribute to positive changes as an
important part of our work with responsible invest-
ments. We engage with companies violating international
norms and companies where we see significant room for
improvement in relation to ESG issues.
Norm-based engagements
In 2012 Nordea demonstrated active ownership in 14
international companies violating international norms.
The breaches include violations of human rights (in-
cluding indigenous people’s rights), violations of labour
rights, severe environmental degradation as well as cor-
ruption.
Ended engagements due to successful progress
In 2012 Nordea also successfully ended five company
engagements because the companies’ norm-based
behaviour had improved significantly since the dialogue
was started. Among the companies were two oil and gas
companies, a car maker, a utility company and a mining
company.
The norm violations included environmental degradation
through severe oil spills, human rights abuses in Burma,
suppression of workers’ rights to unionise and violations
of the indigenous people’s rights at a dam project in Pan-
ama. Other examples were supply of military equipment
to Sudan as well as environmental and human rights
violations at mining facilities in India.
All the companies have developed and implemented
sufficient policies and procedures to address the previ-
ous norm violations. Furthermore, they have improved
transparency and begun reporting on how they address
ESG risks in their business operations. Another impres-
sive development and change is how the companies now
see sustainability as an important part of their strategy.
From being a laggard in its strategic approach to sustain-
ability, the mining company now has sustainability as a
core strategic pillar of its business strategy.
New engagements with norm-breaching
companies
Nordea initiated three new engagements in 2012. One
engagement targets labour rights at a company’s sub-
sidiary in Mexico, where labour rights in general are
weak. The other two company engagements address
indigenous people’s rights in relation to a dam project
in Brazil. Often it takes time before we see real strategic
change in the companies we engage with. But we know
for a fact that the time and efforts we spend on engag-
ing with companies discussing their norm violations and
overall approach to sustainability do lead to progress. It
is especially rewarding when the companies not only ad-
dress their norm-breaching behaviour, but also start to
look at sustainability as an important part of their overall
business strategy.
We engage to change. Nordea initiates engagement dialogues to change behaviour
and to enhance business performance by addressing the business practices used
by companies we invest in.

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Examples of norm-based engagement activities
in 2012
Case: Environmental violations
An oil company has been responsible for severe water
and soil pollution. The company has repeatedly failed to
maintain corroded pipelines, resulting in at least eight
registered oil spills since 2006. The most recent spill
was in April 2010. Management is acknowledging the
problems related to the oil spills. The company has been
provided with a list of key issues to work on including
pipeline monitoring and oil spills reduction systems, gas
flaring as well as cleaning and remediation of areas con-
taminated by oil spills. Management was also provided
with a detailed road map for pipeline integrity manage-
ment and other environmental issues, and it has com-
mitted itself to work with us to make progress.
Case: Human rights violations
Violation of indigenous people’s rights in connection
with a dam project in Central America. Previously, the
company has been reported to be involved in trade union
discrimination in Africa, constituting a breach of several
ILO conventions on workers’ rights.
Nordea put pressure on the company, requiring it to
adopt adequate risk mitigation strategies that address the
violations of the indigenous people’s rights. Among other
things the company was provided with samples of leading
peers’ work in this area.
We have achieved the main target of our engagement
because the company has now implemented a risk
mitigation strategy. Furthermore, effective reporting
mechanisms are now in place, with increased transpar-
ency as to the company’s operations. In early 2013 the
company will publish an extensive CSR report on the key
ESG risks related to its business operations. Nordea was
allowed to preview the report, and we are satisfied with
the way the company now reports on and addresses its
risks.
Nordea also put pressure on the company, requiring it to
do better in terms of honouring labour rights. We have
now also seen a positive development in this respect. In
Cameroon, where the company previously opposed any
form of unionisation, workers are now represented by
three different unions and the company has developed
a strong culture for unionisation at its facilities. This is
something that was quite unlikely a few years ago.
Following sufficient progress and with the targets met,
Nordea ended this engagement in the autumn of 2012.
Case: Labour rights violation
In early 2012 Nordea initiated a dialogue with a Finnish
company allegedly involved in labour rights violations in
Mexico. The company had recently acquired a Mexican
company that was suppressing unionisation.
Since we started the dialogue, the Finnish company has
been very responsive and forthcoming towards Nordea,
discussing ways to approach the labour controversies
and to ensure that the rights of the workers are suffi-
ciently safeguarded.
This autumn the company arranged a vote organised by
a third party on union representation among its employ-
ees. Nordea view this as a proactive and timely response
by the company, demonstrating its willingness to ensure
the workers’ right to union representation of their own
choosing. The next step in the dialogue will be to ensure
that the company has sufficient policies and processes in
place to mitigate labour related controversies.

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Proactive dialogues and company engagements
Nordea also prioritises proactive engagements. We
initiate dialogue with the companies representing our
largest holdings as well as companies identified for our
RI enhanced funds during the ESG analysis process. As
owners we would like the companies we invest in to ad-
dress ESG risks as well as opportunities.
The proactive dialogues and engagements are carried out
by Nordea’s inhouse team for responsible investment
and governance. In 2012 we met with 44 Nordic and
global companies. It is our practice to engage in a direct
face-to-face dialogue with the companies.
Three levels of interaction with companies
The first level of interaction is the information request.
The aim of this dialogue is to receive basic information
from the company. The information is used in our ESG
analysis for the RI enhanced funds and, where necessary,
to encourage the company to improve transparency.
The second level is a dialogue initiated in order to un-
derstand more about a specific key issue. The companies
often have good reporting processes in place, but we may
lack certain information in order to complete our assess-
ment of the company. The dialogue is often conducted at
face-to-face meetings or via conference calls.
The third level of interaction involves more intensive
engagements conducted in order to improve a company’s
ESG rating. In addition to contributing to a positive
development in the company in terms of ESG, the goal of
such interaction is to improve the company’s ESG profile
so that we can invest in it through our RI enhanced
funds.
This type of engagement has clear targets based on find-
ings in our analysis and is a long-term activity lasting
between six months and three years.
All three types of interaction are drivers of change and
will result in improved transparency and better risk or
opportunity management.
Examples of company meetings – 2012
Astra Zeneca
Axis Communication
BR Malls
Estacio Participacoes
Elextrolux
Getinge
H&M
Holmen
J.M.
Kappahl
Kungsleden
LLX
Lojas Americanas
Meda
Millicom
Mills
Multiplan
NCC
Nobia
Nordea
OGX
Oriflame
Petrobras
PRG Realty
Engagements -
a cornerstone for active investors

