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No such thing as a free lunch

Our goal is clear and simple: to provide our clients with the best risk adjusted returns. The businesses we invest in strive to deliver long-term value creation, not short-term profit maximisation. Environmental, societal and governance issues play an important role in our portfolio companies.

All our companies have a carbon footprint, all employ hundreds if not thousands of people, and all look after enormous values in terms of dollars and cents. This demands strong stewardship.

We have to continue improving all sides of the ESG equation. We are under no illusion that our portfolio companies are utopian with no controversial issues regarding these important topics. However, we are optimistic and have faith in people's ability to apply their creativity and cooperate at a global level to take on the necessary battles.

A level playing field

International and local regulations are needed to ensure guardrails for market participants and a level playing field for global operators. Regulation is not a solution on its own, however. International regulation takes years to agree on and the interests of different nations often delay progress. Europe has taken the lead in developing a taxonomy to define which economic activities may be considered sustainable. The taxonomy will provide investors with clear operational guidance on what is green and what is not. The proposal has encountered hurdles, however, with 10 EU nations disagreeing with the recommendation that natural gas be considered a "transitional" fuel, even when it replaces coal in power plants. The taxonomy will eventually be agreed upon and help guide investors, even if the final outcome is a watered-down version.

Nonetheless, capital markets do not stand still and wait for regulation to be enforced before they act. Companies are developing and adopting new technologies at a breath-taking rate. Be they within energy, agriculture, buildings & infrastructure, staples or textile industries. Without a healthy climate, biodiversity, clean air and water we all know just how much future generations will suffer. Everyone has an important role to play in the transition we are in. There is not only push from regulations, but also pull from consumers, governments, employees and investors. And as we have seen in some nations during this pandemic, we can do wonders when we all pull in the same direction.

Holistic approach to ESG

At SKAGEN we take a holistic view of ESG. For us, it is paramount that companies have a strong culture for pursuing improvements and set clear targets which are followed up and reported on regularly in a transparent way. The "E" for environment is critical, but with the accelerating rise in inequalities, we also engage in the "S" and encourage our companies to align themselves with international labour laws and provide fair living wages to their employees.

As stewards of our clients' wealth, we are firm believers that we will find winners in those companies that pursue ambitious targets and contribute to the Paris Agreement and the United Nations Sustainable Development Goals. We are less concerned whether our portfolio companies are defined as "green" today, and more focused on clear improvements tomorrow, looking ahead to 2030 and 2050.

The environmental crisis is a result of companies and individuals being allowed to pollute for free. Nature has been exploited beyond its capability to rejuvenate. Not from intent, but out of ignorance. Pollution can no longer be free; there must be a price to pay. Equally, paying our workers a fair living wage is a cost we cannot ignore.

There is no such thing as a free lunch.


Historical returns are no guarantee for future returns. Future returns will depend, inter alia, on market developments, the fund manager's skill, the fund's risk profile and management fees. The return may become negative as a result of negative price developments.