ESG statement

Nordea Asset Management

Nordea Asset Management’s (NAM’s) commitment to Responsible Investment (RI) is deeply rooted in our Nordic corporate culture, philosophy and business model. It’s in our DNA and we care about all factors that are material to clients’ investments, including those that are non-financial.

Since becoming an early signatory of the UN Principles for Responsible Investment in 2007, we have been actively involved in several Nordic, European and global ESG-related initiatives such as Carbon Disclosure Project, Carbon Action, Sustainable Investment Forums and Water Disclosure Project.

NAM’s RI framework extends to specific strategies and products, using a wide combination of RI approaches. Our STARS strategies, for instance, stand at the forefront of our RI offering, presenting a unique approach to generating attractive returns while adhering to advanced RI standards. Since the launch of our first STARS strategy in 2011, we have built a strong suite of ESG solutions that cover Emerging, Global, European, Nordic and North American equity markets as well as more recently launched as Fixed Income strategies.

Besides the STARS family, our Global Climate & Environment strategy is a sustainability themed portfolio that concentrates on resource efficiency and environmental protection. Moreover, our Global Gender Diversity strategy is a solution aiming to prove it is possible to deliver solid returns by investing in companies with a strong focus on gender balance.

Award Winning RI Team

In order to provide these cutting-edge solutions, Nordea has one of the largest and most experienced RI teams in Europe. The team, formed already in 2009, is truly embedded within our portfolio management and they sit side by side with Equities and Fixed Income teams. In regards of the STARS funds the team contributes to the analysis of the holdings as well as engages with the companies together with the portfolio managers.

Over the years, the team has received awards from several external entities such as Extel and the European magazine “Capital Finance International” (CFI). CFI has awarded Nordea Asset Management “Best ESG Investment Process in Europe” for the past five years in a row (2014 – 2018).

Active ownership

Active ownership is a central component of our corporate-wide overlays. Being an active owner is of paramount importance to NAM. We believe this is a powerful way to protect shareholder value, enhance long-term returns and foster positive change. We do this by exercising our formal voting rights as well as engaging with companies and encouraging them to improve their management systems and ESG performance.

Our active ownership efforts begin with voting on our holdings, attending Annual General Meetings (AGMs) and representation on nomination committees. We vote in about 400 companies (which typically represents around 60% of equity AUM) and we are striving to extend our coverage outside Europe. Our publicly available Voting Portal shows how we have voted in AGMs for stocks held across our funds. Access to the Voting Portal can be found here.

Engagement is the next step of being an active owner and is a crucial component of our RI philosophy and framework. We influence and foster change with our companies by engaging in dialogues around specific ESG topics. Our engagement activities entail constructive dialogues with companies through face-to-face meetings, conference calls, letters or even field visits. As such, it provides an opportunity to improve our understanding of companies that we invest in as well as the ability to influence them. We engage proactively with companies and other stakeholders on behalf of all internally-managed Nordea funds.

A successful example of engagement

Over the years, we have actively and successfully engaged with companies all over the world to ensure they meet our ESG criteria. One such company is Swedish fashion retailer H&M (Hennes & Mauritz AB). H&M works with many of its suppliers in emerging markets to improve labour conditions. Nevertheless, some of the challenges facing these suppliers have caught our team’s attention. On a site visit to Cambodia, Nordea inspected a supplier’s factory that had been flagged after an incident where workers fainted due to extreme heat in the building. Our team spotted several issues such as poor ventilation and lack of access to drinking water. As a result of the visit, a number of immediate action points were made to improve the working conditions. These included better air condition and more drinking stations. However, the engagement work does not stop there. Follow-up meetings are scheduled on an ongoing basis with H&M to ensure that they maintain their focus on improving working conditions in their supply chain.

To learn more about further engagement cases please refer to the Quarterly ESG reporting for STARS Funds.

Transparency and Reporting

For an investor, timely and adequate information is key. We expect companies to report on materiality and support standardized and integrated reporting which incorporates material sustainability information with financial information.

We ourselves strive to be transparent in regard to how we work and incorporate ESG in our responsible investment decisions and activities. We regularly report via our website, through our Annual Report and through the PRI reporting framework.

 

 

 

 


Funds to watch

Name Ratings ISIN Domicile Description
Nordea 1 - Global Stars Equity Fund FNG 2 Stars, LuxFlag, Eurosif LU0985320562 (BP-USD) Lux

A true Global equity solution combining fundamental research with a detailed ESG analysis

  • Long term bottom-up stock picking approach with a strong focus on valuation
  • Focused on identifying companies able to generate sustainable shareholder value over the long term
  • Detailed ESG analysis and active engagement performed by our independent, in-house Responsible Investment team

Factsheet | ESG Quarterly Report
Nordea 1 - Emerging Stars Equity Fund FNG 2 Stars, LuxFlag, Eurosif LU0602539602 (BP-USD) Lux

A true Global Emerging Markets equity solution

  • A pure bottom-up, high quality portfolio with a GARP bias
  • Focused on identifying companies able to generate sustainable shareholder value over the long term
  • Integrates ESG analysis as a risk management tool: a core GEM solution, not an ethical fund

Factsheet | ESG Quarterly Report | Fund Portrait
Nordea 1 – European Stars Equity Fund FNG 2 Stars, LuxFlag, Eurosif LU1706106447 (BP-EUR) Lux

A true European equity solution combining fundamental research with a detailed ESG analysis

  • Long term bottom-up stock picking approach with a strong focus on valuation
  • Focused on identifying companies able to generate sustainable shareholder value over the long term
  • Detailed ESG analysis and active impact engagement performed by our in-house independent Responsible Investment team