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Mr Sasja Beslik is Heading Responsible Investment and Governance activities for Nordea Asset Manage-
ment. Beslik joined Nordea in 2009. During his time at Nordea he has worked as CEO for Nordea
Investment Funds in Sweden and is leading development of Responsible Investment concept, products and
solutions within Nordea Group . Beslik has extensive international investment experience, before joining
Nordea, working in Africa, Asia and former Soviet Union countries, Beslik worked also as Global Head of
Engagement activities for ABN AMRO Asset Management.
Appointed as most influential business individual in Sweden under age of 40 in 2007, Beslik have since
then been awarded best ESG analyst in Sweden 2010 and Young Global Leader by World Economic
Forum in 2011, one among 100 selected individuals globally.Aside of his work within Nordea Group Beslik
chairs UNEP FI Water Work group addressing global water issues within the context of financial industry as
well as participating in steering committee within UNPRI on shale gas and water issues.
Before joining Financial industry 2003, Beslik worked for multinationals in extractive industries in the CSR
field all over the world.

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PRI initiatives for company
engagement
Nordea also participates in company engagements and
initiatives through the PRI Clearing House. This is a hub
for signatories to PRI (United Nations-backed Princi-
ples for Responsible Investment) where they can jointly
support, drive and participate in different initiatives.
Nordea is currently involved in five PRI initiatives:
sustainable fisheries and Global Compact reporting as
well as three initiatives addressing oil sands production,
water risk and fracking.
Sustainable fisheries
It is increasingly recognised that overfishing and un-
sustainable fishing practices could cause an irreversible
decline in fish populations. This may lead to disruptions
in company supply chains and represents a risk to both
the companies and the investors that have invested in
these companies.
The sustainable fisheries initiative was initiated and is
backed by 18 investors and covers 41 companies. The
goal is more sustainable fisheries practices in their busi-
ness operations. Among the companies are Mitsubishi,
Unilever, McDonalds, Wesfarmers and Nestlé.
This initiative was started in July 2011.
Global Compact
Nordea also supports the investor-backed initiative
towards companies that have signed the UN Global
Compact* but do not fulfil its reporting requirements.
The goal of the initiative is to make the companies report
on how they address and implement the ten principles to
which they have signed up.
34 investors from over 12 countries and representing
over USD 3 trillion are supporting this initiative through
the PRI Clearing House. Together with the respective
investors, Nordea has addressed 116 companies in total,
89 leaders and 27 laggards, on their Global Compact
reporting.
This initiative was started in 2007.
Oil sands initiative
In August 2012 Nordea joined a new initiative through
the PRI that targets oil sands production and the key
environmental and social impacts of such production.
TheinitiativeisrunbyPRIsignatoriesincooperation with
COSIA**, an organization established by the 12 biggest
oil sands producing companies operating in Canada. The
aim of this initiative is a constructive dialogue focusing
on how the industry may reduce the environmental and
social impact of the companies’ oil sands production.
This initiative was started in 2012.
Water risk and fracking initiatives
In late 2012 Nordea was elected to participate in the
steering committee of two new engagements through the
PRI, focusing on water risks and fracking.
Water withdrawals are forecast to continue to grow
significantly – according to the Water Resources Group
demand for water will by 2030 exceed current available
supply by 40%, leading to large areas with significant
water scarcity around the world. This will most likely
have a significant effect on future economic growth and
is therefore likely to impact long-term investors.

The aim of this initiative is to initiate a dialogue with
water-intensive companies and sectors in order to
address direct risks and supply chain risks related to
water-demanding production and water scarcity.
The initiative on fracking aims at addressing several
aspects of fracking operations, with a targeted group
of companies. The focus of engagements varies from
greenhouse gas emissions, water pollution and manage-
ment to social and community concerns.
The water risk and fracking initiatives will run for three
years.
*The UN Global Compact is a set of ten principles that busi-
nesses can sign up to regarding the protection of human rights,
labour rights and the environment and anti-corruption efforts.
Reporting on how the company is following up on the principles
is not required, but highly recommended so as to avoid so-called
blue-washing. Blue-washing is when a company signs up to the
UN Global Compact for branding reasons, but does not follow
up on the principles or report on how the principles are followed.
**COSIA stands for Canada`s Oil Sands Innovation Alliance.
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Nuclear weapons excluded from
Nordea Funds
Nordea has decided to exclude companies that con-
tribute to the production or development of nuclear
programmes from our funds*. We regard nuclear
weapons and their potential use as controversial,
given their indiscriminate effects on human populations.
During the first months of 2012 ten companies were
excluded from our funds due to their involvement in the
production or development of nuclear programmes. That
is, of the ten companies two were already excluded due
to their involvement in anti-personnel mine and cluster
munitions production.
Companies excluded from Nordea’s funds
due to their involvement in the produc-
tion or development of nuclear pro-
grammes are:
• EADS
• Goodrich Corp
• Safran
• Babcock International Group
• BAE Systems
• Huntington Ingalls
• Northrop Grumman
• Rolls-Royce
• General Dynamics**
• Lockheed Martin**
* By production and development of nuclear
programmes we mean companies’ contribu-
tion to nuclear programmes in the develop-
ment and production phase.
- In so-called nuclear weapons states as
defined by the Non-Proliferation of Nuclear
Weapons Treaty (NPT), constituting the
following five countries: the United States,
Russia, the United Kingdom, France and
China. It therefore applies to all nuclear
programmes apart from the programmes
established before 1970 when the NPT
entered into force.
- It also involves all nuclear programmes
outside the NPT. The NPT is an international
treaty whose objective is to prevent the
spread of nuclear weapons.
** Previously excluded from Nordea´s funds
due to anti-personnel mine and cluster
munitions production (2009).

