140 Nordea funds now tighten their requirements on fossil companies and are only investing in companies that are on a green transition path. In short, the energy companies must have a clear plan for how they intend to comply with the Paris Agreement, and they must visibly have started implementation. Currently 73 of Nordea’s funds already impose these requirements or even stricter ones.
“No oil and gas producers and of course coal miners live up to these requirements at present, but quite a few electricity companies do,” explains Eric Pedersen, Head of Responsible Investments at Nordea Asset Management (NAM), the largest asset manager in the Nordics.
The initiative is the next step for NAM in its investment strategy for limiting global warming, as it has committed to do as a founder member of the international Net Zero Asset Managers Initiative.
So what are the requirements that the 140 funds now make on energy companies?
“The key measure to limit global warming is to reduce emissions from fossil fuels. The energy companies must have a strategy for complying with the Paris Agreement and limiting emissions from fossil fuels – and they must have started the hard work of changing their business model,” says Eric Pedersen.
At the same time, tobacco companies will be excluded from the 140 funds.
Greater transparency in the market for sustainable investments
Nordea’s new requirements come into force on 10 March – the same day as the first part of the EU’s new Sustainable Finance Disclosure Regulation (SFDR) takes effect.
The SFDR aims to create greater transparency among the many more or less green funds and investment opportunities that are now sprouting everywhere.
The SFDR classifies funds into three categories based on how sustainable they are:
- Article 9 contains funds that evenly balance the goals of a sustainable world and financial returns – also known as “dark green” funds
- Article 8 covers funds that have enhanced ESG characteristics, also known as “light green” funds
- Article 6 includes all other funds, including some funds with baseline ESG safeguards and integration of sustainability risk in the investment process such as NAM’s overall coal exclusion.
Most of Nordea’s funds are now green
Most of Nordea’s funds will now be aligned with the stricter fossil-related restrictions – 213 to be precise. 209 will be in the light green category and 4 in the dark green category. A total of 120bn euro has been invested in the funds
Nordea also sets requirements for the remaining 155 funds:
”The customer demand for sustainable investment products is higher than ever, and is the way forward. And for the remaining funds which are not marketed as having enhanced ESG characteristics, we still have fundamental requirements in place. We screen these funds for violation of human rights, we exclude coal producers and we examine the companies’ environmental impact and social factors and, if necessary, exclude them," concludes Eric Pedersen. "In addition, we will on an ongoing basis be analysing our Article 6 funds, to see which ones are candidates to move to Article 8."
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