Let me start by saying it's great fun to finally get to meet after, well, as a matter of fact, three years. Now we can finally meet in person again. We represent Investor, and we meet with you shareholders. This is something that we feel is a great opportunity. We would like to start today with the so-called Investor Dialogue, which is, well, a bit more relaxed, a bit more relaxed way to discuss with the president and the chair. Viveka, you will guide us through this.
Yes. That is correct, this is the first time since 2019 that we have the Investor Dialogue in this format again, which is very gratifying. The last two years we have had a digital Investor Dialogue, and what we've done this year is that we are broadcasting this Investor Dialogue, which means that I also want to say welcome to everyone who is participating online. Before we get started with our Q&A session with the president and the chair, we have a few practical issues. We have a number of microphones, and you see signs with numbers. When you have a question you want to ask, just wave, then we'll have a microphone brought to you.
Please start with your name before you ask your question. We're going to try to get through as many questions as possible. Just one minor practical detail. If you have cell phones with you, please put them on mute. That being said, now we are going to start our Investor Dialogue. While you are thinking about questions that you want to ask, I will begin. As a matter of fact, we're here in 2022, and the world is very different. The beginning of 2022 was very dark. For the first time since World War II, we now have a major war in Europe. Jacob, on the 24th of February, you publicly commented on this unprovoked invasion from Russia into Ukraine. Now, well, 2 months, 2.5 months have passed, and what do you think about the situation today?
Well, I wish that I could say something positive about the situation, unfortunately we see that the war continues. I would like to be able to draw another conclusion with all the information that we get, and I think that we're all being well informed. I think it's obvious that this war will continue for quite some time until Putin decides on something. That he will actually win this and be able to do everything he set out to do, well, that he will not. Which means that this will take time, and that is something that we have to understand and adapt to, and that is the thinking that we have to have. Of course, we're all hoping that it will end sooner, but there is a major risk that it won't.
You commented, well, Investor has also condemned the invasion just like other companies. Johan, what do you think about the developments and how different companies have acted over these months?
Well, like Jacob said, this of course is an incredible human tragedy. If we're thinking about it, more than 10 million individuals in Ukraine have left their homes, and we have to remember that the total population is about 45 million. It's quite difficult to understand the numbers that we're talking about. Investor and our companies, well of course we have provided humanitarian help to Ukraine, for example, but of course this will also have, business and geopolitical effects. Let me start by saying that with our business or our ownership model, it is for each and every company and the board of that company to make a decision for that specific company.
It is important for us because we have all different types of companies, healthcare, mechanics, technology, finance, and all of these companies, well, they have very different preconditions and possibilities and difficulties in managing this, and that is important. What do we see more generally speaking? That all companies have to deal with sanctions, and that's very complex. Needless to say, they also need to look after the employees that they have on site. We also see that many companies that we have, they are now reducing activities that they have in Russia.
Of course, this will also have macroeconomic effects. We did see before the war already, before it started, we saw inflation going up quite significantly, and we had major disruptions in supply chains across the globe, and that because of the long pandemic. If I now may call these two trends. These trends have deepened and become more significant because of the war, which means that companies, they have to work to find components, chips, for example. That is one great difficulty, that in order to be able to deliver to their customers. Another component of this is that many of our companies, they will have to significantly increase prices so that they can compensate for the increased costs that they have for raw materials, and that is what we see with sanctions, price increases, and a lot of work with the employees.
Well, as I've already said, just raise your hand if you have a question. I have many questions, there will not be a shortage of questions. We have one from the floor, and it's microphone number 4.
Thank you for that. My name is Thorwald Arvidsson. I would just like to point out that this conflict can actually spread. If I may remind you of the opening of the First World War when the Austro-Hungarian Throne Prince and his spouse were shot in Sarajevo. Nobody could see that developing into a world war. One thing led to another, and it ended in a major disaster. I don't want to rule out that this could be an East-West conflict. Our friend Vladimir the Great has threatened to use nuclear arms, and let's hope that such a bleak prophecy is not fulfilled. What is the gentleman's take on that? That's my first question. I will also like to ask you about the unfortunate event at Ericsson.