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Aeroteh S.A. Involvement in cluster munitions
Alliant Techsystems Inc. Involvement in cluster munitions
Aryt Industries Ltd Involvement in cluster munitions
Doosan Corporation Involvement in cluster munitions
General Dynamics Corporation Involvement in cluster munitions & nuclear weapons
Hanwha Corporation Involvement in cluster munitions & anti-personnel mines
L-3 Communications Corporation Involvement in cluster munitions
Lockheed Martin Corporation Involvement in cluster munitions & nuclear weapons
Motovilikhinskive Zavody OAO Involvement in cluster munitions
Poongsan Corporation Involvement in cluster munitions
Singapore Technologies Engineering Ltd Involvement in cluster munitions & anti-personnel mines
Textron Inc. Involvement in cluster munitions
Potash Corporation of Saskatchewan Violation of human rights related norms
Babcock International Group Involvement in nuclear weapons
BAE Systems plc Involvement in nuclear weapons
European Aeronautic Defence and Space Company EADS N.V. Involvement in nuclear weapons
United Technologies Corporation Involvement in nuclear weapons
Huntington Ingalls Industries Inc. Involvement in nuclear weapons
Northrop Grumman Corporation Involvement in nuclear weapons
Rolls-Royce plc Involvement in nuclear weapons
Safran Group Involvement in nuclear weapons
List of companies excluded from Nordea’s funds:
If a company is not demonstrating a real commitment to
changing its norm-breaching behaviour, Nordea’s Com-
mittee for Responsible Investment may decide to exclude
this company from all Nordea’s fund portfolios.
Certain companies also produce specific products that
make an engagement less feasible, for example compa-
nies where the production of illegal weapons and com-
ponents to nuclear weapons constitutes an important
part of their business operations.
Below the companies excluded from Nordea’s funds
as of December 2012 are listed. These are companies
where dialogue is not feasible or has led to insufficient
progress.
Excluded companies – where engagement is not feasible

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Corporate governance activities
When exercising our role as an owner, we focus our rela-
tively limited resources on companies where our owner-
ship is of such a size that our decisions have significance
for the company’s development. In a relatively large
number of companies our shareholding is of signifi-
cance. For example, at the end of 2012 we had hold-
ings in 42 companies exceeding 5% of the outstanding
shares, and in more than 95 companies we held more
than 3%.
The absolute majority of these large holdings are con-
centrated to Nordic companies, mainly Swedish compa-
nies. Some examples of our largest holdings are Sigma,
an information technology company in which we hold
20% of the capital, and Sectra, a company operating in
the area of medical systems and secure communication
systems in which we hold 19% of the capital.
Nomination committees
During the first half of 2012 Nordea Funds
was represented on 26 nomination committees of
the companies; Alpcot Agro, Arise, Boliden, Bure Equity,
Connecta, Dibs, Doro, East Capital Explorer, HiQ, JM,
Kungsleden, Lagercrantz, Meda, MTG, NCC, Opus
Prodox, Proffice, Rezidor, Saab, Sectra, Sigma, Studs-
vik, Svedbergs, Swedol, Transmode and ÅF.
The nomination committees normally consist of repre-
sentatives from the 3-4 largest owners. It is their re-
sponsibility, among other things, to evaluate the perfor-
mance of the board and to propose new board members
and auditors as well as their remuneration to the AGM.
At the end of 2012 Nordea Funds was a member of 29
nomination committees.
During the year we have had dialogues with the boards
of 16 companies regarding the design of remuneration
programmes for executives and employees.
We consider correctly designed incentive programmes as
useful instruments for the creation of added value for the
shareholders. This means for instance that participants
in the incentive programme should be exposed to both
increases and decreases in the value of the company’s
stock. Incentive programmes should have a clear con-
nection to performance at both individual and company
level and should also aim at long-term ownership of
shares. Provided that clearly operations-related goals
or explicit and relevant reference measurements are
achieved, the incentive programme may result in shares
or options to the management and staff.
In one case during 2012 (Autoliv) we voted against the
advisory resolution to approve the compensation of the
company´s executives, among other things due to the
lack of performance criteria for granting shares and op-
tions.
At this season’s AGMs, proposals have in a number of
cases been presented, mandating the boards to decide
on rights issues against cash without pre-emptive rights
for the shareholders. In our opinion rights issues against
cash without pre-emptive rights could result in obvi-
ous disadvantages for existing shareholders and in some
cases destroy value.
We therefore normally act on such proposals. In a
number of companies we have initiated a dialogue with
the boards, resulting in the mandates being limited to
Nordea Funds is an active owner in the companies we invest in.
A good long-term development of the companies will benefit shareholders,
employees as well as other stakeholders.

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issues with pre-emptive rights. At some AGMs we have
also made requests to the boards regarding the use of
such mandates. One example is Finnish company Rapala
where the suggested mandate was exceptionally exten-
sive. In other cases, for example Consilium, we have
voted against such a mandate.
We have focused on this type of mandate for a number of
years and are happy to note that the number of requests
for such mandates is decreasing. More importantly, we
note that in no case where we have acted has the man-
dates been used for rights issues against cash without
pre-emptive rights for the shareholders.
At the AGM of Scania, together with eight other Swedish
institutions we abstained from voting for the election of
board members. We considered it to be the most suitable
way to express our concerns. The reason was that the
only representative on the nomination committee who
was independent of VW and MAN did not support the
proposed board on the grounds that it would not take
the interests of minority shareholders sufficiently into
account. At the AGM Nordea Funds requested that the
majority owners’ representatives on nomination com-
mittees should in future consider the interests of all
shareholders.

