MAKING GOOD For 17 years, the Nordea 1 – Stable Return Fund has been able to make good on its promise to provide stability in any weather / 08

MAKING PEACE Allocating funds to global listed real estate can help investors to make their peace with record inflation and rising interest rates / 12

MAKING SENSE Investing in high emitters to fight climate change? Hilde Jenssen, Head of Fundamental Equities, explains why this makes sense / 16

Advertising material for professional investors only , investing for their own account – according to MiFID definition ISSUE 01.2022 Any investment decision in the sub-funds should be made on the basis of the current prospectus and the Key Investor Information Document (KIID). nordic friends

Making an impact

More and more people want to actively contribute to making the world a more sustainable place. This also applies to their financial investments. Nordea helps them to achieve their goals / 04


Selected Nordea funds at a glance Find out more about Nordea´s full product range at

ESG solution





Equity Europe European Stars Equity Fund





Nordic Stars Equity Fund





Emerging markets Asian Stars Equity Fund





Chinese Equity Fund





Emerging Stars Equity Fund





Latin American Equity Fund





Global Global Real Estate Fund






Global Stable Equity Fund





Global Stable Equity Fund – Euro Hedged





Global Stars Equity Fund






North America North American Stars Equity Fund Bond Covered bonds European Covered Bond Fund









European Covered Bond Opportunities Fund





Low Duration European Covered Bond Fund





Credit Emerging Stars Bond Fund





European Corporate Stars Bond Fund





European Cross Credit Fund





European Financial Debt Fund





European High Yield Bond Fund





European High Yield Stars Bond Fund





Global Green Bond Fund





North American High Yield Stars Bond Fund





US Corporate Bond Fund





US Corporate Stars Bond Fund





US High Yield Bond Fund





Unconstrained solutions Multi-asset solutions Balanced Income Fund





Flexible Fixed Income Fund





Stable Return Fund






Liquid alternatives Alpha 7 MA Fund





Alpha 10 MA Fund





Alpha 15 MA Fund





Thematic sustainable

Global Climate and Environment Fund 1





Global Climate and Social Impact Fund






Global Climate Engagement Fund





Global Gender Diversity Fund





1 Soft closed as of 26.02.2021. Please note that not all sub-funds and share classes might be available in your country of jurisdiction.

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In this edition

Dear reader,

It has been an incredibly difficult be- ginning of the new decade for inves- tors, as well as for the world around us. Just as it seemed we were return- ing to some sort of normality, we have been confronted with new challenges following the outbreak of war in Europe. We remain deeply concerned about the conflict and our hearts go out to all Ukrainians affected.

From an investment perspective, the events seen in recent months reinforce our belief in the importance of taking environmental, social and governance (ESG) considerations into account. While all investors have been directly or indirectly impacted by the war, a robust ESG process can undoubtedly help to avoid potential risks. Our Emerging Market Debt Team, for example, has not invested in Russian debt for years due to its strict governance framework. While Covid-19 and then war heightened fears of a derailing of the climate change agenda, it is pleasing to note that the commitment to decarbonisation remains intact. We talk to Hilde Jenssen, our Head of Fundamental Equities, about some of the emissions-reduction actions undertaken within our flagship ESG ‘STARS’ strategies. Furthermore, visit the lounge section for information on the latest addition to our family of climate strategies, the Nordea 1 – Global Climate Engagement Fund . By engaging with heavy emitting companies and promoting progressive actions, we truly believe we can help to significantly curb real-world emissions, as well as generate meaningful alpha.1 As fears of stagflation and recession also increase, it is no surprise we are witnessing heightened interest in the solutions offered by our renowned Multi Assets Team, headed up by Asbjørn Trolle Hansen. Inside, Asbjørn talks about how his team has successfully protected investors from turbulence for almost two decades. Also, as investors face up to inflationary pressures not seen in at least a generation, the managers of our Nordea 1 – Global Real Estate Fund discuss property’s proven history of delivering during periods of sharp price increases. Finally, all of us at NAM understand the continued challenges you face in this uncertain environment, so we are extremely grateful for your ongoing support and trust. We hope you have a safe and enjoyable summer, and we look forward to seeing you soon.

