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Enter Fonder Sustainability Report downgrades Volvo, announces Climeon investment

Some Swedish companies with a wide geographic presence have difficulties in fully controlling their global supply chains, says Enter Fonder's analyst Vilhelm Böhme.

Photo: PR: Enter Fonde

Enter Fonder downgraded Volvo as a medium-risk company during the first quarter of this year, the company's newest Sustainability Report reveals. The firm also withdrew from particularly vulnerable companies such as Swedbank and Attendo, listed hotel chain Scandic, and Securitas.

According to the report, there are shortcomings in the quality of Scandic's services, and the type of guard service Securitas offers in around 50 countries makes it vulnerable to human rights violations. With clothes manufacturer H&M, Enter Fonder is continuing dialogue regarding the former's monitoring of labor conditions at factories producing its garments in Bangladesh.

At the end of the quarter, the company also made a new investment in Stockholm-listed Climeon, which produces clean electricity from low-temperature heat sourced from as waste heat from different industrial processes.

Dialogue with Volvo continues

Vilhem Böhme, analyst at Enter Fonder, tells AMWatch Volvo's credit rating was downgraded from it former status as a low-risk company mainly due to controversies in the supplier chain. "We have a long relationship with Volvo, which has been in our portfolio for more than a decade, and we have an ongoing dialogue with the company about these issues," he says.

Despite Volvo's sustainability efforts being positive overall, controversies regarding human rights have been recognized as the company's products have been used for questionable purposes, the report states. "The most recent case was noticed in 2018, when the company's products were used for controversial mining in Myanmar," the report states.

Swedbank and Attendo were previously flagged as particularly vulnerable in Enter Fonder's sustainability engagement and were both involved in a controversy during the first quarter of this year. In Attendo's case, the reason for withdrawing was the misadministration revealed at the company's facilities in Finland, which, together with the company's response, did not meet Enter Fonder's expectations. The decision to exit from Swedbank was based on the suspicions of the firm being involved in money laundering and how it handled the situation.

Having full supply chain control is a challenge

It is difficult for some Swedish companies with a wide geographic presence to have a full control of their supply chains, Böhme says. "This is one of the main shortcomings we are dealing with in the Swedish universe," he notes.

"A wide geographic presence demands a high control of the supplier chain. The difficulty of having a full control often reflects in the incidents that occur in Swedish companies. Volvo and H&M are just two of several examples," Böhme explains.

The main challenge in analyzing Swedish companies is still the lack of reporting from smaller companies, Böhme says. He would also like to see further forward-looking research that focuses more on the processes of development in companies. "Today, most ratings and analyses are based on static data from the past. This approach can mislead one to not invest in the companies that are putting most effort into sustainable development," Böhme notes.

Enter Fonder currently manages assets worth approximately SEK 9bn, invested mainly in Swedish equities and fixed income. Approximately half of the assets belong to institutional investors, including pension funds.

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