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Focus Brazil
Rio
The UN conference on sustainable development was
held in Rio in June 2012. The event, known as Rio+20
marking the twentieth anniversary of the Rio Earth Sum-
mit held in 1992, gathered 45,000 delegates from 188
countries to discuss the institutional framework and
economics of sustainable development.
Company meetings in Brazil
Before the PRI conference, Nordea representatives took
the opportunity to meet a total of 12 Brazilian com-
panies which are all Emerging Stars holdings or potential
holdings. The sustainability index (ISE) of the Brazil-
ian stock exchange (BOVESPA) has been in place since
2005, and this has encouraged Brazilian companies to
build strong ESG management systems and practices.
Many Brazilian companies report far less than they are
actually doing in terms of ESG management. This “doing
instead of reporting” attitude is indeed a welcome devel-
opment, and as a whole (with few exceptions) the ratings
of the Brazilian companies are improving.
The future we want
The large international development conferences nowa-
days rarely produce binding international agreements,
and while the Rio+20 conference as expected did not
result in any new binding agreements, several business-
related initiatives were included in the conference
outcome document “The Future We Want”.
Corporate responsibility for sustainable development
was wholeheartedly supported through for example the
promotion of green economy, environmentally sound use
of raw materials and corporate sustainability reporting.
During the conference many organizations and stock
exchanges announced their ESG reporting initiatives.
The UK Department for the Environment, Food and
Rural Affairs (DEFRA) announced that greenhouse gas
emission reporting will be a mandatory part of the annual
reporting of all companies listed on the London Stock
Exchange as from 2013. DEFRA estimates that over time
this will make it possible for the UK to reduce its annual
carbon emissions by 4 million tonnes and thus meet the
EU target by 2020. Nasdaq OMX announced that it will
join the Sustainable Stock Exchanges initiative, requiring
ESG reporting from all listed companies on a “comply or
explain” basis.
The Nordea RIG team fully supports and endorses
initiatives improving transparency on ESG issues. The
“Stars” ESG research process relies on corporate trans-
parency, and the LSE and NASDAQ OMX are welcome
additions to the Sao Paolo, Johannesburg and Singapore
exchanges, all key exchanges for Emerging Stars that
already include some form of ESG disclosure in their
listing requirements.
PRI conference
Shortly after the Rio+20 conference, the Principles
of Responsible Investment initiative held its annual
conference for PRI signatories in which the Nordea
delegation including the Emerging Stars fund manager
and analysts also participated.
Main conference topics addressed systemic risks and
how the responsible investment community as a whole
can respond. Among the key initiatives, the PRI
secretariat will start consulting signatories on which
policy issues to research and lobby, to identify policy
responses on the key subjects identified for action.

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 19
Focus Mexico
Big Business hazards in the world’s most dangerous city
Mexico has in many ways become highly popular among
investors and companies around the globe. From one coast
the country offers access to the Pacific Ocean and Asia and
from the other to the Atlantic Ocean and Europe. Also, sunny
Mexico borders the US, the world’s largest and most attractive
market with which it has a long-standing free trade agree-
ment. Even so, the wide-spread corruption and high crime
rates in Mexico often terrify even the most hardened market
players, and many companies soon see themselves as pawns in
a game where it is difficult to see what the real agenda is.
When the Finnish company PKC Group acquired activi-
ties in Mexico some years ago, the strategy was fairly
straightforward. The company wanted access to cheap
and efficient labour in one of the most appealing geo-
graphical areas in the world. Separated only by the once
so mighty Rio Grande river, Mexico is only a stone’s
throw away from the world’s most potent market in the
US where for instance major car makers are willing ta-
kers of the company’s products.
PKC is not alone. Three out of four of the largest com-
panies in the US have established production facilities
here just south of the US border. Over the past 50 years
the Mexican government has offered extremely lucrative
conditions for production companies setting up busi-
ness in the border region, the so-called “maquiladoras”.
These companies have always been treated benevolently
to ensure that the slow wheels of Mexico keep turning.
Political changes in difficult times
For almost 100 years Mexico was governed by the
Institutional Revolutionary Party, the PRI. But in the
early 2000s something happened. The Mexican people
demanded changes, and the PRI president was ousted
and replaced by a new candidate who pledged to fight
corruption and crime. This president has now also been
toppled and in 2013 the PRI returned to power.
Unfortunately, the fight especially against the drug
barons became much bloodier than anyone dared ima-
gine. During the second half of the 2000s and up to now
the war between drug barons, the police and the mili-
tary has claimed close to 60,000 lives. The epicentre of
the war was the almost mythical border town of Juarez,
which quite ironically is just across the border from El
Paso, one of the safest places in the US.
But Juarez also acts as a magnet to big companies looking
for access to cheap labour and the US market at the same
time. The production facilities of major global players
are located along the border like pearls on a string, with
most of them in Juarez. Even companies such as Swedish
Electrolux, which is known for its soft Nordic values and
an ethical rule book the size of the Bible, has more than
5000 people employed at its huge white goods factories
in Juarez.
The drug war is, however, far from the only serious issue
in Mexico. For decades poverty and an almost totali-
tarian regime has given free rein to corruption. Many
companies have had to realise that principles were one
thing, reality another. Recently, American supermarket
giant Walmart, one of the largest retailers in the world,
was caught in having systematically been paying bribes
for years as a means to grow its activities. Today, Walmart
is the second-largest employer in Mexico and the
scandal remains front-page news in the media including
New York Times. On the list showing the most corrupt
countries in the world in 2012 Mexico is number 105.
Topping the list as the world’s least corrupt countries are
Denmark, Finland and New Zealand.
Unions fighting to gain a foothold
But the companies in Juarez and other border towns in
the maquiladoras zones in Mexico are not only struggling
with crime and corruption. One very hot topic these days
is the Mexican trade unions.

