LSR is guided by the interests of its members when shaping its investment strategy and managing assets. One of the fund’s obligations is to establish ethical standards for its investments, cf. Article 36 of Act No. 129/1997 on Mandatory Pension Insurance and the Operation of Pension Funds.

Regulation (EU) 2019/2088 of the European Parliament and Council has also been incorporated into Icelandic law through legislation on sustainability disclosures in financial services and the classification system for sustainable investments. The purpose of the regulation is to ensure consistent information on how financial market participants assess sustainability-related risks and how principal adverse impacts of sustainability factors should be taken into account in investment decisions.

When assessing investments, potential adverse impacts the investment may have are analysed, with reference to the fund’s sustainability and investment policies. LSR has established procedures for responsible investments, and the fund requires that the companies it invests in operate in line with social values, recognised corporate governance guidelines, and demonstrate responsibility in environmental matters. LSR is a member of the UN PRI – the UN Principles for Responsible Investment – and has thereby committed to integrating environmental, social, and governance (ESG) factors into its investment assessments and decisions.

For initial investments in a company or fund, a questionnaire is sent to the counterparty asking, among other things, how such factors are addressed within their operations and whether sustainability-related policies and guidelines are in place. Additional available sustainability information is also taken into account. This applies to both domestic and international investments.

LSR has adopted the PRI principles for responsible investment and applies these priorities when assessing and analysing sustainability information.

Climate change

LSR strives to reduce the fund’s environmental footprint through targeted measures. The fund aims to lead by example in environmental matters, contributing positively to its surroundings and to society as a whole. The fund operates a single office in Reykjavík, and due to the nature of its operations, its direct environmental impacts are minimal. Although the fund’s operations (Scopes 1 and 2) are not likely to cause environmental harm, LSR considers it important to monitor these impacts, and environmental considerations are integrated throughout its operations. The fund’s main environmental impacts fall under Scope 3, resulting from its investments and lending activities.

Human resources

LSR places strong emphasis on equality within its operations and prioritises a healthy and safe working environment. The fund focuses on ensuring that staff feel well at work, both in terms of working conditions and workplace culture, and places importance on unity, collaboration, and mutual respect among employees. Human rights are fundamental, and LSR emphasises that all employees are valued and enjoy equal opportunities. The fund’s human resources policy aims, among other things, to motivate both employees and managers to foster a professional, challenging, enjoyable, and family-friendly work environment.

Society

As a long-term investor, it is important for the fund to consider the societal impacts of its investments. While the fund’s own operations (Scopes 1 and 2) do not have direct effects on society, its investment decisions (Scope 3) have indirect impacts — on specific sectors, regions, and society as a whole. It is therefore essential that the fund operates in line with a responsible and sustainable investment policy. By analysing societal impacts, risks, and opportunities, the fund can contribute positively, reduce negative effects, and safeguard long-term returns for its members.

Fund members

The fund emphasises transparency and fairness in its work, supports long-term value creation for its members, and ensures that their interests are protected at all times. By adhering to a responsible investment strategy, ensuring clear and accessible information, and fostering active dialogue with members, the fund seeks to strengthen trust, support informed decision-making, and ensure that its activities meet the needs and expectations of those who rely on it. In doing so, the fund aims to provide long-term stability and security for its members.

Business ethics

Good governance is a fundamental pillar of LSR’s operations, ensuring professional, transparent, and responsible management of members’ assets. With a clear regulatory framework and strong, active oversight, good governance builds trust, reduces risks, and strengthens the fund’s long-term performance. It is therefore essential that the fund’s governance is based on recognised principles of good corporate governance and business ethics.

LSR looks to international standards and collaborations in the field of sustainability. The fund aims to be a responsible investor and has therefore implemented and strengthened sustainability factors that support its investment objectives and priorities. Further details on the fund’s collaborations in this area can be found in its sustainability policy, located at the top of this page.

An important part of implementing the sustainability policy is analysing ESG information and publishing the results publicly. In its sustainability policy, LSR encourages the companies it invests in to demonstrate transparency and report publicly on how their operations align with recognised standards, for example regarding sustainable business practices. LSR’s role as an investor is to analyse this information for individual investments and for the portfolio as a whole, and to assess the outcomes of its investment activities.

Environmental factors

It is the fund’s policy that companies should monitor the environmental impacts of their operations, including energy use, carbon footprint, biodiversity, water consumption, and waste management. Companies are also encouraged to define how they address climate change, with reference to mitigation and adaptation measures.

Social factors

The fund considers it important to assess the societal impacts of corporate activities, and to promote diversity, equality, human rights, good communication, information security, and oversight of the value chain. Attention should be given to how companies treat their employees, customers, suppliers, and stakeholders. It is also important that companies comply with laws and regulations concerning the rights and working conditions of employees and other stakeholders.

Governance

Good governance is a fundamental pillar of LSR’s operations. Governance includes corporate management, internal controls, and shareholder rights. Attention is also given to the composition and structure of boards and management teams, the definition of sustainability processes, sustainability oversight, and follow-up. Governance further includes executive remuneration, political contributions, lobbying activities, and defined procedures to prevent bribery and corruption.