Despite increased pressure on share prices, Novo Nordisk’s commitment to sustainable development remains unchanged. The obligation to maintain a healthy business requires a long-term perspective. As markets get more volatile, socially responsbile investments are gaining ground as more than a niche position.

In 2002 not just our values were put to the test. The financial value of Novo Nordisk, built over the years and substantiated by almost five years of satisfactory profit growth, was indeed severely challenged during the year. In a tense market with high pressure on pharmaceutical companies in particular, two adverse events resulted in a market cut of 40% of Novo Nordisk’ market value – from DKK 119 billion to DKK 71 billion.

On 10 April the company had to announce that sales in the first quarter of the year were lower than expected. That information instantly reduced share prices from 342 to 205. Three months later, the decision to suspend phase 3 clinical trials of
an experimental diabetes drug, NN622, further dampened the market’s expectations of the company’s business prospects.

However, such fluctuations, it is generally agreed, do not paint a fair picture of a company’s ability to operate a sustainable business. And so, whereas the weekly share curves should not be neglected as a barometer, the real challenge lies in keeping the long-term perspective in view. This is where we see a convergence of interest between a company such as Novo Nordisk and those investors that take a wider, sustainability-driven view.

Socially responsible investing (SRI) can be defined as an investment process which combines the investor’s traditional financial objective with a commitment to social and environmental responsibility. It has evolved from primarily involving negative screening to positive screening, using social and environmental criteria to identify best-in-class companies. Other strategies include shareholder activism and community investments.

Pharmaceuticals, being an attractive investment object but also operating in areas of controversy and high risk, have naturally been in focus for SRI investors. Hence, identification of key issues is vital, as is risk management and addressing the global and industry-specific issues at a strategic level. By describing the societal risk of a company, a social screen can help remove risk to the investor, which may be one way to explain why SRI investments have been found to outperform mainstream international indices, such as the Dow Jones and the Standard & Poor’s 500 Index (S&P 500). As is the case for mainstream investors, performance – documented by relevant and preferably comparable indicators – is the main driver for SRI.

Novo Nordisk is included in all the leading global indices, such as the Dow Jones
Sustainability World Index (DJSI World), and the FTSE4Good. In 2002 the DJSI World Index rated Novo Nordisk as leader in the pharmaceutical industry in terms of corporate sustainability.

Through our long-standing Triple Bottom Line commitment and favourable ratings in several independent benchmarks, Novo Nordisk has been included in a range of mutual funds and asset managers’ portfolios, in the US as well as in Europe. See more specific investor information in the section 'socially responsible investment'.

Novo Nordisk attends a number of international conferences on SRI investments and corporate social responsibility – often invited as keynote speakers or panellists. We
have seen a shift in the conversation with the investment community towards taking Triple
Bottom Line issues into account, and we would like to encourage that development. To that end, Novo Nordisk hosted a roundtable meeting in 2002 on SRI. The main objective was to discuss how and on which parameters the pharmaceutical industry might be evaluated in the future.

We are seeking a proactive strategy to push SRI further up the agenda of the mainstream financial community. Further, in a continued dialogue with the investor community, Novo Nordisk is investigating how shared goals by SRI asset managers, analysts and rating companies on the one side and corporations on the other might materialise in practice.

Transparency and accountability work both ways. Hence, we welcome the initiative to set up a Europe-wide accreditation standard for socially responsible investment funds.