Cover story


Making an impact Increasingly, investors are asking themselves how they can make a difference with their investments. Fund in focus 8 Stability in turbulent times For 17 years now, the Nordea 1 – Stable Return Fund has been able to live up to its name. Market view 12 A real inflation shield In the past, listed real estate offered protection in times of high inflation. Does that still work now? Macro opinion 15 Deflating a hot air balloon After years of ultra-loose monetary policy, central banks must now change course – a delicate task. Inside Nordea 16 No shortcuts to net zero What is the most effective way to achieve the goal of net zero? Hilde Jenssen provides answers. ESG decrypted 19 How can you meet clients’ ESG preferences? Once the changes to MiFID II come into force in August, there are three routes to MiFID-eligibility. Lounge 20 Are you ready for ESG and MiFID II? Let’s come together! Nordic point of view: Embracing change

Yours faithfully,

Christophe Girondel Global Head of Institutional and Wholesale Distribution

1 There can be no warranty that an investment objective, targeted returns and results of an investment structure is achieved. The value of your investment can go up and down, and you could lose some or all of your invested money.

ISSUE 01.2022


Making an impact

For many investors today, making a positive contribution to a more sustainable society is just as important as achieving their financial goals. Nordea’s strategies allow them to do both.

Environmental, social and governance (ESG) considerations are now firmly entrenched in the minds of many investors. This is shown by the fact that inflows into sustainability-focused strategies outpaced demand for traditional portfolios in Eu- rope last year. While the stunning rise of responsible investing is undeniably positive for society and the future of our planet, vast differences remain in ap- proaches to ESG. Nowhere is this more evident than in the rapidly expanding ‘impact’ investing space. The most recognised approach is what is often referred to as traditional impact investing, where capital allocation is made to explicitly address social or environmental problems. Here, Nordea Asset Management (NAM) has partnered with renowned private equity investor Jan Ståhlberg in the creation of Trill Impact. Trill is one of the largest dedicated

impact investment houses in Europe, with more than EUR 1bn of assets under management within its private equity and microfinance investment ad- visory strategies. However, this is not the only way in which NAM is approaching the impact space. Capitalising on its considerable experience in man- aging thematic ESG portfolios, NAM’s Fundamental Equities Team is convinced of the long-term merits of ‘investing with impact’ in public markets. For NAM, investing with impact combines two powerful investor objectives – delivering long-term alpha and achieving positive real economy outcomes.1 Sustained performance and positive impact Investing with impact is at the heart of the Nordea 1 – Global Climate and Social Impact Fund , which harnesses the momentum behind both

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„ We aim to make a lasting

difference by backing companies able to deliver better social and environmental outcomes. Thomas Sørensen portfolio manager at Nordea Asset Management

numerous opportunities for companies that are able to provide solutions to the world’s most pressing sus- tainability challenges. By investing in listed equities, we want to allocate capital to deliver both sustained financial performance and positive impact.”1 Indeed, the investment opportunity in achieving the 2030 Sustainable Development Goals (SDGs) is un- precedented, with economic prospects worth at least USD 12trn a year by 2030. Investing in sustainable transportation – which is aligned to SDG 11, sustaina- ble cities and communities – is one such compelling opportunity, according to Sørensen and Padberg. The duo cites Central Japan Railway Company as a beneficiary of the planet’s sustainability drive. The second-largest rail operator in the Asian power- house, Central Japan Railway generates more than 80% of its revenues from the Tokaido Shinkansen high-speed train line, which connects the mega cities of Tokyo and Osaka. Compared to a passenger aircraft on the same route, the Shinkansen bullet train uses 88% less energy, while carbon emissions are 92% less per seat than its aviation equivalent. Even though the daily Tokyo-Osaka airline passenger capacity is just 6.25% of the Tokaido Shinkansen capacity, adopting a train-only approach could lead

Dedicated: with the right strategy, investors can truly make a difference and help change the world for the better.

the environmental and social megatrends. Unveiled last year, the Global Climate and Social Impact strategy is run by Thomas Sørensen and Henning Padberg, managers of NAM’s renowned Nordea 1 – Global Climate and Environment Fund . In populating the Global Climate and Social Impact portfolio, Sørensen and Padberg target companies at the forefront of an inclusive green economy. These in- vestments are aligned to four primary themes: health and wellbeing, inclusion and opportunity, sustainable living and the low-carbon economy. “The UN-backed concept of an inclusive green economy aims to im- prove human wellbeing and social equity, while sig- nificantly reducing environmental risks and ecological scarcities,” Sørensen says. “Alongside the multitude of benefits for people and the planet, there are also

At a glance ` Investing with impact is at the heart of the Nordea 1 – Global Climate and Social Impact Fund , which targets solutions addressing the world’s most pressing sustainability challenges ` Portfolio managers Thomas Sørensen and Henning Padberg allocate capital to solutions aligned to the 2030 Sustainable Development Goals ` A key tenet of the investing with impact process is corporate engagement – which is conducted alongside Nordea’s renowned Responsible Investments Team

1 There can be no warranty that an investment objective, targeted returns and results of an investment structure is achieved. The value of your investment can go up and down, and you could lose some or all of your invested money.

