Nordea: Nordic Companies' ESG Progress Slows

Helsinki – Nordea Equities' ESG Research team has released its annual update of ESG ratings for Nordic companies. The analysis, based on 2023 data from approximately 300 companies, indicates continued progress in environmental, social, and governance (ESG) areas. However, the pace of improvement has slowed for some metrics compared to previous years.

Companies' adoption of ESG targets remains strong, with 80% of those covered by the research having both climate and other ESG goals. The linkage of CEO pay to these targets has increased significantly, rising from 29% in 2022 to 40% in 2023.

Environmentally, absolute Scope 1 and 2 emissions decreased by 4%. However, the reduction in emissions intensity has slowed to 5%. Nordea suggests this may be a temporary trend due to market conditions impacting industrial processes. Progress in renewable energy use has advanced to 60%, and other environmental metrics like water consumption and waste production have also improved.

Social and governance metrics show robust improvement. Gender diversity on boards has reached a record high, with nearly 40% female directors, aligning with Norway's legal requirements. Board independence has also increased. Workplace fatalities have declined, and sickness rates and staff turnover have normalized.

The analysis also highlights a growing focus on companies improving their ESG performance. While top-rated ESG companies continue to trade at a substantial valuation premium compared to lower-rated peers, investors are increasingly looking at potential improvers. Nordea anticipates positive ESG trends in the coming years.