Apparently they have been involved in bribery, I do understand that the realities are such that in certain regions you cannot do business without bribing your way through it. The alternative is, of course, to abstain from any business operations there. The American Justice Department is not fun to deal with. They have some kind of a thesis, if I remember correctly from my law studies, that American legislation has global validity. All it takes is the slightest connection, and it will lead to America imposing sanctions and fines, and that is part of the American state's very beneficial agreement, settlement agreement. I'm also wondering to what extent has this, not providing not discharging the board from liability, how that has damaged Ericsson and Investor and the Wallenberg sphere?
Thank you. If we begin with your first question that concerns maybe if I ask you, Jacob, what is your view on the risk of a worsening conflict, and like you said, between West and East, and the risk of the war expanding?
It is obvious that this conflict is very serious between Russia and large parts of the rest of the world, primarily Europe and the United States, that this could escalate. Let's all hope that that will not happen, that Putin threatening these countries is part of the whole, the big picture. He's trying to send signals to Sweden and Finland because we have our discussions about how best to maintain peaceful relationships in our between our countries. He has a purpose in raising his voice right now. That doesn't mean that he necessarily will do something more. He's having some problems in Ukraine at the moment.
My belief is not that this will escalate into something larger. I don't think that NATO and the U.S., who's the largest country in NATO, they have no interest of course in escalating this, and that is why NATO has not entered Ukraine either. My belief and my hope is that this will not get any worse. It's bad enough as it is right now.
How about a question about Ericsson as well? If we start with you, Johan, and then if Jacob would like to comment as well.
Yes. Let me take a step back here and go back a number of years. We have a company that had fairly major challenges that they faced. New management and partially a new board drew up a new strategy, and over the past few years we've seen very good operational development in that company. They have got increased their ownership of 5G, and they have improved profitability significantly. When it comes to the specific matter that's being discussed now, concerning Iraq among other countries, it should be very clear about the fact that from Investor we have zero tolerance to any sort of failings in business ethics. Unfortunately, that doesn't mean that it never happens.
It means though that if it happens, which it does unfortunately, that we then deal with it immediately and take necessary steps against it. That is what we represent. When it comes to Ericsson specifically, we've said that the work that they've done for years, they've not only worked on improving their strategy and the execution thereof, there's also been enormous efforts on the necessary work to strengthen the culture in the company, the corporate culture, and also improving processes for compliance. As owners of the company, major majority owners in the company, we support the board and management in their continued efforts. For that reason, we did not only vote in favor of the board, but also to discharge them of liability. I should add, I'm the chair of the nominating committee at Ericsson, and we had a unanimous nominating committee concerning the board that was elected.
Yes, Jacob, you would like to say a few words and perhaps comment the information disclosure that was also a matter that was discussed.
Yes, I should begin by saying that I am biased. I'm partial because I'm the deputy chair of Ericsson, and I have been so for quite a few years. I'd like to begin by pointing to what Johan stressed here, the so-called Iraq matter. That concerns things that took place between 2011 and 2018, 2019. When Börje Ekholm stepped up as a new CEO, January 1, 2017, the first thing he does is to create the conditions for being able to deal with this culture of bribery. The important thing is that it's depicted in the media as something that took place in 2017, 2018, 2019 under his management.
That is misleading. This took place far earlier, what Börje represent is to actually deal with and implement these very strict measures that Johan pointed to. That's one thing. I would like to stress that both from the perspective of the board at both Ericsson and Investor, all forms of bribery is absolutely unacceptable.
I would like to say something about communication around this as well because there's been considerable criticism aimed at Ericsson's management that they have not answered a number of questions concerning the so-called Iraq matter. As Torbjörn Larsson touched upon, Ericsson is subject to an investigation by the U.S. Department of Justice. When you are under their scrutiny, so to speak, you do not have, or rather if you say something publicly about the ongoing investigation, you might be sued again, which means that in practice you have, you cannot say anything, even though it's not explicitly expressed. Svenska Dagbladet, the Swedish broadsheet, wrote an article 2 weeks ago where they claim they have consulted a legal expertise to say that that's not true. Ericsson's management can say something publicly about these matters.