ISSUE 01.2022


From energy-efficient homes to sustainable transport to education for all: the Nordea 1 – Global Climate and Social Impact Fund invests in companies offering innovative solutions for environmental or social issues.

ties, a key component of the investing with impact process is engagement – which is conducted along- side NAM’s award-winning Responsible Investments Team. “Not only do we generate impact through the positive change created by the innovative solutions we invest in, but we also strive for ESG improve-

to a 40% reduction in carbon emissions. “The trans- port sector is a major contributor to climate change, responsible for about 14% of annual emissions, so providing environmentally friendly transportation solutions will be imperative for a sustainable future,” Padberg explains. “While Japan’s rail industry is

„ Investors can contribute to an inclusive green economy by supporting companies that develop solutions to urgent sustainability challenges. Henning Padberg, portfolio manager at Nordea Asset Management

ments and impact measurement resulting from our engagement efforts,” Padberg adds. “By entering into active dialogue with companies on specific sustain- ability risks and opportunities, we are able to guide them towards the adoption of more sustainable prac- tices. We truly believe sustainability improvements can enhance long-term value for companies and investors, while benefitting society overall.” NAM’s

already viewed as a world leader, we envisage continued positive developments for this industry – particularly as Japan aims to reach carbon neutrality by 2050.” Encouraging sustainable practices In addition to identifying company-specific metrics and tracking its contribution to SDG-aligned activi-

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to an inclusive green economy by supporting com- panies that develop solutions to urgent sustainability challenges.” His colleague Sørensen agrees: “Every investment creates an impact on society, whether it be positive or negative. Our aim is to make a lasting difference by backing companies able to deliver better social and environmental outcomes.” He con- cludes: “At the same time, the market continues to underestimate the cash flow generation potential for these solution providers, and this market inefficiency presents a sustainable value creation opportunity for fundamental long-term investors.” 

long-term dialogue with Republic Services, the US provider of waste collection and disposal services, is a strong example of the group’s engagement efforts. Historically, Republic Services had been plagued by a poor ESG profile. However, during initial engage- ment efforts in 2019, NAM was encouraged by the CEO’s willingness to publish more transparent ESG data and targets, including 2030 sustainability goals. Subsequent engagement activities led to multiple ESG improvements, such as improved reporting that displays science-based targets and progress track- ing. The ESG score NAM assigned to Republic Ser- vices was upgraded from B to B+ over the first year of engagement, with third-party providers eventually noting the company’s improved ESG profile. While Republic Services has made solid strides in improving sustainability, NAM is committed to continued engagement to ensure the company remains on track to achieve its 2030 goals. It is also pushing for new targets to increase recycling and reduce landfill waste volumes, as well as a further reduction in toxic discharge. “We are convinced of the power of ‘investing with impact’,” says Padberg. “Through their investment, investors can contribute

Nordea 1 – Global Climate and Social Impact Fund

Thomas Sørensen and Henning Padberg



Base currency

LU2355687059 (BP-USD) LU2355687216 (BI-USD)


06.07.2021 (BP-USD, BI-USD)

Launch date

ISSUE 01.2022


Stability in turbulent times The Nordea 1 – Stable Return Fund has successfully protected investors from the elements for almost 17 years now. Asbjørn Trolle Hansen, the head of NAM’s Multi Assets Team, explains how.

Over this period, the Nordea 1 – Stable Return Fund has successfully negotiated many bouts of severe turbulence – such as the global financial crisis and European sovereign debt instability, as well as the more recent dislocations caused by the emergence of Covid-19 and subsequent variants. “First and foremost, we understand the role our strategy has as a core component of an investor portfolio. Inves- tors look to balanced strategies – such as our Nordea 1 – Stable Return Fund – for consistent returns over a cycle,2 as well as the ability to protect precious downside,” Trolle Hansen states. “Our focus on capital preservation over a three-year time hori- zon undoubtedly helps us when we encounter a pe- riod of fear and panic in markets, like we have seen on a number of occasions over the past two years.”

