As shareholders, we can choose to help companies improve the management of their environmental, social and governance risks. We believe that clearly informing the companies in which we invest of what we expect of their ESG performance is the best way to help them improve. The two main ways we achieve this is through active ownership and engagement.
Environmental, social and governance issues are an increasing source of risk and opportunity, which is the main reason for integrating ESG into our investment analysis methodology. Our proprietary research seeks to identify stakeholder risks at company level, which can be related both to the business model and to how the company manages its material ESG risks and opportunities. ESG data is used to support and to understand how companies are positioned to manage longer-term risks and opportunities.
We recognise that integration of material ESG issues is a part of our fiduciary duty towards clients and beneficiaries. By integrating ESG issues, we ensure that investment decisions are based on comprehensive information and, by combining financial performance with ESG insight, we strive to offer clients sustainable solutions. ESG data is made available to portfolio managers and analysts and we continuously work to develop ways to ensure that ESG analysis adds value in the investment decision-making process.
We seek to encourage best practices through participation in international initiatives and collaborate with other investors to achieve our goals. Nordea is a signatory to the PRI as well as CDP. We are also members of IIGCC. Read more about our commitments here.
We set clear expectations on corporate ESG management and performance in our investments and ownership activities and communicate these expectations to the companies we are invested in and to other stakeholders. As a responsible investor we expect that invested companies operate in line with our commitment to the PRI and in observance of laws and regulations, international humanitarian law and international conventions, as well as standards for sound environmental, social and governance performance. We have clearly defined positions that are important for us in terms of fulfilling our own requirements for being a responsible investor. The positions are related to both exclusions and focus areas, which we see as important to support the development of a sustainable economy and future.
At Nordea we have a unique inhouse ESG process
In the process for the Stars funds, after thorough analysis, every company is assigned an internal ESG rating and must pass a certain rating threshold if we are to invest in it.
The rating scale is based on a three-degree format – A, B and C, where A is the highest possible rating and C the lowest. The rating accounts for how well a company performs across five pillars – business model, business ethics, corporate governance, social aspects and environmental aspects.
A positive trend sign (+) indicates that the company has a positive ESG outlook. Furthermore, it has taken key steps since our last review and continues to demonstrate strong initiatives to excel in terms of managing ESG risks and focusing on opportunities.
A negative trend sign (-) indicates that the company has a negative ESG outlook. Material incidents have occurred since the last review, or a change in company structure or business that increases risk profile without adequate initiatives undertaken by the company to address the changes.
* ESG is an abbreviation of Environmental, Social & Governance and is commonly used in the context of addressing ESG aspects.