I can only conclude after looking at American legal expertise on this matter that Ericsson's management shall not, cannot say anything about these matters. That is the reason why they have not answered these questions. I think it is very important, like when my mother calls me and says, "Why don't you answer the questions?" Well, there's the answer. We can't. We're not allowed to, however much the media would like us to. I think it's important for you to be able to communicate this. Thank you.
Well, thank you. Let's see if we have more questions. I believe we have one over there. Let's start it there perhaps with microphone number 8. Hang on, we'll have a microphone brought to you. If you just raise your hand again, please, we'll hear the question.
Well, Neely is my name, the question about Russia. How big a market is Russia for Investor?
Well, it varies. I guess we could say that for most of the companies, Russia represents about 1% or 2% of the sales, but it differs a lot between different companies, and it also depends on what sector you have an exposure to. The industrial companies are wholly owned subsidiaries. If we look at those nine subsidiaries in aggregate, it's only about 0.1% of the sales that actually go to Russia. The two companies with the most exposure directly and indirectly, that's Wärtsilä , and Epiroc, and they are at 5% and 7%, respectively. Epiroc, such a company, of course, that has to do with the fact that they sell primarily mining equipment, and there Russia is a big market, but roughly, let's say 1%-2%.
We had a question up here as well.
Hi. Bo Olsson is my name, and I usually am allowed to ask questions here. Johan, back in 2016 when you came on board, I asked you a question whether it isn't time to change the product range to get rid of drills and fridges, et cetera. Perhaps that has been a good thing to have them, but I'm now happy to see that I can read about Patricia Industries and Advanced Instruments and their successes and the fact that you have invested there. What is the idea with Advanced Instruments, and what are the thoughts in the future? Is it pharma technology or what is? Thought ahead.
Well, Advanced Instruments is a U.S. company that we bought in 2020, and they have, well, we own 100% since the end of 2020, and it's an amazing company. This company, they do testing equipment, and, quite simply, they're working with equipment that measure dissolved particles in a solution. These instruments, they are being sold to clinics, to biopharma industries, to laboratories.
It is a very nice company that is growing significantly, and they have margins over 40% profit margins. What we have done is that we have started with this platform, and in quite a short time, we have now been able to make two acquisitions. Advanced Instruments has bought a company called Solentim, and they work with products within cell line developments, and they develop those starting cells that you need when producing pharmaceuticals. What is the nice thing here is that those products as well go to biopharma, so there are clear synergies in that commercial part of the chain. We also have synergies when it comes to R&D. The latest acquisition that was announced by Advanced Instruments, that's a company called Artel, and they work with measuring equipment that is being used for handling solutions for testing and for calibrating.
That goes to the same industry, which means that we're building a very exciting company there having to do with measuring equipment. I do think that this is very, very exciting for the future.
Well, we did have a company once upon a time called LKB, and I started 1965 in this business. Well, I had a question for Jacob as well. Refanut. Well, that is the other part of the family. For me, it's Regina af Vindö, and if you don't know what we're talking about, we're talking about a sailboat, and she'll be in the water in two weeks, so there's hope.
I see no more questions. Yes, we have one there. Please.
My name is Gaius Thaddeus, yes, this, terrible thing that Russia is involved with in Ukraine is actually us in the West who financed that buildup in Russia, primarily by our German friends. Without the money that they have obtained from primarily Germany, they wouldn't have an opportunity to do this. Unfortunately, there's something similar going on in another part of the world, thinking China, where the greatest sinners are not Germany, but the Americans. We're also involved in that to some extent, aside from Americans and Germans and Japanese who provide China with money. When you see China's action in their neighboring countries, not much better than Russia's actions. I'm thinking about aggressions towards Taiwan primarily, but also the Philippines, Vietnam, and other countries in the region.
Wouldn't it be about time? Sweden cannot, you know, stop trading with China by themselves. That wouldn't happen. It wouldn't lead to much. Isn't it time that someone should take forceful steps to make it clear to our Chinese friends that we cannot continue to do this and still continue to trade with the West to get money that they use to threaten their neighbors?
That is, I'll take this question.
Sure, you go ahead.