Risk assets enjoyed an extraordinary, and almost uninterrupted, march upwards during the pre- vious decade, underpinned by unprecedented intervention by global central banks after the global financial crisis. With muted inflation and extraordinarily low levels of volatility, the tranquil investment environment may have given rise to complacency, with little attention paid to the need for true defensive assets within a portfolio. Investors ignoring downside risk were given a rude awakening early in 2020, as the world witnessed its worst pandemic in a century. Further turbulence has followed, with years of subdued prices morphing into record-high inflationary levels, while Europe has also tragically witnessed a return to conflict this year. “The sole focus of many investors has been to maximise returns, with little consideration for mitigating risk and true portfolio diversification,” Asbjørn Trolle Hansen, the head of Nordea Asset Management’s (NAM) EUR 150bn Multi Assets Team, says. “This has now changed, and it is un- derstandable that many investors now do not know where to turn.” Consistent downside protection While stability and risk mitigation have not been the most in-demand investment qualities in recent years, they have always been at the heart of the Multi Assets Team’s philosophy. Nowhere is this better emphasised than in the team’s Nordea 1 – Stable Return Fund , which has offered investors protection from the elements for almost 17 years.1

Taking a balanced approach In the construction of the Nordea 1 – Stable Return

At a glance ` The Multi Assets Team’s ‘risk balancing’ philosophy and focus on capital preservation comes to the fore when markets are gripped by fear and panic ` Trolle Hansen argues efficient diversification is not achieved by simply allocating to numerous asset classes, but by identifying truly uncorrelated positions ` While stocks are the greatest source of risk in a portfolio, the Multi Assets Team’s allocation to Stable/Low Risk Equities display compelling ‘all weather’ characteristics

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Come rain or shine: with the backing of one of the most experienced teams in the industry and a proven strategy, the Nordea 1 – Stable Return Fund offers investors stability in any weather.

„ Investors look to balanced strategies such as our Nordea 1 – Stable Return Fund for consistent returns as well as downside protection. 2 Asbjørn Trolle Hansen portfolio manager at Nordea Asset Management

Fund , the Multi Assets Team follow a ‘risk balanc- ing’ philosophy, which is built on exploiting risk premia. “We do not adopt a typical method of asset class investing, such as making a top-down call or allocating to directional/beta investments. In our view, making major asset allocation decisions based on macro calls has repeatedly been proven to be a flawed investment approach,” the portfolio manag- er explains. “We are different. We look at a broad and diversified set of 20-30 risk premia and select those of which we are most convinced. The concept of risk premia is well known, but experience and the right toolkit are vital when looking to capitalise

1 The performance represented is historical; past performance is not a reliable indicator of future results and investors may not recover the full amount invested. The value of shares can greatly fluctuate as a result of the sub-fund’s investment policy and cannot be ensured, you could lose some or all of your invested money. 2 There can be no warranty that an investment objective, targeted returns and results of an investment structure is achieved. The value of your investment can go up and down, and you could lose some or all of your invested money.

ISSUE 01.2022


With a steady hand: Asbjørn Trolle Hansen and his team are confident that they can help investors successfully steer through the current turmoil.

Isolating equity stability Equities offer the highest return potential in a multi- asset portfolio, but also contain the greatest source of risk. To counter this, Trolle Hansen and this team seek exposure to Stable/Low Risk Equities, which have repeatedly demonstrated an ability to perform better through periods of heightened volatility.4 “These Stable/Low Risk Stocks display a greater degree of solidity in stock price, earnings, dividends, EBITDA and cash flow than the broader market,” Trolle Hansen explains. The first step in the identification process is to eval- uate the universe of 10,000 companies from more than 50 countries and remove stocks with low liquid- ity and less than five years of fundamental data. The Multi Assets Team then applies quantitative screens based on fundamental factors, before selecting hold- ings on account of valuation and other risk control metrics. Once the team have identified a basket of appealing stocks, they hedge out the sensitivity – or

on this segment of the market. “We have long argued that traditional diversification can no longer protect investors to the extent they have been accustomed to, and it is not getting any easier in this increasingly complex environment,” Trolle Hansen points out. “Therefore, efficient diversification is not just allocat- ing to different asset classes, but about identifying a select number of truly uncorrelated positions able to deliver through all market environments.”3

Nordea 1 – Stable Return Fund

Asbjørn Trolle Hansen



Base currency

LU0227384020 (BP-EUR) LU0351545230 (BI-EUR)


02.11.2005 (BP-EUR) 01.04.2008 (BI-EUR)

