Responsible investment structure
As shareholders we have developed a responsible investment framework that comprises a wide range of approaches. Some are decided and deployed at the corporate level – “overlays”, which apply to all funds – while others are product-specific and apply to solutions with an enhanced ESG focus.
Our responsible investment approach is governed by the Responsible Investment Committee (RIC), chaired by Nordea Asset Management’s CEO, which determines our ESG investment guidelines. It also decides the appropriate reaction when a company is found to have acted outside our guidelines. The RIC might decide to exclude, quarantine or engage with the company, depending on the type of violation and our ability to influence the company.
To add detail to the ESG investment guidelines, the RIC has developed a Responsible Investment Policy, which details the international conventions we subscribe to and what we require of the companies we invest in.
We recognise that integration of material ESG issues is a part of our fiduciary duty towards clients and beneficiaries. In order to ensure that investment and portfolio construction decisions are based on full information, we seek to integrate ESG issues into our investment analysis. To do this, we make both external and internally sourced ESG data available to all investment teams and we have integrated ESG into the portfolio performance reviews of our equities and fixed income teams. We believe this ESG integration can enhance risk adjusted returns.
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.
Positions and commitments
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. We have clearly defined positions that are important for us in terms of fulfilling our own requirements for being a responsible investor.
We commit to be a responsible investor through various international commitments. We seek to encourage best practices through participation in international initiatives and collaborate with other investors to achieve our goals. Among others, Nordea is a signatory to the PRI, CDP and PRB.
Read more about our positions and international commitments here.
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.