20 
The Finnish company PKC recently found itself at the
centre of one of these battles. In line with many other
foreign companies in Mexico, it had not previously
opened its doors to the trade unions because as so many
other organisations in the complex Mexican society the
unions are known to be deeply corrupt and engaged
in power struggles with one another. And the outcome
of these struggles is not always to the benefit of work-
ers or employers. Some unions are even rumoured to
be a source of funding for the ruling PRI party, with no
transparency as to the many millions of pesos raised in
this way.
But most observers have long agreed that for companies
in Mexico to climb up from the lowest level of the pro-
duction ladder, the trade unions will have to be involved
more and in a better way. Consequently, as one of few
companies PKC arranged a vote among its employees
on union representation. The employees were to choose
between two unions competing for the exclusive right to
represent the thousands of workers at PKC’s factories.
The vote resulted in a tie, and the matter has now been
transferred from the PKC factory floor to the Mexican
courts. Meanwhile, PKC and many of its employees have
become pawns in a game where so much more than col-
lective agreements, overtime payment and training is at
stake.
A new era
But despite the obvious hazards of the Mexican miracle,
the country is no doubt moving in the right direction.
The horrendous experiences of the past notwithstand-
ing, the Mexican government has introduced new laws
aimed at securing transparency in government and
public administration – and it seems that the new laws
may have the desired effect in terms of putting an end to
corrosive corruption. Moreover, the drug war has turned
less ferocious and far fewer people have been killed over
the past year. Some think that the reason is that the most
dangerous drug cartels have lost, but others believe that
the confrontations have merely declined following the
election of a new president.
But no-one can take away Mexico’s strategic geographi-
cal location, and in fierce competition with Brazil Mexico
has evolved into one of the greatest attractions for
foreign direct investment in Latin America. The question
is whether companies such as PKC and Electrolux will
succeed in anchoring their own values in this complex,
highly charged and dangerous society that Mexico is and
will be for many years to come.
Focus Mexico

 21
On 1 December 2012 Mexico got a new president. The
former president Mr. Felipe Calderon from the National
Action Party (PAN) handed over the power to the new
president Mr. Enrique Peña Nieto from The Institutional
Revolutionary Party (PRI). Mr. Peña had won a clear
victory in the election in July.
The PRI has more or less been running Mexico for most
of the 20th century. However, in 2000 the PAN won the
election and stayed in power through two presidents
until 1 December 2012.
Mr. Peña is considered “new blood”, and he has clearly
stated that he represents a change from the PRI that was
in power before year 2000. He is a very good communi-
cator and has a strong appeal among the Mexican public.
Mr. Peña has very clearly stated that his top priority as
president is to make the economy grow faster and to
focus on reducing poverty. Some very interesting and
important reform proposals will be up for voting
soon, and we have become more optimistic about a
positive outcome. The reason for our optimism is that
there is actually a huge “overlap” in the reform agendas
of the PRI and the PAN, which should make it relatively
straightforward to get the reforms passed in Congress.
Some of the reforms are quite significant and require
constitutional changes. A two-thirds majority in Con-
gress is needed to change the constitution. However, we
are talking politics, and as we know things are not always
straightforward.
Two key reforms in the short to medium term are an
energy reform and a fiscal reform. An energy reform ob-
viously contains many elements, but simply put, Mexico
has huge reserves of oil and gas but they all remain in
the ground because the state-run oil and gas company
(Pemex) has been stripped of all its cash flows by the
government to fund the government budget. So despite
its huge reserves, Mexico ends up importing refined
products from the US and having subsidised prices at
a cost for the government. An energy reform will im-
prove the fiscal situation significantly over the long run,
domestic energy structures will improve and the manu-
facturing industry will receive a boost. As Pemex starts
to restructure and increase production, we will see very
positive industry developments in the full value chain
around the energy sector, and job creation will surge.
Turning to the fiscal reform, it again involves many ele-
ments, but simply put, tax collection needs to improve
and the tax system needs to be simplified. Over the long
term, these reforms may provide a strong boost to the
economy and the budget and, in turn, the market.
A recent labour market reform may be seen as a good in-
dicator of the potentially better times ahead for Mexico.
During the period from September to November, ie after
the election but before the PRI took office, the PAN
and the PRI managed to agree on a new labour market
reform.
Nordea’s RIG team visited Mexico in December to as-
sess the effects of this new labour market reform. The
conclusions we draw from this trip are generally on the
positive side because from an ESG perspective we see
important improvements. One aspect for which the
Mexican manufacturing companies have been much
criticised from an ESG perspective has been the fact that
they made women do pregnancy tests before hiring them
– which was totally legal. The new labour law does not
allow this. We believe this is great news and an indication
that this reform has positive ESG implications. However,
much still remains to be done in Mexico in terms of ad-
dressing ESG related issues.
Besides the much better outlook for economic reforms in
Mexico, a number of other factors also contribute to our
more positive view on Mexico from an economic growth
Mexico – new government and new opportunities

22 
perspective. The key driver here is the competitive
strength that Mexico has gained over the past few years
and the fact that this looks set to continue in the years to
come. This will help Mexico attract investments, thereby
lifting job creation and, in turn, consumption.
The improvement in competitiveness is well illustrated
by the trend in average manufacturing wages. In 2000
the level in Mexico was USD 1.5 compared to USD 0.3
in China so there was a quite large gap in favour of Chi-
na. Now data for 2011 show that manufacturing wages
averaged USD 2.1 in Mexico and USD 1.6 in China. The
gap has thus significantly narrowed in favour of Mexico.
And if you add transportation costs, Mexico really starts
to have a competitive edge over China in a number of
areasseen from aUS market perspective.Furthermore,in
future Mexico will benefit from its huge domestic energy
resources (assuming the energy reform is implemented),
but in the meantime until domestic energy production
picks up, Mexican manufacturers in the northern part
of Mexico can increase their use of cheap shale gas from
the US.
Another important advantage for Mexico for years to
come is its attractive demographic profile. This not only
has positive implications for the manufacturing sector,
but also much broader structural economic implications
for the trend rate of growth in the economy. We believe
Mexico is getting closer to the point where as an econo-
my and a society it can start to harvest the benefits of the
so-called demographic dividend.
Big structural economic issues still have to be resolved
in Mexico, and reforms are definitely needed in the
years ahead to address them. Corruption is also a huge
problem, which will take years to solve. Transparency
International, a leading anti-corruption organisation,
estimates that Mexican households spend a hefty
USD 2.5bn on so-called“petty corruption”(iepayments
to ensure your rubbish is collected or your kids get the
school books they need, or a sudden parking ticket by the
local police officer etc). This is a huge economic waste.
However, relative to other emerging market countries
Mexico is not doing too badly. The World Bank ranks
Mexico as one of the most straightforward places to do
business in Latin America.
We are confident that Mexico is on the right track. We
are quite optimistic about the economic outlook for
Mexico in the years to come as we think the probability of
successful reforms will generate some positive surprises
for the economy. Consequently, we are starting to look
more closely for new stock ideas in Mexico. However, in
the past we have struggled a bit to find companies with
both a good business model, strong ESG drivers and an
attractive valuation. Hopefully we will be able to invest
in a few new names relatively soon – we are working on
some interesting cases, and the current political changes
and potential implications for the longer-term growth
outlook are making us more confident.
Mexico – new government and new opportunities