You're pointing to the complexity of the global world that we inhabit. The point of departure here must be that since the Second World War, we have mostly lived in peace, and that has created the conditions for globalization. Free trade that we are so dependent on here in Sweden has developed. Poor people have been lifted out of poverty around the world, that has created amazing developments up until now. The fact that one country, a major country, under a despot do what they do, like Russia is doing against Ukraine, the question is should we treat the entire world in the same way, which is basically the question you're asking. I am of the opinion that you should not. Instead, we have to work peacefully trying to maintain relationships with all country, that included Russia up until they did what they did.
The world has also shown forcefully what the world on the whole think about this. We've seen the sanctions that have been imposed, the far-reaching consequences it has, that of course sends a very clear signal to the Chinese as well. That is what I mean by our having to work on maintaining that relationship without China or some other country choosing to resort to violence. I believe that we should continue working with China. I think we have to because we are dependent on them, they are dependent on us, which means that they, I believe, will not resort to the type of violence that we are seeing in Ukraine today. That's my principled approach to this matter.
I've also spoken to individuals who work with human rights concerning this particular matter, which is a crucial point, and they are telling me that it's better to continue to operate in China in spite of what the Chinese are doing to the Uyghurs and what they're doing to the Swedish publisher because in the long term, that will benefit developments in that country more than if we were to turn our backs to China. That is what human rights organizations keep telling me. Overall, I believe in peaceful relationships, and it's our role to work accordingly, and for that reason, I do not believe in excluding China in response to that challenge.
Number six.
Well, [Lars Wennerlind], it is my question. I'm a bit curious when it comes to Patricia Industries. They have Mölnlycke, for example, but there are tons of other very interesting companies as well. Perhaps those should be highlighted as well. Linked to that, Patricia's future and what will happen there, does that impact what to do when it comes to recruiting, et cetera? What do you do with Patricia? Are they just allowed to continue to grow?
Well, the last question, I have to say that we're very focused. We're very focused much more so than EQT. EQT is there across the globe in many different sectors. We focus to a greater extent when it comes to wholly owned companies, the Nordics and the U.S. We focus on a few sectors like tech, advanced technology. I do not see a problem with any type of competition, but I do think, like you said, that we have many interesting companies in Patricia. We have nine wholly owned subsidiaries, and if you're not familiar with all of them, we have, for example, Permobil with the advanced wheelchairs for individuals with ALS, for example, and we have Laborie, another company that work with urology in U.S., for example.
We have Piab in Sweden, one of the most advanced automation companies working with vacuum equipment that is being used to lift things in production, which means that we have many exciting companies that are growing rapidly, are profitable with good cash flow that is being generated. In our interim reports, we do try to highlight all companies to the same extent, more or less. Thinking about media, well, Mölnlycke is about half of the value, and that is why there's a lot of focus on Mölnlycke, but I share your opinion that sometimes you get that feeling perhaps also I'm out talking to people, and there is a lot of focus there, and that's kind of a shame, and I do hope that also in media we'll see a more disseminated interest.
We have a question up there, microphone number 7.
Hello, Johanna is my name. I would like to ask about your thoughts around your work on equality and climate change, also quite crucial issues. Thank you.
Jacob, would you like to begin or?
Yeah, I'd be happy to. We find these issues very important. I should say when it comes to sustainability issues and the environment, we have for the past two years more or less been pushing this quite actively. We survey all our companies. We're talking about matters of principle here, how important it is both from a moral perspective that we are all responsible for working with sustainability issues, but also that it's important from a business perspective because customers, all of you in this room, you're more interested in companies that actually work with these issues and trying to do something about it.
If you want to be competitive, you have to be at the forefront in that regard. Last but not least, young people, we believe that when we recruit young people or when companies recruit young people, it is very important that they actually have an active approach to sustainability issues. There are a number of different reasons why individual companies need to consider this, and we're really trying to push that agenda. Johan can say a few more things about this in a minute. When it comes to equality, just as, I mean, just as it sounds between the lines in your question, it is important to us, and we've worked with it for a very long time.
We are not always very successful on every level, but our ambition is crystal clear, and it has been for around 20 years at this stage. We keep working on it as much as we can.