Launch dates

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„ Efficient diversification is about identifying truly uncorrelated positions able to deliver through all market environments. Asbjørn Trolle Hansen , portfolio manager at Nordea Asset Management

less impacted by current circumstances relative to the broader market. In addition, we know many in- vestors have long had concerns about elevated index valuations. Again, we see strong valuation support, as our Stable/Low Risk Equity portfolio is far more attractively valued than the wider market.” Countering inflationary pressures The rise of inflation is also likely to result in con- tinued equity market demand for the remainder of 2022. Eurozone inflation accelerated to a record high earlier this year and it is unlikely to subside in the near term, considering the spike in global energy prices. Trolle Hansen believes rising inflation must be a key consideration in the asset allocation process. “Higher inflation and interest rates have historically been detrimental for fixed income, particularly rates. However, the impact on equities, and the ability of companies to increase earnings and valuation, has been positive,” he points out. “If inflation continues to run hot and rates move upward at the expected pace – or even faster – we are comfortable in the composition of our Stable/ Low Risk Equity portfolio to continue delivering for investors over the medium term.”4 As NAM’s Multi Assets Team has repeatedly ex- pressed since the turn of the new decade, the 2020s are unlikely to resemble the benign investment envi- ronment of the prior ten-year period. With investors increasingly accepting the need to prepare for turbu- lence, the virtues of stability and balance are unlikely to remain underappreciated for much longer. 

beta – to the equity market, which isolates exposure to the ‘defensive’ characteristics.

“Stable Equities have historically shown an outstand- ing ability to protect our portfolio when equity mar- kets have sold-off aggressively driven by economic or earnings’ recessions,” Trolle Hansen says. “Not only are the defensive qualities appealing, but these stocks have also proven to participate relatively well on the upside.” The expert adds: “Looking at the landscape today, we believe our Stable/Low Risk Equities continue to exhibit strong fundamental support, with the expected earnings growth of this basket of stocks far

3 There can be no warranty that an investment objective, targeted returns and results of an investment structure is achieved. The value of your investment can go up and down, and you could lose some or all of your invested money. 4 The performance represented is historical; past performance is not a reliable indicator of future results and investors may not recover the full amount invested. The value of your investment can go up and down, and you could lose some or all of your invested money.

ISSUE 01.2022


Confronted by price pressures not seen in a generation, investors are increasingly seeking assets with proven inflation-busting attributes – such as listed real estate. A real inflation shield

After years of staring down an economic en- vironment dominated by deflation, developed market investors are now being confronted by inflationary pressures not seen in at least a generation. While debate rages over wheth- er today’s heightened inflation will prove to be transitory or permanent, interest rates are already on the rise in many parts of the world. This is leading investors to increasingly seek allocations to areas with a proven ability to successfully nav- igate through such an environment – like listed real estate. Duff & Phelps Investment Management, the US- based global property securities specialist, has long recognised real estate’s qualities as a robust inflation hedge. Since June 2019, Duff & Phelps has been managing the Nordea 1 – Global Real Estate Fund , a diverse portfolio of real estate investment trusts (REITs) from around the world. “During historical periods of rising interest rates and medium-to-high inflation, REITs have gen- erated positive total returns and outperformed equities,” Geoffrey Dybas, co-portfolio manager of the Nordea 1 – Global Real Estate Fund , says. “This is because real estate has two attractive attributes when it comes to hedging against in- flation. Firstly, investors who seek out real estate during these periods recognise REITs can increase cash flows and dividends at a pace that may more than offset higher borrowing costs from rising interest rates and the negative effects of

higher inflation. Additionally, the replacement val- ue of the underlying real estate should increase as land values and input costs rise.” Frank Haggerty, who has led Duff & Phelps’ global real estate securities strategy alongside Dybas for more than a decade, believes the pace and magnitude of interest rate increases will have a significant influence on global economic growth this year. Nevertheless, he continues to see healthy underlying property fundamentals. “Rising interest rates and inflation occur during a rebounding or strengthening economy, which in turn leads to an increasing demand for commercial real estate space,” Haggerty, co-portfolio manager of the Nordea 1 – Global Real Estate Fund , explains.

