As investors face increased exposure to climate-related risks – and new regulations – sustainability is becoming an important part of their strategic investment decisions. There are clear signs that ESG investing is turning mainstream. At Nordea we are well prepared as it’s our strategy to support the companies we are invested in to transition to a more sustainable business model.
Nordea has for the last couple of years significantly enhanced our commitment to ESG (Environmental, Social and Governance). We have widen the scope, both when it comes to product offering and in the use of research and data to further integrate ESG scoring into the larger investment universe.
Last year, we also ramped up our engagement activities in the companies we are invested in and voted on thousands of proposals at over 500 Annual General Meetings and Extraordinary General Meetings, a 14% increase over the prior year.
Engagement the preferred approach
“Nordea is an active owner, it’s our policy to engage with the companies in our portfolios. We believe that ensuring good ESG practices in our funds’ holdings is an important part of safeguarding the long-term interests of shareholders and society,” says Eric Pedersen, Head of Responsible Investments at Nordea Asset Management.
Nordea Asset Management’s engagement activities are carried out on behalf of all our funds and generally falls into three categories:
Norms- and incident-based engagement: engaging with companies breaching international norms or conventions or companies having ESG-related incidents.
Investment-led engagement: engaging with companies on their financially material ESG risks and opportunities.
Thematic engagement: engaging on specific themes such as climate change, biodiversity/water, human rights and good corporate governance, including AML, diversity etc.
Recent examples of engagements are the coalition of investors Nordea has led against the construction of the coal plant Vung Ang 2 in Vietnam, the engagement with the Government of Brazil around deforestation and our long-term engagement with the pharmaceutical industry in India.
“We use several different active ownership tools in our engagement process,” explains Eric Pedersen. “We collaborate with other investors, sign letters to management and board of directors, go on field visits and make our voice heard through voting and filing shareholder proposals. The effectiveness of the tools depends on the individual case. Currently, because of the COVID-19 situation, we use Teams and Zoom meetings to keep in touch with the companies we engage in.”
“Engagement is always our preferred approach, which is why we have an in-house team of responsible investment experts consisting of 18 persons, in addition to the 2 corporate governance and voting experts in Nordea Funds – all with deep industry knowledge operating on a global scale. However, we are also ready to exclude companies that are unwilling or unable to have a serious dialogue on the issues we think are important. The latest examples of this are the Brazilian meatpacker JBS and the Saudi oil giant Aramco.”
Supporting companies delivering real change
Our engagement strategy is also expressed in the new Fossil Fuel policy for sustainable Nordea Funds (pdf, 944 KB) which supports companies in their transition to meet the Paris Agreement climate target. The aim of the policy is to be able to stay invested in and support companies delivering real change, while making clear that as a major investor Nordea Funds will start to divest from companies that are not in transition.
Henrika Vikman, head of Nordea Funds, explains why Nordea has chosen not to pursue an exclusion strategy:
“What we try with the policy is not just to exclude all fossil companies – which – if the real aim is to limit the amount of greenhouse gas emissions as fast as possible – does not produce any real-world impact. Nordea’s approach to support the companies transitioning is balanced – it takes into account that we will not get rid of fossil companies by just shifting the responsibility to the next investor. But on the other hand, the companies need to present a transition strategy that puts them on a credible path to complying with the Paris Agreement – and then to stay on that path.”
“Our approach is to encourage the companies responsible for the highest emissions to transition in due time. This is a logical step for us to take as active owners when striving to make a real difference and help to curb climate change – and it also makes sense from the point of view of maximising risk-adjusted returns on our investments.”
Our engagements in numbers (2019)
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