 23

24 

 25
Focus Canada
Field visit March 2012, the tar sands, Alberta Province
The fight over Canada’s dirty oil
These years a regular fight on words, facts, feelings and not
least over billions of dollars in potential earnings takes place
in the old Indian territories in the Canadian Alberta province.
Nordea went to Fort McMurray – the epicentre of what may
be regarded as the world’s most controversial oil bonanza –
to examine the environmental and social impact of a
burgeoning industry.
At first sight, the idea of anyone wanting to start a new
adventure here seems totally absurd. Fort McMur-
ray, a former homely, tumbleweed-blown town in the
middle of Canada, and its surroundings are now a truly
depressing place to stay if you are not paid abundantly
for it. Fort McMurray itself is not much bigger than a
small country town located in the middle of nowhere, but
as soon as you venture out into town where the money
flows, all your senses are assailed by the heavy industrial
haze overhanging the area. There is a constant, long line
of heavy trucks moving in and out, the climate is almost
brutal, and you get the feeling that people are here only
because of the money. And money – lots of it – is pre-
cisely what it is all about in these parts of the country.
In an area the size of England many of the world’s lead-
ing oil companies are investing in excess of USD 100bn
to harvest oil from reserves that are considered to be
among the most difficult to extract. And even though
producing one barrel of oil here requires three times as
much energy as producing one barrel of conventional
crude for instance in the Middle East, the high level of oil
prices has so far made it a profitable business. The rule
of thumb for the multinational oil companies is that if oil
prices exceed USD 65 a barrel, there are profits to be
made in the area.
The fight seen from above
To be able to grasp what is at stake, you have to see it all
from above. Because the area is so huge that it is impos-
sible to fully understand the scope of this industry and its
environmental and social impact from ground level.
Almost no matter in what direction you fly, it takes more
than two hours by helicopter to get away. All over, we see
Armageddon-like production sites. The oil resources in
the tar sands (oil sands) are just beneath the surface and
are extracted using vast amounts of energy and water.
Actually, it was a local chemist who in the 1920s dis-
covered how to wash oil out of the sand – using his wife’s
washing machine! And although the helicopter flight
reveals that much has happened since then, the method
used to extract oil today is roughly the same. Either hot
steam is injected through the sub-surface oil layers or oil
sands are mined from unbelievably large open pits that
leave the old Indian hunting grounds literally “scalped”.
At an altitude of 300 metres above ground level you can
see how massive the scenery is. The trucks used in the
open mine pits operate 24/7 all year long and are the
size of big houses. Also, out in the wilderness a number
of landing strips have been constructed that the large oil
companies use to fly in fresh supplies of multi-ethnic
labour several times a day. With annual salaries in the
USD 150,000-200,000 range the companies have no
problem filling the seats of their jets.
Words, facts and feelings
But this wilderness bonanza has come under attack from
all sides, and in this fight between profits and environ-
mental protection the ends justify the means.
Greenpeace, the global environmental activist organi-
sation and one of the more controversial players, has
thrown the spotlight on the environmental hazards
involved. And the hazards to highlight by the feared
green activists are many. One ticking bomb is the huge
artificial lakes, that is, the massive tailings ponds. The
tailings ponds contain non-recycled water from the oil
production and are thus large pools of toxic sludge from