At a glance ` In previous periods of elevated inflation and rising rates, real estate investment trusts (REITs) have been able to provide positive total returns and outperform equities ` While the magnitude of rate rises will strongly influence global growth this year, many areas of the property market have emerged from the depths of the Covid-19 downturn with healthy underlying fundamentals ` US-based global property securities specialist Duff & Phelps Investment Management has managed the Nordea 1 – Global Real Estate Fund since June 2019

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High rises: in times of record high inflation and rising interest rates, the asset class of listed real estate stands out by offering investors effective protection. „

During historical periods of rising interest rates and high inflation, REITs have generated positive total returns and outperformed equities. Geoffrey Dybas portfolio manager at Duff & Phelps Investment Management

“We expect cash flow and dividend growth in the global listed real estate space to accelerate further over the course of 2022 as economies continue to recover from the Covid-19 downturn.” A universal evolution However, despite its well-known qualities in an environment of rising rates and elevated inflation, there is still some investor pessimism directed towards real estate. This is largely because of the underlying dynamics affecting traditional property sectors – such as retail and offices. The challenges facing the retail sector have been apparent for many years, as the rise of e-com- merce permanently altered the fundamentals of brick-and-mortar assets. Offices have also come under recent scrutiny, as the Covid-19 pandemic overhauled established working practices. But the real estate market has evolved significantly over the past decade, with the number of REIT sectors growing from nine to twelve. In 2010, traditional

property types – such as retail centres, residential, healthcare and offices – featured heavily in the REIT universe. Now, however, the real estate opportunity set encompasses many fast-growing areas of the advancing global economy. “We see a number of secular trends positively impacting the global real estate securities market over the long term. For example, the growth of e-commerce and the online economy has fuelled rapid growth in demand for industrial properties focused on ware- housing and logistics,” Haggerty says.

ISSUE 01.2022


Growth engine: the trend towards e-commerce is driving demand for modern logistics centres.

opportunity set that has grown over time,” Haggerty says.

A related theme is the growth of cloud com- puting and the Internet of Things, which must be accommodated via specialised data centres. “These growth themes reflect the change in the infrastructure that supports our daily lives and will continue to underpin rapid growth in demand for specialised real estate for decades to come,” Haggerty points out. The active advantage Another unique feature of today’s listed real estate market is lease durations, which can range from as short as a day to over a decade. With inflation hovering at the highest levels for a generation, Dybas says the role of active man- agement in generating long-term alpha cannot be overestimated. “Just as bond portfolio manag- ers can adjust the effective duration of their portfolios, active managers of listed real estate can do the same through a selection of listed real estate securities with a shorter or longer average lease duration,” he explains. “When pric- ing power rises for landlords, having the ability to reprice leases more frequently is a significant advantage – particularly for those property sec- tors with typical lease durations of one year or less.” These sectors include lodging, apart- ments, single-family home rentals, manu- factured home communities, student housing, senior living and self-storage sectors. “The pool of property sectors with a typical lease duration of one year or less represents a significant

REITs take responsibility Finally, aside from inflation, environmental, social and governance (ESG) factors remain a key investor consideration for the remainder of 2022 and beyond. Duff & Phelps, which integrates ESG analysis into its fundamental processes, says that the REIT market has made a number of positive strides forward in recent years. “Listed real estate investors regularly engage with companies to encourage improvement in ESG practices and disclosures,” Haggerty concludes. “As ESG practices and opportunities continue to grow in importance, we believe listed real estate owners are better positioned to meet the future ESG requirements of tenants, employees, stakeholders and shareholders.” 

Nordea 1 – Global Real Estate Fund

Geoffrey Dybas and Frank Haggerty



Base currency

LU0705260189 (BP-USD) LU0705259504 (BI-USD)


15.11.2011 (BP-USD, BI-USD)

Launch date

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Sébastien Galy , Senior Macro Strategist at Nordea Asset Management:

Deflating a hot air balloon

The global economy, fuelled by cheap liquidity, has run too hot, forcing central banks to tighten monetary policy. This has complex implications for investments. However, the secular strength of ESG remains.

Central banks in the US and the eurozone have started to rapidly raise interest rates and reduce their balance sheets. However, such a withdrawal of liquidity inevitably has consequences. In the US, the Fed is confronted with a widening wage inflation spiral in a labour economy that is running very hot. It needs to tighten monetary pol- icy and, above all, regain control over the narrative as this will influence expectations of workers and employers. The first step is a series of 50 basis point rate hikes and a rapid reduction in the Fed’s balance sheet. As a consequence, the US equity market is likely to oscillate between the euphoria of ample liquidity and growth and the prospect of a slowdown and, eventually, much tighter liquidity. The ECB, in turn, is far behind the curve, but still has time to change its course. We expect that over time it will become more hawkish to the tune of another 125 basis points over the next two years so that real interest rates turn less negative. This should not come as a major shock to European eq- uities. They are cheap and the eventual slowdown in the European economy should be subdued. The war in Ukraine could continue until next year, but it is a war of logistics and production that is particu- larly challenging for Russia. Eventually, the market will price in wilder moves by Russia, followed by the end of the war. What does this mean for investors? In such an environment, listed infrastructure continues to be a decent hedge against inflation, while short-duration covered bonds and their alpha capability are of interest. In addition, holding flex- ible solutions that can quickly adjust to changing conditions can also be advantageous. Due to the volatility in US markets, we are cautious on US equities, but see ample opportunity in US fixed income. Finally, and most importantly, the secular force of ESG remains. 

