Outlook 2025
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the perceived weakening of NATO security guarantees, such a simple approach no longer seems appropriate. Thus, during 2025, we will be developing more nuanced policies for defence investments, and expect to provide our clients varying degrees of access, depending on which parts of our product range they choose. It is our conviction that such an approach can meet the expectations of our clients, while allowing us as a firm to be supportive of the defence of democracies in Europe and across the globe. Finally, the “Omnibus” drive to simplify regulation – including that which is sustainability-related – across the European Union has meant that ESG data which was expected to become in- creasingly accessible and of higher quality, will not be available for now, especially in the small- and mid-cap segments. This in itself is disappointing to responsible investors and, if it were re- flective of a more relaxed attitude towards companies’ sustain- ability risks in general, would be for the worse. The flip side of this simplification however, could well be a booster to sustain - able investments among private investors in the EU: When the expected revision of the Sustainable Finance Disclosure Regula- tion arrives, it is expected to include the introduction of product categories or labels, to help investors orient themselves more easily in what many perceive as a jungle of more or less ESG, or “sustainable” products. If these categories are intuitive and well-defined, and if they are transposed all the way into the Mi - FID regulation, it could remove what – according to surveys – has been one of the main barriers to individual investors invest- ing sustainably: The fear of greenwashing. As we at Nordea Asset Management see it, times like these re- quire that asset managers maintain the courage of their con- victions, stand by the commitments on the basis of which as- set owners have hired them, and act as true fiduciaries of their clients. In other words, the asset management industry needs to be as consistent in its commitment to responsible investing as asset owners have shown themselves to be, and it needs to help give voice to and support the aspirations of individual in- vestors when it comes to sustainability. In the current environment, consistency in responsible invest- ing is not as straightforward as it may sound. For instance, it is increasingly important to ensure that all activities under the headlines of Stewardship, engagement and AGM voting – es- pecially towards US firms – are justified by material risks to companies and their investors. In the absence of such justifi - cation, stewardship initiatives may find themselves subject to legal challenges. Although such challenges will very often be exclusively political in nature, and mostly rely on creative inter- pretations of the relevant regulation, they can nonetheless incur both direct and indirect costs.
Against this backdrop, we expect the discussion about what constitutes a risk to a given investee company on one hand, and to an investor in that company on the other hand, to become in- creasingly topical. This is the case because, once an investment portfolio is sufficiently diversified, it becomes relevant to adopt the perspective of a “universal owner”, taking into account not only the effects of an investee company’s decisions on the value of that company itself, but also the repercussions of those deci- sions across the economy and thus across the total investment portfolio. This is the more important because investors (in the case of institutional investors, their stakeholders) ultimately benefit from the absolute return of their portfolio, rather than that portfolio’s performance relative to a benchmark or the av- erage market return. In other words: It is not much use outper- forming the market for a while, if the market itself is returning less than it could have – especially if you, through your invest- ment choices and practices, are partly responsible for this. As both realities of climate and other sustainability risks, and the recognition of these by regulators and legal authorities across the world become more widespread, we expect the ex- plicit adoption by investors of a universal owner perspective to become increasingly common. This, in turn, has important impli- cations for the scope of what constitutes the fiduciary duty of fi - nancial market participants, including both asset managers and institutional investors. The argument is perhaps best laid out in the 2024 report on pension fund trustees’ duties in the context of climate change, from the UK Financial Markets Law Com- mittee, which – among other important observations - explicitly states that there can be situations in which it may be necessary to forgo short-term gains, because they give rise to “identifiable risk to long-term investment returns”. All in all, while there is no shortage of competing priorities, we remain as fully committed to responsible investing as we have been all along. “Returns with Responsibility” is our motto – be- cause we appreciate that one is not sustainable without the other.
Eric Pedersen Head of Responsible Investments
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