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Investment Activities

KIRKBI’s Investment activities are based on a long-term and responsible investment strategy with an overall objective to ensure a sound financial foundation for the family’s activities and contribute to a sustainable development in the world

Investment

Approach

To reflect the two strategic objectives, the investment portfolio is split into two areas: Core Capital and Thematic Capital as set out below.

Investment principles

Across all investment activities, KIRKBI aspires to create value through responsible ownership and investments characterised by:

• Long-term mindset

• Engaged, ambitious, and active ownership of the companies and properties we invest in

• Invest in defined sustainability themes and practice active ownership that lives up to high ESG standards

• Work with partners with high integrity to create mutual long-term value

• Focus on investments where rigorous due diligence can enable deep insights into the underlying risk and return factors

Strategic objective Investment Portfolio Aim

Long-term and responsible investment strategy to ensure a sound financial foundation for the family’s activities

How we engage as owners of companies

As an active owner and as representatives on the Board of Directors of companies where we own long-term equity stakes, our primary focus areas are:

1. Strategy

The company’s robustness and positioning for long-term sustainable growth as well as 3-5 year’s value creation planning

2. People and governance

Ensuring that the right people and competencies are present on the Board of Directors and in management teams as well as ensuring that the company’s systems and procedures are appropriate and supportive of its long-term development

3. Sustainability

Focusing on the company’s continuous improvements to ensure sustainable growth via continuous progress within environmental and social areas

Core Capital (Equity, Real Estate, Fixed income investment)

Contribution to a sustainable development in the world Thematic Capital (Energy Transition, Circular, Plastics, Land Sustainability, Building Billund)

Deliver a long-term, attractive risk-adjusted return, and a responsible investment strategy. Secure financial flexibility and liquidity for the owner family, the LEGO® branded entities and other strategic activities

Maximise KIRKBI’s impact and contribution towards a more sustainable development in the world

4. Financial discipline

The company’s efficiency around capital allocation and structure as well as progress on selected financial and nonfinancial KPIs

For all investment activities apply that it is essential to avoid negative spill-over effects on the LEGO ® brand and the owner family’s reputation.

Active ownership

KIRKBI’s long-term investment focus is exercised by engaging actively with the portfolio companies and investment partners. The engagement seeks to contribute positively to the strategic direction and to create sustainable long-term growth and positive impact. The engagement also includes supporting the pursuit of new business opportunities and the mitigation of material risks.

As an active owner, KIRKBI engages in several ways, including:

• Board representation

• Shareholder communication

• Voting at the annual general meetings

In companies where KIRKBI is not represented on the Board of Directors, we engage with management in case of controversies or breaches of internationally agreed conventions and norms. In such cases we seek to understand the remedies put in place and the types of enhanced controls implemented to prevent breaches.

KIRKBI applies its influence by exercising shareholder voting rights at the annual general meeting of the portfolio companies. KIRKBI voted at 100 % of annual general meetings during 2022.

Responsible investing and ownership

ESG factors are intrinsic parts of KIRKBI’s assessment of attractiveness and performance of an investment. ESG is considered both in the due diligence phase and as part of the ongoing ownership supporting a responsible behaviour both for companies, properties, and partners to protect the value and enhance long-term returns.

To fulfil the inherent responsibility, the investment activities are regularly screened for compliance with international conventions and norms while measured against high responsibility standards. KIRKBI’s guidelines have appropriate flexibility to address differences among strategies and managers.

KIRKBI assesses its potential investments and monitors its portfolio considering the following:

• Activities on the negative list

• Performance in areas of material ESG risks and ability to manage these relative to industry peers

• Involvement in notable ESG controversies related to the company’s operations and/or products, possible breaches of international norms and principles, such as the UN Global Compact, and performance with respect to these

Furthermore, investments in certain industries such as tobacco, armament, gambling, and adult entertainment are excluded.

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