Flying high: The loose monetary policy of central banks has helped the global economy to soar. Now, it’s time to change course. But that is not without risks.

The world economy is growing fast Since the end of 2020, global purchasing managers’ indexes (PMI) have been above 50 points, indicating continued growth.

62 60 58 56 54 52 50 48

Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22 Mar-22

JP Morgan Global PMI Manufacturing

JP Morgan Global PMI Services

Source: Nordea Investment Funds S.A. and Macrobond Date: 30.04.2022

ISSUE 01.2019 ISSUE 01.2022



No shortcuts to net zero Hilde Jenssen, Head of Fundamental Equities at Nordea Asset Management (NAM), discusses the global decarbonisation drive and how activities at portfolio level can make a difference.

Can you set the scene for us and explain why decarbonisation is so important?

At a glance ` In 2020, NAM joined forces with like-minded investors to launch the Net Zero Asset Managers initiative – a coalition targeting net zero emissions by 2050 ` Net zero is not possible purely by avoidance and exclusion, which is why NAM engages with companies to deliver meaningful carbon emissions reductions ` Adviser allocation choices can be powerful, as evidenced by the Global Stars Equity portfolio, whose carbon emissions are 40% lower than those of its benchmark

I am sure all the readers of this magazine rec- ognise that climate change is a global crisis, one that not only threatens the environment, but also the future of our society and economy. As carbon emissions are a key driver of climate change, achieving net zero carbon emissions would put a stop to the damage we are currently inflicting on the planet. This is why governments and asset owners continue to sign net zero targets and outline steps to decarbonise. Investors also under- stand the gravity of the situation, which is why we joined forces with a number of asset management peers in launching the Net Zero Asset Managers (NZAM) initiative.

Could you tell us more about the initiative and how NAM plans to achieve net zero?

Put simply, all NZAM signatories are setting decar- bonisation goals consistent with net zero emissions by 2050, with interim reviews and targets along the way. As for NAM, the steps we are taking to reduce emissions within our portfolios are quite straightforward. Ultimately, we do not believe we

Certainly. Launched by NAM and 29 other asset managers in 2020, NZAM has since grown to more than 220 signatories, which represent almost USD 60trn of assets under management.

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„ Engaging is a key part of our


process, as this is where the most meaningful carbon emissions reductions will occur.

But surely this is counterintuitive to the net zero goal you outlined earlier?

can achieve net zero purely by avoidance and exclusion. While we will divest from companies not supporting the transition and direct capital towards climate solution providers, engaging with businesses is a key part of our process, as this is where the most meaningful carbon emissions reductions will occur.

No, it is actually not. Remember, the overall portfolio’s emissions level is considerably lower than the benchmark, so investors in this strategy are still making a positive difference compared to buying an index-tracking product. While there are instances when our stock selection results in elevated emissions relative to an individual sector, this is in perfect alignment with our desire to enact change. What we do not want to do is simply offer investors a lower-carbon portfolio by avoiding every high-emitting company. Sure, this would be an easy way of having a low carbon footprint, but it would not make any real-world difference and cer- tainly would not drive the planet towards net zero. Our philosophy is clear: we want to engage with high emitters to deliver real change. To demon- strate what we mean: just four of the 60 companies within our Nordea 1 – Global Stars Equity Fund account for roughly 70% of the portfolio’s total emissions. If we could encourage these entities to reduce CO2 emissions by half, the carbon footprint of the portfolio would be lowered by 35%.

Can you outline your decarbonisation efforts at the portfolio level?

Let’s use our Nordea 1 – Global Stars Equity Fund , one of NAM’s flagship ESG STARS strategies, as an example. As you would expect, the funds within our ESG STARS range typically avoid heavy-emitting industries like oil and gas. By avoiding such sectors, the fund’s overall emissions are naturally lower than its MSCI All Country World Index (ACWI) benchmark. At the end of 2021, for example, the Nordea 1 – Global Stars Equity Fund’s weighted average carbon intensity was 41% lower than that of the MSCI ACWI Index (Net Return). However, when looking at the individual sectors we do invest in, it is not uncommon for our stock selection to result in higher sector-level emissions.

