SWEDEN – Preventative engagement measures are an effective way for investors to make sure the companies they invest behave in a socially responsible manner, the Ethical Council of Sweden's buffer funds has said.

The council – the joint socially-responsible investment (SRI) and compliance platform of Sweden's AP1, AP2, AP3 and AP4 – said in its annual report that it had spoken to more than 200 companies last year about environmental and social responsibility.

Christina Hillesöy, chairwoman of the Ethical Council for 2013 and AP3's head of responsible investment, said: "The Ethical Council's extractive industries project clearly shows that preventive initiatives are an effective way to exert influence."

During 2012 the council said it engaged on various aspects of environmental and social responsibility with 118 companies around the world.

Additionally, its external consultant held discussions with a further 102 companies on the council's behalf, it added.

Extractive industries was one of the sectors the council focused on in 2012, along with the tobacco and cocoa industries, tackling human rights, business ethics and environmental issues.

The Ethical Council described its approach as both preventative and reactive, but said it increasingly took a preventive approach to encourage companies to act more responsibly.

Preventive steps include making sure that companies the funds invest in operate within ethical, social and environmental standards, and also that they have policies and monitoring systems in place that enable them to behave responsibly, it said.

Reactive measures include talking to companies already violating international conventions to encourage them to comply and make sure they do so in future, it said.

The council said it had influenced Rio Tinto and Goldcorp to change their behaviour during 2012.

Following the council’s demands, Rio Tinto adopted a policy stating that river and shallow marine disposal of mining waste must be avoided at new mines.

Meanwhile, the council linked up with a group of Canadian investors to demand Goldcorp respect human rights in current and future projects.

"Goldcorp responded by commissioning an independent human rights impact assessment and subsequently implemented an action plan to address identified deficiencies," the council said.

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