26 
the extraction process. The companies use different
methods to clean the water, but even after 40 years they
still have not come up with an effective way to do so. In
addition to the challenges associated with managing oil
sands tailings, there are fears of leakage from some of the
old ponds into the drinking water of the local population.
Some of the indigenous Cree Indians, who have also
themselves become part of the oil industry, are beginning
to oppose the fast industrialisation of the area, among
other reasons for fears of pollution of drinking water.
Many have stopped using tap water following reports of
people starting to suffer from eczema, amnesia and in
some cases cancer. Instead, they have water containers
brought in from elsewhere.
However, with so much going on in the area it is dif-
ficult to document and validate the many facts presented
by the various parties involved: the powerful lobby of
the oil industry, the different factions of the indigenous
population, the environmental organisations, the human
rights organisations, those who have become rich and
those who have become ill. And the mere fact alone that
the provincial government of Alberta does not appear to
have a good grasp of what is going on is not a good sign.
The contrasts between profits and environmental con-
sequences are so manifold and diffuse that it will require
thorough in-depth analyses to merely understand the
basics of this real-life war game.
Big brother is covering the rear, for better
or worse
The US is by far the biggest importer of Canadian oil.
Canada overtook Saudi Arabia in 2004 as the number
one supplier of oil to the US market. And in one way
it is easy to understand why the Americans favour the
expensive oil from Alberta. The massive oil spill in the
Mexican Gulf, the worldwide debate on nuclear power
and not least the many wars in the Middle East make oil
deliveries from the neighbour to the North appear easy
and secure. However, several US states have started to
apply the thumbscrews to fuel suppliers that leave a jet-
black trail of CO2 emissions, and to meet their demands
producers have to mix the oil with biofuels. Meanwhile,
there are strong protests against the highly controver-
sial Keystone XL oil pipeline that is planned to run from
Alberta several thousand kilometres across the US to
Texas. Recently, President Obama has postponed the
decision until 2013 – after the US presidential elec-
tion. Canada has responded by threatening to redirect
the oil pipeline to the Pacific coast from where the oil
can easily be transported to the Asian markets instead.
But also here the industry faces almost insurmountable
challenges as the indigenous peoples – First Nations, in
Canadian terminology – in for instance the neighbour-
ing province of British Colombia strenuously oppose the
pipeline, and there are now indications that the parties
have reached a deadlock.
Massive growth, CO2 war and a reindeer
Back in the helicopter the global oil giants do not ap-
pear particularly affected by the protests raised by their
actions. After one hour’s flight we see yet another new
investment. The big oil company ExxonMobil is in the
process of constructing a huge plant at a cost of more
than USD 20bn. Like many of its peers in the oil indus-
try, the company is convinced that demand for energy
will exceed supply by a wide margin in future. And many
of the big oil companies, including Norwegian Statoil,
have been granted a licence to take their share of the
spoils. Local economists believe that 600,000 new jobs
will have been created in the area before 2020 and that
the oil bonanza will be a key growth driver for the Cana-
dian economy going forward.
But nobody denies that the commercial risk involved is
huge. If oil prices plummet, as they did for instance in
2008, it could jeopardise the profitability of the pro-
jects. Moreover, oil extraction presents other problems.
Focus Canada

 27
Canada is under massive pressure to meet international
conventions and reduce its rising CO2 emissions. As the
first country in the world Canada has responded by with-
drawing from the Kyoto Protocol the objective of which
is to reduce global CO2 emissions. Officially because the
US and China have not signed the agreement.
The biggest threats may be the challenges that are closer
to home, including the lawsuits instigated by groups
of First Nation people against the Canadian federal
government. The First Nations in Canada have a consti-
tutional right of exclusive use and occupation of the land.
If the indigenous people cannot fish in the big rivers or
cannot hunt the caribou, the local reindeer, the oil com-
panies’ licences could, in theory, be withdrawn.
Nordea’s analysis of the risks involved in oil sands extraction
Nordea is in the process of analysing the environmental and human costs of oil sands extraction. In 2012 Nordea identified
the oil companies involved in oil sands extraction and analyse how these companies manage the environmental and social
risks. Nordea Funds has not invested in the two biggest Canadian oil sands companies, Suncor and Syncrude, whose core
business area is oil sands extraction.
Nordea acknowledges the substantial social and environmental risks involved in oil sands extraction, as reflected in the
ongoing lawsuits raised to uphold the constitutional rights of Canada’s First Nations. Also, several environmental organisa-
tions accuse the oil companies of damaging the environment, but no ruling against the companies has so far been handed
down. And the provincial government’s management and supervision of the companies, their activities and the social and
environmental impact far from meets international standards including those of the World Bank.
During our visit we took water samples of the public water supply. These samples, which were sent to Stockholm’s Karolinska
Institutet for testing, turned out to be of the same quality as drinking water in Sweden.
Facts on the oil in Alberta
Oil or tar sands consist of crude bitumen-saturated sandstone. Crude bitumen is a type of oil that is too heavy for extraction
using conventional drilling techniques. Oil sands deposits are a very large proven energy resource. The biggest deposits are
found in Venezuela, Canada and the Middle East.
The Canadian oil sands deposits are estimated to hold about 175bn barrels of oil. By 2020 the production of synthetic oil is
forecast to have risen to 4m barrels a day, which is twice as much as today.
It requires huge amounts of energy to extract and wash the oil out of the oil sands. There are two main methods of extraction:
surface mining (open mine pits) or in-situ mining where heated steam is delivered to the crude bitumen-bearing strata through
injection wells. The processes require four times as much energy as conventional oil extraction methods and are three times
as energy-intensive as for instance production of wind energy.

28 
Emerging Stars & Swedish Stars
The firstinvestment productsbasedonpositivescreening
were introduced in the spring of 2011. Swedish Stars is
a focused Swedish equity fund with 25-30 holdings.
Emerging Stars invests solely in emerging markets
countries such as Brazil, India and China. Its portfolio is
considerably more concentrated compared to the majo-
rity of other emerging markets funds. The portfolio of the
Emerging Stars fund typically comprises 40-60 compa-
nies. With the relatively low number of companies in the
Star fund portfolios Nordea is able to constantly monitor
and assess the performance of the individual companies.
The portfolio managerspickthecompaniestoinvestinon
the basis of Nordea’s own ESG analysis, which scores
potential investment candidates based on an evaluation
of how they handle ESG risks and opportunities. Only
the companies that demonstrate an ability to handle both
risks and opportunities and that have a positive approach
to ESG issues will be selected.
Emerging Stars
For the Emerging Stars fund we constantly look for
the actual Emerging Stars, companies from the global
emerging markets that have the star potential to be a
global leader in their industry, both in traditional indu-
stry and financial terms as well as from an ESG point of
view.
Qihoo, China
Qihoo 360 Technology Co. Ltd. (NYSE: QIHU) is a
Chinese software company known for its antivirus soft-
ware (360 Safeguard) and web browser (360 Browsers).
It was founded by Hongyi Zhou and Xiangdong Qi in
August 2006.
As of March 2012, Qihoo’s monthly active users were
411 million for its security products and 273 million for
the 360 Browsers at the end of the first quarter of 2012.
The company is only active in China.
Qihoo has a strong code of conduct that addresses the
company key risks adequately on acknowledgement and
policy level. Qihoo was criticized in 2011 for its
financial disclosure. The company responded by
opening up its corporate governance structure and
disclosure. The company does not provide any additional
general corporate responsibility information, which is
typical both in China and among internet companies.
Privacy and freedom of association related risks are
typical for Chinese internet companies that rely on social
media. Qihoo does not have strong links to social media,
therefore the risk is mitigated by low exposure.
Urbi, Mexico
During its 30 years of operations the company has built
and sold more than 400,000 homes. It uses advanced
business processes and has outstanding financial per-
formance, which makes it the most profitable company
in the sector. Urbi can serve all market segments, but
focuses primarily on affordable entry-level and low
middle-income housing.
Urbi Desarrollos Urbanos SAB de CV is a Mexico-based
company primarily engaged in the real estate sector.
The company’s main activities include the acquisition
of land, as well as the design, construction and deve-
lopment of residential properties under the UrbiVilla,
UrbiQuinta, UrbiHacienda and UrbiClub brand names.
In addition, the company’s projects are supported by
two information technology (IT) platforms that maintain
the scalability of operations: UrbiNet and UrbiNova.
The company shows a strong commitment to CSR. Urbi
has a Sustainability Development Committee which
from 2012 will be a part of the board of directors. The
company has started a lot of initiatives but unfortunately
lacks a bit in terms of a structured approach to CSR.
Anhanguera, Brazil
Anhanguera is among the highest ranking Brazilian com-
panies in the Emerging Stars fund. It is Brazil’s largest

