Outlook 2024
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EU SFDR. This could reasonably be interpreted to reflect inves- tor concerns with greenwashing, in the sense of funds labelling themselves as ESG without delivering much in terms of differenti- ation from traditional investment strategies without a sustainabili- ty lens. Circumstantial evidence for this can be found in numerous investor surveys, where respondents express interest in – and a priori preference for – ESG investing, but are held back by doubts about the validity of the sustainability-related claims made. In fact, surveys35 among both institutional and retail investors continue to confirm that investors look for value creation not just in financial terms but also in terms of positive environmental (especially climate), as well as social impact. The avoidance of harm, expressed as a wish to minimize negative environmental
closer to the thinking behind SDR. In the US and Japan, as well as Singapore and other countries globally, regulation to further sustainable finance are also continuing to be rolled out. From our own dialogues with investors, there is a consistent message: ESG factors are increasing in importance and the fo- cus is shifting from easy solutions to the nitty-gritty of what we at Nordea Asset Management call Returns with Responsibil- ity. Our clients are looking for strong baseline ESG content, ro- bust and effective stewardship activities across portfolios, and specialised tools and approaches in areas like climate, DEI and elsewhere. External certification of ESG-related processes will also become increasingly important. Notably, on the institutional side, even mandates and strategies that are not explicitly “ESG” now imply specific demands around especially stewardship, in the form of company engagement and voting at AGMs. Finally, climate investing and the challenge of contributing to real-world decarbonisation are taking centre stage against the backdrop of the increased urgency to reduce the pace of global warming and stay as close to the targets of the Paris Agreement as possible. We believe all of these themes play to the strength of Nordea Asset Management: Investment stewardship has always been a core activity, whereby we have won several awards, including, in 2023, the Environmental Finance Company Award for Pollu- tion Reduction Initiative of the Year. This award was given for our Methane engagement program, under which 9 engaged compa- nies joined UNEP’s OGMP 2.0 Methane mitigation Partnership in 2023, with Exxon Mobil – in a major reversal – announcing its in- tention to join as the 10th in January 2024. In the area of climate, our uniquely focused Global Climate Engagement strategy fol- lows in the footsteps of our long-running Global Climate and En- vironment Strategy, and is the hands-on future of climate invest- ing. At the same time our industry-leading decarbonisation tools and methodologies can be adapted across a range of portfolios. In conclusion, no matter the labels and the language used, the substance and integrity of ESG processes and strategies are in- creasingly what counts. At Nordea Asset Management, we are committed to this, seeking to deliver, as always, Returns with Responsibility.
From our own dialogues with investors, we get a consistent message: ESG factors are increasing in importance and the focus is shifting from easy solutions to the nitty-gritty of what we at Nordea Asset Management call Returns with Responsibility.”
and social impact, is equally prevalent. This does not mean that investors are not in the market for financial returns – they clearly are. But it does tell us that they are looking to achieve those re- turns within a set of guardrails that reflect their personal and institutional values. This preference for ESG guardrails becomes especially clear when investors are asked about their prefer- ences to company behaviour, where a large majority consistently agree that companies should do their best to reduce their nega- tive environmental and social footprints. It seems fair to con- clude that sustainability issues matter to many – if not all – in- vestors, and that these investors care not just about the headline of an investment strategy, but about what is actually delivered. Regulation in many jurisdictions is supportive in this regard. In the EU, adjustments and clarifications to the current SFDR are currently being published, while regulation governing the nam- ing and content of ESG funds is imminent. In the UK, the SDR will introduce categories of ESG-related products that should introduce more clarity and alleviate the confusion and hesitance some investors have felt in taking the step from preferences to portfolio implementation of their sustainability-related views. And next in line is a reform of the SFDR, potentially bringing it
Eric Pedersen Head of Responsible Investments
35) Including Morgan Stanley: “Sustainable Signals”, January 2024.
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