Sustainability Report 2021: Leveraging existing capabilities for sustainable value creation
Despite the continuing impacts of the Covid-19 pandemic, rising geopolitical tension, and the Russian invasion of Ukraine, Aker is experiencing one of its most transformative periods in its 180-years history. Aker has adapted trough an increasingly volatile operating environment and is now more resilient and better positioned to contribute to a low- carbon future.
CONTINUING AKER’S TRANSFORMATION TO LOW CARBON
Aker embarked on a significant transformation to low carbon business development in 2020. We restructured Aker Solutions and set up several green companies under our investment arm, Aker Horizons. These new companies include Aker Carbon Capture, Aker Offshore Wind and Aker Clean Hydrogen. And at the start of 2021, Aker Horizons bought 75 per cent of the independent energy company Mainstream Renewable Power, a leader in the onshore and offshore wind and solar power sector. Through these activities, Aker Horizons has grown to become Aker’s second most valuable asset.
Aker has also freed up capital by selling its ship leasing business, Ocean Yield, to the American private equity firm KKR, and by reducing its stake in Aker BP. We plan to reinvest the capital we have raised from these activities in existing and new businesses that are well placed for a sustainable future.
The growth of Aker Horizons and its portfolio companies has seen Aker’s exposure to climate solutions and renewable energy grow from around zero to more than 20 per cent of total investments. Conversely, Aker has reduced its exposure to oil and gas from 75 per cent in 2019 to around 50 per cent. In the last three years, Aker Solutions has increased its order intake from renewable energy and low-emissions solutions from 5 per cent to approximately 30 per cent.
This is only the beginning. Aker’s transition to renewable energy and clean technologies will continue in the years to come.
ACKNOWLEDGING STIMULUS FROM THE NORWEGIAN GOVERNMENT
In reflecting on the extraordinary growth in green technology and solutions over the past two years, I believe it is important to acknowledge the Norwegian government’s industrial support package. Temporary changes to the petroleum tax regime had a powerful effect on the oil and gas sector, including the supply industry. The tax deferral to the industry stimulated activity and was crucial in enabling the transition to green investments. Projects previously on ice were executed; not only the development of new fields, but also electrification projects and other projects aimed at reducing emissions. Had this package not been offered, certain businesses and business areas would likely have had to downscale, downsize and possibly close.
ENTERING A NEW AND SUSTAINABLE ERA OF FISH FARMING
In 2021, Aker announced its entry into aquaculture with the establishment of SalMar Aker Ocean. Together with our joint venture partner, SalMar, we have the bold ambition of leading the seafood industry into a new era. SalMar Aker Ocean will drive and develop offshore, sustainable, zero- emission fish farming, with animal welfare as a core value.
REALIZING INVESTMENT OPPORTUNITIES IN THE TRANSITION TO GREEN
In 2021, our rapid expansion into green capital-intensive projects and investments led us to form Aker Asset Management (AAM). With a target of EUR 100 billion in assets under management, AAM will further support Aker’s green investment ambitions. AAM’s new CEO Yngve Slyngstad, the former head of Norges Bank Investment Management, summed up the opportunity in his first press release for Aker:
“We are facing an energy transition that presents enormous investment opportunities. Realising big projects that can accelerate the transition to a net-zero society requires that leading industrial companies and major global investors come together.
“This is why AAM is ideally positioned to make a difference. The goal is to establish funds totaling EUR 100 billion that will invest in profitable climate solutions that create value. Green energy, green industry and green cities will be our prioritised investment areas.”
SHARING OUR BOLD AMBITIONS AT COP26 IN GLASGOW
Through Aker Horizons and its portfolio companies, Aker actively participated in COP26, the international climate negotiation held in Glasgow in November 2021. Aker Horizons wanted to listen, learn and gain useful insights from other organisations at the summit. We also showcased Aker Horizons capabilities, climate solutions and renewable energy projects, and shared our ambitions for green investments.
During COP26, US President Joe Biden announced the First Movers Coalition. This coalition is an initiative by the World Economic Forum and US Special Envoy for the Environment John Kerry to drive demand for decarbonising solutions. As a founding member of the coalition, Aker joined some of the world’s biggest companies in its commitment to accelerating demand for sustainable and low-carbon materials and products.
ESTABLISHING A HUB FOR GREEN INDUSTRIAL DEVELOPMENT IN NORTHERN NORWAY
In 2021, Aker Horizons announced plans for significant development in Northern Norway. In collaboration with Narvik municipal council and other business partners, Aker Horizons plans to establish a hub for green industrial development in this northern town. The shared vision is that Aker Horizons and its portfolio companies will develop entirely new industrial value chains through major regional investments. A holistic approach will draw on core capabilities across industries such as hydrogen and renewable energy, creating the potential to enter new sectors.
AKER BP TO BECOME A GLOBAL LOW EMISSION LEADER IN THE OIL AND GAS INDUSTRY
We ended last year with the announcement of the merger between Lundin Energy and Aker BP’s oil and gas businesses. This is the largest ever foreign acquisition by a Norwegian company and will make Aker BP the second- largest oil and gas producer on the Norwegian continental shelf. The company will be a global leader in low-cost and low-emissions oil and gas exploration and production.
FOCUSING ON OUR OWN SUSTAINABILITY PRACTICES
Over the past year we have continued to develop our internal capability for sustainable operation. Aker’s network of resources within this area has grown substantially in line with our green business growth. Currently, we have more than 20 full-time professionals developing sustainability practices for Aker portfolio companies. These professionals are part of a coordinated network, and regularly share best practices and knowledge to be more efficient and drive performance improvements.
In 2022, Aker revised its governing document on sustainability. Approved by the Board of Directors, the document sets out an ambitious policy and high expectations for both Aker and the companies we hold. This policy implies nothing less than continuous and systematic endeavours to make Aker the best possible force for sustainable development and long-term value creation. We are setting forward-looking and clear targets for our work and investment portfolio – and we will be transparent and report on our progress. Aker has, since the beginning of 2022, formally committed to the UN Global Compact corporate responsibility initiative and its principles in the areas of human rights, labour, the environment and anti-corruption.
SALUTING OUR SHAREHOLDERS AND STAKEHOLDERS FOR THEIR FEEDBACK
As a final note, I would like to thank our shareholders and other stakeholders for their ongoing interest and support of our developments. The past year has been incredibly productive, and we will undoubtedly maintain this tempo into 2022. We continue to focus on progressing our projects and achieving our goals, and I am confident that the changes we have made will ensure we are in a strong position to face whatever the future may hold.
In reading this report, I hope you will gain a deeper understanding of how Aker is integrating sustainability into its investments and ownership activities, and how we are developing our businesses for a sustainable, low-carbon future. We have substantially enhanced our sustainability capabilities, revised our sustainability policy, set ambitious targets and further developed our reporting based on the World Economic Forum’s Measuring Stakeholder Capitalism metrics. I hope you will enjoy reading this report and welcome your feedback.
At the time of writing, we are, at least in parts of the world, slowly reopening our societies, steadily building back economies, systematically deploying capital against climate change and for emissions reduction. Then, as if the world did not have enough on its plate, a devastating and dreadful war caused by the Russian invasion of Ukraine. What the near future holds is frightening and at best unsure. The price that will be paid by the people of Ukraine is nothing short of a tragedy, and the war’s social and economic toll will inevitably ripple out to affect us all.