Sustainability and Corporate Governance Report 202
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HANDELSBANKEN FONDER – HOW WE TAKE ACTION TO REDU
CE CLIMATE IMPACT The economy of the future is circular In the 2030 Agenda, increased resource efficiency is an important target. We see the potential to better conserve and manage the planet’s resources as key to the development towards a richer future. “Through a circular economy, we can actively strengthen and conserve nature’s ecosystem,” says Simon Park, Sustainability Analyst at Handelsbanken Fonder. “The beauty of the circular economy is that it addresses the entire challenge of securing our ecosystems,” says Simon Park, Sustainability Analyst at Handelsbanken Fonder. “To achieve more economic growth, we need to move towards a circular economy. By investing in companies that have integrated circular thinking in their business models, we can relieve the burden on our planet, reduce waste and improve our future living conditions.” He explains that a circular economy can most easily be described by comparing it to the linear economy we have today and have had historically. “The linear economy is based on a take-make-waste pattern, a kind of throwaway mentality, which means that we take up raw materials from our ecosystems to produce goods that are then thrown away after use. If we’re lucky, the raw materials degrade, but oftentimes the material remains in nature as toxins or waste. This approach is, of course, not sustainable in the long run because the earth’s resources are finite. That’s why we urgently need to shift to a more circular economy, where materials and resources can be reused in a natural flow.” Engagement for a circular economy Handelsbanken Fonder engages with companies in order to step up their circularity efforts in several ways. Allocating capital to companies actively working for the transition is a key component. “To this end, we spend a lot of time in our active management’s sustainability analysis identifying the companies that have done a good job of integrating circular thinking in their business models,” Park says. “Another impactful way is to engage with the companies through dialogue and to be an active owner. We also try to highlight the issue and address the sector’s challenges, for example in collaboration with other capital owners and through participation in various initiatives. In cases where we choose not to invest in a company, we can also clearly show where we stand and create incentives for the companies to develop more circular business models,” he says. “We attach particular importance to the fact that the companies, although their operations are not fully circular today, recognise the problem of a linear economy and have a plan for managing the transition and their resources in the longer term. Replacing fossil fuels with renewable sources, for example, is essential to our ability to achieve the climate goals, yet we must ensure that the companies producing renewable energy solutions take a circular perspective concerning the resources used.” Circularity in the design phase In the circular economy, the products and services produced aim to preserve the planet’s resources and help strengthen nature’s ecosystems instead of depleting them. This requires actions like replacing fossil-fuel raw materials with bio-based materials that benefit the climate, the environment and biodiversity. “An important part of enabling the circular economy is getting companies to think early on during the design phase about what resources to use in their products and how they will be managed without leaving toxins or waste in nature,” Park says. “Moreover, the companies need to ensure that the materials can be preserved by, for example, recycling or reuse in other products and services. Another key in the transition is that we as consumers can rethink and change our linear consumption patterns. One example is the shift towards the sharing economy, which means that we can rent and borrow things to a greater extent instead of owning them ourselves,” he says. “The circular economy requires making radical changes on a global scale. One of the challenges is that a significant part of society’s infrastructure today is built according to the linear economy and our linear way of consuming things. This contributes to a generally sluggish mobility, which in some situations causes problems for those companies that have come a long way in offering circular products and services since there may be challenges around how to handle them.” 30