 29
(second largest in the world) publicly held company in
the education sector. Anhanguera focuses on post high
school vocational education and has 400.000 students
in 73 campuses and over 500 learning centres located
across the 27 Brazilian states. Brazil’s growth rates,
demographic changes and low unemployment rates have
boosted demand for vocational training to a level that
the government cannot fulfil on its own. Consequently,
the government supports private involvement, enabling
Anhanguera among other education companies to fulfil
a social mission by providing vocational education for
large parts of society that have not been able to benefit
from the relatively high education standards of the few
elite schools in Brazil. The social mission is also very
visible locally. Graduation from private schools such as
Anhanguera requires practical training, and Anhanguera
often organises this training within its campuses, which
would otherwise stay unused during daytime by the
mostly working students. The practical training in for
example nursing and healthcare enables these services to
be available at zero or close to zero costs at Anhanguera
campuses for people who otherwise might not be able to
afford them. On top of their social mission, Anhanguera
has thorough ESG management and reporting mecha-
nisms in place addressing key stakeholder risks. The
company has published GRI (Global Reporting Initia-
tive) sustainability reports since 2009 and is included in
the BOVESPA corporate sustainability index (ISE).
Swedish Stars
Swedish companies are often described as mature
companies well aware of any environmental and social
risks and at the forefront of developing new sustainable
technologies. Our analysis shows that this is true for
some of them, but not for all. Through our ESG analysis
both the leaders and the laggards have been identified.
The leaders have a good structure in place to manage
environmental and social risks, and are increasingly
integrating their commitment to sustainable business
development, eg in group visions, mission statements
and strategies. Our analysis has also identified compa-
nies that are not top performers in this area today but
demonstrate positive momentum and have a strategy for
how to further improve, ie our future stars. SSAB and
Tele2 are companies that show concrete improvements
and also a willingness to go further.
SSAB & Tele2
SSAB made progress addressing health and safety is-
sues, supply chain management and business ethics in
late 2011 and in the beginning of 2012. The company
is now addressing all key issues at a strategic level in a
structured way and with clearly defined responsibilities.
To receive an even better rating the company now needs
to show the results of its newly established strategies.
Tele2 has been on a very positive journey over the past
five years. Analysis conducted five years ago revealed the
company’s limited interest in taking group-wide re-
sponsibility for social and environmental issues. Today,
key issues have been identified through stakeholder
engagements, and the relevant policies are now in place.
Disclosure has improved with the group publishing an
annual corporate responsibility (CR) report (GRI), but
detailed information, concrete actions and results are
lacking. We have asked the company to further improve
its communication regarding privacy protection and
integrity and establish a stronger statement through
a position paper that describes the situation and dis-
close actions taken. Both of these companies have been
subject to closer proactive engagement activities and it is
good to see that recommendations from earlier analyses
have been fulfilled.

30 
70
75
80
85
90
95
100
105
110
Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12
Nordea Swedish Stars 110228-121231 (after fees).
Nordea Emerging Stars 110415-121231 (after fees).
Performance chart: Swedish Stars
Performance chart: Emerging Stars
70
75
80
85
90
95
100
105
110

 31
Emerging Stars – product facts
Philosophy
The Emerging Stars investment process includes an implicit environmental, social and governance (ESG) evaluation.
The investment process is based on the belief that:
• structural changes in the fields of technology, demographics and globalisation combined with global challenges
such as climate change and resource scarcity are the main challenges and opportunities for companies.
• companies with a competitive edge in terms of ESG that benefit from structural changes will achieve superior
cashflow growth over a prolonged period.
• thematic research that focuses on structural changes and identifies companies that benefit from them can
produce superior information, thus leading to excess returns.
Investment objectives
• Excess return target 4% per annum
• Ex-ante tracking error Minimum 5% per annum
• Benchmark MSCI Emerging Markets as reference index
Investment policy
• Number of holdings 40-60
• Active stock positions Maximum 5%
• Cash / equivalents Maximum 5% of the portfolio’s market value
• Individual securities Maximum 10% of the portfolio’s market value
• Country deviations No restrictions
• Sector deviations No restrictions
• Currency No currency hedging
The Emerging Stars Investment Process
Sustainable
shareholder
value
generation
Valuation
Social responsibility
GovernanceEnvironment
Industry key
success factors
Theme & Strategy

Published by: Nordea Investment Funds
Photo: Håkan Flank, iStockphoto, Klaus Fridorf
Graphic design: IMMERFRISCH
Sources: Ethix SRI Advisors, Hermes Equity Ownership Services, UNCTAD
March 2013
Responsible Investment & Governance
Annual Report • 2012

Responsible investment & governance annual report 2012

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