I thought that was fairly exhaustive. I'll cover some of that in my presentation a little bit later. Let me say a few things. When it comes to our efforts to reduce CO2 emissions in our own operations, we see a significant improvement in our companies. Compared to 2016, for example, our CO2 emissions have halved during that period. There are a lot of things going on. We have solar panels using vegetable oil instead of fossil fuel, and many other things. There is plenty of things happening there.
One challenge is still what we call Scope 3. That is when we look at the entire value chain, including the use of the product. There we and our companies have plenty of things that we need to do, and that is often where the greatest CO2 emissions arise. I can take one example. I'm on the board of Atlas Copco. If we look at the overall CO2 emissions from such a company, if we look at their own plants, it might be 1%-2% of the total CO2 emissions. Transport, transportation, that could be, say, 3% or 4%. 95% of the emissions come from the use of their products, meaning the electricity required for running a compressor or whatever it may be. Of course, there you need to find green electricity. How can we improve these processes?
It's a global issue that involves not only our companies but other suppliers as well. It's a very important issue. If I were to say something about equality, I can sum it up by saying that we've seen a distinct improvement over the past few years when it comes to women on boards. When it comes to management teams, things are moving a bit more slowly. There are more things to do there. There is an improvement, but a fairly marginal one last year.
I would like to add one thing here concerning our overarching work. Viveka, who is the communications manager at Investor, part of the management team, she is also responsible for all sustainability issues. She also has a network where all the companies in our portfolio who collaborate and meet to discuss these issues and learn from one another. We're trying to build networks, a joint approach in order to create momentum in these important issues. I should also add that diversity is a very broad term. We have gender, but you also have background, experience, skill, and where you're from. If I look at some of the figures we have, if we look at our boards, for example, we have a total of 15 nationalities. In the management teams of our companies, there are 23 nationalities, so that's another form of diversity.
Let's see. I think we have a question up there, and we're back to microphone number 7.
John Erik Konradsson is my name. Investor, you have a great number of different companies in your portfolio, but what about the unlisted companies? Do you have those as well, and to what extent?
Johan. Well, thank you for that question. Those unlisted companies, they're within Patricia Industries primarily. We have 19% of our assets there. We have EQT. In total they are 15% of our assets. About 2/3 of that is listed, about 1/3 is investments in funds. Maybe 5% or 6% in total of what we have in EQT is unlisted, about 18, 19% in Patricia.
Let's see if I have forgotten someone who wanted to ask a question. Let's start with you, microphone number 4.
Well, if you pass the microphone. Yes. My name is Per-Arne Gustavsson. I was thinking here, ASEA-Atom, that was part of Investor once upon a time, and that has now become a current issue in public discourse about nuclear power. I'm wondering if ASEA or some other company is involved in that, and what your take is on the development on these ASEA reactors.
The small reactors, yeah? Small modular power plants. Yeah. Thank you for that question. No, we, as far as I know, we do not have any company that we are affiliated with that is directly involved. ASEA, because Sweden actually legally banned the development of nuclear technology in our country, very few people have spent any time doing that in our country.
A more important issue is nuclear power an alternative in this very important matter of sustainability as we're trying to replace fossil fuels with other alternatives. We're talking about renewables, solar cells, and wind power in Sweden, and that's excellent. We have our rivers, our dams, excellent hydropower. We also need, and that's like Anna Borg, the head of Vattenfall says, "It's not about our needing only one form of energy.
We need every opportunity that is on offer. According to Swedish law, it is still permitted to operate a nuclear power plant, and work is ongoing to see if we can find a way of investing in small modular reactors that are much smaller than the ones we are used to, the ones we have today. These modular ones also use nuclear fuel far more efficiently than the old types of reactors. This is something I think would be an excellent supplement to the other alternatives we have available in Sweden. 'Cause Sweden has a major benefit from the fact that we've got cheap electricity for our industry, and that is why we can now manufacture green steel and then batteries, et cetera, in the north of Sweden. We'll continue to develop that, and we will do so by having several different forms of energy.
Yeah. A question up here again.
