Many investors are concerned about how companies balance long-term issues management with shorter term performance. Non-financial assets are deemed to be of increasing importance in their assessment of share value, and particular attention is being paid to ethical business conduct and corporate responsibility.

Solid financial performance - Dialogue prevails - Managing and reporting on risks - Indices and ratings

Several surveys indicate that there is a positive correlation between social and environmental risk management and long-term market value. Moreover, there appears to be a stronger business case for proactive responses by companies – both in terms of reputation and risk management, market development and societal licence to operate. Increasingly, corporate reputation is a factor in making investment decisions – and is often found to be more important than market value and economic performance.

Careful management of costs and improved operational efficiency have been undertaken without sacrificing medium- to long-term growth opportunities. For Novo Nordisk’s shareholders, this has resulted in an appreciation of the share price to 241 at the beginning of 2004, up from 205 at the end of 2002.

Novo Nordisk is increasingly commended by investors and analysts for the company’s leadership in terms of sustainability and financial strength. For example, in their assessment of the pharmaceutical industry, Henderson Global Investors singled out Novo Nordisk as one of five sector leaders. In their report, Fulfilling its Potential, Henderson proposes five priorities for the industry in addressing proactively the new sustainability, responsibility and ethics agenda. These include embedding corporate responsibility in governance systems and demonstrating leadership in addressing global health disparities.

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There is a clear trend towards more dialogue between businesses and their shareholders on these issues and also more dialogue on what the issues are and how to address them. For instance, companies are encouraged to include in their annual reports areas such as risk identification, risk/opportunities management and compliance with international and national regulations.

Novo Nordisk is addressing these concerns and proactively communicating with the financial community. We met with 25 institutional investors in the Nordic capitals to present the company’s strategy for becoming a sustainable business.

To better meet investor demands for information on the company’s non-financial and often long-term performance, Novo Nordisk reports on sustainability-driven initiatives in its quarterly statements. As of 2003, the Annual Financial Report includes a separate environmental and social discussion.

In 2003 Novo Nordisk responded to all questionnaires received from investors and rating agencies. Most frequently, questions are asked about corporate governance, environmental management and social responsibility, including employee health and safety. These questions are a good measure of investor concerns, and supplement the personal dialogue in investor conference calls and at roadshows.

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In 2003 Novo Nordisk established a consolidated risk reporting system, in which key risks are monitored and reported through line management to Executive Management and Board level. Five high-level risk areas have been identified: corporate ethics and human resources, development of new drugs, manufacturing and quality, competition, and security, litigation and financial risks. From 2004, the risk assessment and rating will be part of the Balanced Scorecard in all business areas and will be integrated in the strategic planning process. See the article ‘Risk management’ on pages 8–9 in the Annual Financial Report.

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Socially Responsible Investment (SRI) combines the investors’ traditional financial objective with a commitment to social and environmental responsibility. It has evolved from primarily involving negative screening to positive screening, index ranking and active influencing. By using these criteria to identify best-inclass companies, the aim is to balance shareholder and stakeholder value. Institutional investors are the major players, followed by individual investors.

Novo Nordisk is included in the Dow Jones Sustainability World Indexes (DJSI World) and in the European Dow Jones STOXX Sustainability Indexes (DJSI STOXX). In the DJSI World, Novo Nordisk tops the pharmaceuticals industry group.

Novo Nordisk is also included in the FTSE4Good Index, E. Capital Partners’ Ethical Index Global, Nordic Sustainability Index and the Folksam Climate Index. For a list of ratings and indexes for which Novo Nordisk has been selected, see ratings and indices in the socially responsible investment section.