Factsheet | ESG Quarterly Report
Nordea 1 - Nordic Stars Equity Fund LuxFlag, Eurosif LU1079987720 (BP-EUR) Lux

A true nordic equity solution combining fundamental research with a detailed ESG analysis

  • Long term bottom-up stock picking approach with a strong focus on valuation
  • Focused on identifying companies able to generate sustainable shareholder value over the long term
  • Detailed ESG analysis and active impact engagement performed by our in-house independent Responsible Investment team

Factsheet | ESG Quarterly Report
Nordea 1 - North American Stars Equity Fund LU0772958525 (BP-USD) Lux

A true Global equity solution combining fundamental research with a detailed ESG analysis

  • Long term bottom-up stock picking approach with a strong focus on valuation
  • Focused on identifying companies able to generate sustainable shareholder value over the long term
  • Detailed ESG analysis and active impact engagement performed by our in-house independent Responsible Investment team

Factsheet

ESG DDQ

Does the investment manager have a policy addressing its approach to the incorporation of ESG factors within the investment process? If there is no policy, please explain why.

With regards to the STARS funds, the portfolio management teams work closely with the Responsible Investment (RI) team throughout the research process. Each STARS strategy has a dedicated ESG analyst participating in team meetings and giving input at all stages of the investment process. They may also pitch investment ideas to the team.

As soon as the investment team proposes an investment candidate both teams together integrate ESG analysis into the stock selection process via the following steps.

  1. For each sector the RI Team identifies the critical ESG issues to include in their evaluation. The materiality of ESG issues varies sector by sector and this first step is crucial.
  2.  Next, the RI Team identifies ESG risks as well as opportunities at the company-specific level.
  3.  Then an in-depth analysis is carried out using data from multiple sources.
  4.  These steps result in an internally-evaluated ESG score (A/B/C). This score is absolute in nature and represents NAM’s view on how well a company is positioned regarding ESG risks and opportunities. The ESG score represents the minimum expectations we have for the companies included in the STARS funds.

Once a company is rated and eligible for investment, the investment team performs a further evaluation of the stock. The objective is to identify companies able to deliver sustainable long-term shareholder value. Nevertheless, they are able to select only companies with a minimum score of B and are not able to invest in lower rated companies.

Please explain what steps have been taken to ensure ESG specialists have authority in the portfolio management process?

As mentioned above, there is a clear process in place based on the true integration of ESG analysis with bottom-up fundamental research. Portfolio managers of the STARS funds are able to select only companies with a minimum score of B and are not able to invest in lower rated companies.

Please explain how the Sustainable Development Goals (SDGs) are integrated in the investment policy and decisions, if applicable.

Beyond traditional engagement (including voting as well as typical financial-based engagement), we break down our engagement into two categories – Risk-related and Thematic.

  • Risk engagement: this can include both proactive ESG-driven engagement around material ESG risks and reactive incident-driven ESG engagement if a company breaches international norms.
  • Thematic engagement focuses on companies’ exposure to certain themes. These themes are typically valid across STARS funds and defined jointly by the RI team and the investment managers. They focus on topics that tend to align well with SDG-related issues such as climate, gender diversity, corruption, environmental protection, etc. Nordea believes companies that align their strategies with the UN Sustainable Development Goals (SDGs) will be successful in the long-term, because they are adjusting to global society’s future needs.

Nevertheless, none of our funds has targets or performance indicators linked to the SDGs: PMs are not incentivised on the basis of SDG-related KPIs, nor are there explicit SDG-related targets in the investment process. However, we believe relating our ESG activities to the SDGs when reporting about ESG is helpful because the SDGs provide an objective and recognised frame of reference.

How do you collaborate with other investors to achieve successful engagement outcomes?

Engagement around material ESG risks is typically carried out independently, but there are times when an issue is being discussed more broadly when we will work with other investors through platforms like the UNPRI engagement clearing platform or joint letters. These might typically be incident-driven situations. Depending on the incident or the complexity of the issue we also team up with local asset managers (especially in emerging markets) in order to get better access to the companies.

Please describe what ESG data, research, third-party consultants and other resources the fund manager uses, and how these are incorporated in the investment and risk management processes.

Environmental, Social and Governance (ESG) data (internal & external) has been incorporated into our investment management system and are available to all our investment professionals. This means that all Portfolio Managers can access this information, which we believe could be an additional factor when assessing risk in an investment portfolio. There is also a database where rating and company meeting information can be shared between the Portfolio Managers and ESG analysts.

The proprietary ESG research methodology on company level is conducted from two perspectives. First, companies are assessed based on if they mitigate risks and capture opportunities in relation to their stakeholders – employees, suppliers, customers, investors, the environment or society at large. Second, we assess whether companies position their products or services well in relation to broader sustainability megatrends such as climate change or changing demographics.

We underpin our internal RI approach with externally sourced ESG research and ratings. This provides coverage of over 6,000 companies globally both in terms of their practices and tracking controversial issues.

Nordea’s RI team uses ESG research providers, brokers with specialized sustainability services and non-governmental organizations for its desktop research. Some of the most used partners are: ISS-Ethix, MSCI Inc., Oekom, Sustainalytics. RepRisk Maplecroft. NGO’s such as: WWF, Amnesty International, Transparency International, Greenpeace, SwedWatch, DanWatch.

All our investment boutiques have been introduced to the MSCI ESG data and their scoring system. MSCI ESG Research uses a best-in-class (AAA), worst-in-class (CCC) approach when they rate companies, i.e. only appropriate when comparing companies within a specific industry. However, they also have an absolute approach called the weighted average score (0-10), which can be used to compare companies across sectors.