Vattenfall – An individual engagement leading to collaborative engagement

The issue 

Vattenfall is a state-owned utility company in Sweden that has ambitious targets to become fossil-free by 2040. Its government ownership and leading position in the Swedish utilities market creates a positive investment case and strong credit rating. Using our internal climate risk rating, we see it as a leader in its sector – a view verified by our exploratory bottom-up climate modelling. 

Notwithstanding this, it’s still a carbon-intensive holding and, relatively, a material contributor to the emissions generated in the portfolio.  

As a result, the company was selected for engagement through our engagement and prioritisation framework, under the climate thematic workstream. As such, it’s appropriate to monitor its progress and understand in detail its plans to meet its targets. 

This work complemented the bottom-up modelling we were simultaneously carrying out on the power generation sector and the insights we were developing from that sectoral deep-dive. 

By paying attention to sustainability factors such as this, which are likely to be financially material to the long-term performance of this issuer, we believe we can better manage downside risk for our clients, shareholders, and other stakeholders. 


We had an introductory conversation with the company, during which Vattenfall provided a detailed outline of its environmental action plan. The conversation extended to its climate targets, current breakdown of energy sources, fossil fuels phase out plans, and customer education. 

As a result of its state ownership, and in order to deliver on its dual requirements for a sustained return and sustainability leadership, Vattenfall further detailed its integration of sustainability and decarbonisation into its business-as-usual activities. 

Given the relevance of the utilities sector to both the global transition to a low-carbon future and our own portfolio, we considered it appropriate to complement our individual engagement efforts with a collaborative engagement. We joined with another European investor through a collaborative network which resulted in the engagement beginning in 2023. 

This second layer built upon the foundations established in our first individual engagement and allowed us to reach a deeper level of detail around our areas of desired focus, which included: 

  1. Governance - maturity of integration of climate-related risks into the company’s risk management systems and whether its state ownership could undermine incentives. 
  2. Decarbonisation strategy - detail on how the company plans to deliver on its targets, balancing the need to supply energy now with the need to develop its future capabilities. 
  3. Capital alignment - possibilities of more detailed disclosure in respect of the capital expenditure plans of the company to meet its climate goals. 


The company reassured us that the board is recruited on professional merits and there is a well-established risk committee that has been integrating climate risk into its enterprise risk management framework for ten years.  

Given its state-ownership, it was acknowledged that there is limited flexibility around variable pay and setting sustainability-related remuneration incentives, which leaves the company with a challenge to find new ways to foster individual accountability. 

The company explained how each market will need different technologies to decarbonise. It also stressed the importance to its strategy of phasing out coal by 2030, along with the growth of renewable energy (mainly wind), heat supply, nuclear, and bioenergy carbon capture and storage. We identified that more detail in respect of how much each of these strategies will contribute towards the final goal is an area for future discussion and engagement. 

Presently, the company discloses planned capital expenditure two years in advance to avoid introducing uncertainty into the disclosure. While we would prefer to see more detailed disclosure in this area, we gained some reassurance from the fact that it does disclose in greater detail to the rating agencies, which is then reflected into its assessments. 

We focus on financial and sustainability risks and opportunities that have the potential to be financially material to long-term performance. The company’s strategy and response demonstrate alignment to this focus as it seeks to deliver a sustained return and leadership in sustainability for its owners and creditors. 

We hope to deepen our understanding, and encourage this issuer to focus its approach on these important areas through our and other investor’s continued engagement around these important themes. 

This case illustrates how an initially bilateral approach can pave the way for later collaborative engagements, and how our prioritisation and engagement framework identifies issuers with a material impact on our portfolio for engagement. 

When selecting collaborative initiatives, we check for alignment to our corporate and stakeholders’ investment goals and priorities. This ensures that our goals, and those of other investors involved in those initiatives, often intersect, allowing us to work together on shared areas of interest, such as this case.