Well, thank you. I was commented on by Göran Persson at the Swedbank AGM, and I was told that that was not the venue for political proposals. Now I am waiting for Jacob Wallenberg to correct me as well. With the tenacity of a drunken parrot, I claim again that the differentiation between voting rights should be done away with in company statutes and in the Companies Act. I know that there is an international debate that is headed in the opposite direction, and there have been discussions in Brussels. However, that didn't go anywhere. That means that neither at EU or Swedish level is this something that is topical today. I maintain that this is something that should be rectified.
I have another thought as well, which is that we should give small and medium-sized shareholders the opportunity to have a representation on the boards of directors as also in the nomination committees. Exactly how that would be done, I wouldn't know. I guess it would be technically complicated. You have to define what is small or medium shareholder and, well, you could imagine that this is something that could be done without voting rights, more of an observer, but I think it should be done and could be done. Thirdly, I also feel that we should look at the possibility to introduce some sort of performance-based fees for directors. I know that this is not an easy question, and perhaps there would be some sort of floor, and then you could give a bonus for directors who are particularly talented.
Of course, there are certain factors that the board of directors cannot do anything about, geopolitical developments, for example. Nevertheless, I think one should look into the opportunity to have some sort of performance thinking also in that regard. I know very well that the current board of directors might not like that idea at all.
Thank you. I think that was three questions in one. After that, we need to round off so that we can start the formal AGM. Class A, Class B shares, representation nomination committees, and also the question as to whether you could have some sort of performance-based remuneration for directors. Should we start with Johan and Class A and B shares?
Well, yes. We are long-term engaged as owners. We work actively with our companies for a long period of time. We are on the boards. We take responsibility, and we do not need a lot of liquidity, which you might need in other situations with Class B shares. We think it's good with Class A shares. If you want more liquidity, if you want to buy and sell all the time, you might need Class B shares. We think it's good that you can choose. Class A, Class B shares, they also fill an important function in society, which means that founders of companies, entrepreneurs who start company but do not have enough capital to grow because they're in that early stage, and perhaps they cannot get the loans that they would want.
Then one way would be, of course, to ask the market for capital, perhaps you do not want to hand over control of what you have created. You can hold on to the Class A shares, then you can sell Class B shares. I think this has been good for Swedish trade and industry for a long time, that is why we think that Class A shares are good.
Representation and nominations committees. I actually hand that one over to Johan as well, but I would like to comment on performance shares for Board of Directors. I do not think that that's a great idea. You have already touched upon the explanations. It would be difficult to measure. Our board, we work differently. The same thing is being done in other Boards, which is that there is a requirement on the Directors that they need to hold a specific number of shares in the company to be allowed to be on the Board. If the company has a good development, then the remuneration, so to say, to directors will also go up because the value of the shares will go up.
That is one important component of what you talked about with performance, and Johan, you're the chair of the nomination committee, representation from smaller shareholders. This is something that is being discussed now and then. We do have a system in Sweden with nomination committees normally consisting of the four biggest shareholders plus the chair of the company. Why do we have that system? Quite simply because we have the major shareholders, and they will present proposals like the ones we will be discussing here today. With those proposals, we know that there will be a decent number in favor.
If we were to have many small shareholders presenting proposals, we wouldn't have that same backing, and it would be difficult to get a decision. It's a practical solution that once you come to the AGM, you should have a big backing for a proposal, and you're always free to nominate an individual. You can propose someone to a nomination committee.
Well, thank you. I see that time is up, and you have actually asked many of the questions that I had, which is great. We managed to, well, think about what could be of interest to you. This is the end of the Investor Dialogue, and at 3:00 P.M., we're going to start our annual general meeting. Jacob and Johan, do you have a few last words for shareholders?
Well, I want to say again that it's very positive that you're here and that you're so interested and ask many questions. It's very, very important for us, and I do think that it's important for friends and everyone that we have that good dialogue.
I can just say that I do appreciate all the questions that concerned our operations, our subsidiaries, et cetera. It's great fun because when you're in the media, it's mostly about the stock exchange and the macroeconomic aspects, so I'm very happy to answer questions about those companies as well. Thank you so much. Thank you, Jacob and Johan, and thank you all of you as well.