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Hilde Jenssen is convinced that investors have a vital role to play in global decarbonisation.

She actively seeks the dialogue with companies to drive real-world change.

Can you point to a company in the Nordea 1 – Global Stars Equity Fund that has made major recent strides forward? Definitely. One great example is Waste Manage- ment Inc, a US company that provides waste collection, disposal and recycling services. Waste services are typically high-emissions activities, and the company is working to set 1.5 degree-aligned absolute emission reduction targets, with the ambition of reducing absolute greenhouse gas emissions for scope 1 and 2 by as much as 42% by 2030 compared to the 2021 level. In addition, the group is boosting its investment in recycling facili- ties by around USD 500m over the next four years. Not only will this increase their recycling capacity, which is a good thing for the environment, but it will also further reduce their own emissions. Furthermore, this investment will also reduce their costs, so they will be winning on both the environmental and emissions side as well as the financial side. When current high-emitters make reductions like this, the overall portfolio emissions go down, taking us and our investors closer to our net zero goals. Finally, with changes to MiFID II coming in at the beginning of August, are NAM’s ESG STARS Funds suitable for sustainability portfolios? This is a very important question, and I am pleased to say that they are. From August 2 nd , distributors and advisers will need to ask their

clients about their sustainability preferences and ensure that the products they offer meet those, as well as the client’s financial goals and risk tolerances. While all funds classified as Article 9 under the SFDR are expected to be MiFID- eligible, not all Article 8 funds will be: there are additional criteria to meet, over and above simply achieving Article 8 status. NAM’s ESG STARS will all meet these criteria, both by com- mitting to a percentage of Sustainable Invest- ments and by considering PAI (Principal Adverse Impacts) elements. Thus, our ESG STARS range will be eligible for clients with sustainability pref- erences. With the ESG STARS solutions covering regions around the world as well as a wide range of asset classes – equities, sovereign, corporate and high yield bonds – these funds can be used individually or in combination as building blocks to create whatever MiFID-eligible portfolio your clients need. 

Nordea 1 – Global Stars Equity Fund

Johan Swahn and Joakim Ahlberg



Base currency

LU0985320562 (BP-USD) LU0985319804 (BI-USD)


17.05.2016 (BP-USD, BI-USD)

Launch date

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INSIDE NORDEA 5 decrypted ESG decrypted ESG

Changes to MiFID II will require advisers to offer suitable products to clients with sustainability preferences. But how will they find the right ones? How can you meet clients’ ESG preferences?

New rules bring new requirements – and new criteria in product selection From 2 August, MiFID II will require financial advisers and distributors to ask their clients whether they have sustainability preferences and offer only products that meet these pref- erences. But how will they know whether a product is suitable? Three routes to MiFID-eligibility, one outcome MiFID II offers three ways to determine whether a fund is suitable for clients with sustainability preferences:

• If it commits to having a certain percentage in so-called Sustainable Investments

New ESG reporting standards will provide additional guidance to advisers to find the best suited sustainable product for each client.

• If it commits to having a certain percentage in Taxonomy-aligned investments

data with their distributor, fund selector and financial adviser clients via a new industry- standard document called the EET (European ESG Template). NAM intends to publish this in June so that advisers have time to build their lists of suitable products. Who decides if a product is suitable? In short, the adviser does. As an asset manager, NAM can confirm to the adviser which products meet at least one of the three routes to MiFID- eligibility, but ultimately the decision about the suitability rests with the adviser. However, with the information NAM will report, advisers and distributors will have everything they need to assess whether a product meets their own clients’ needs. 

• If it commits to considering the Principal Adverse Impacts of its investments.

To be MiFID-eligible, a fund must adhere to at least one of these criteria; although funds can meet two or even all three of them. Ultimately, the three criteria are all ways of demonstrating that a fund considers the sustainability of its underlying investments. New disclosures around these three routes Going forward, funds’ prospectuses will include information about each product’s sustainability commitments, the criteria that define whether a product can be offered to a client with sustaina- bility preferences. However, on a more practical level, asset managers will be sharing detailed ESG

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Are you ready for ESG and MiFID II? On 2 August 2022, the changes to MiFID II will come into force. Distributors and financial advisers will then be obliged to actively enquire about the sustainability preferences of their clients and take them into account – a demanding task that requires a solid understanding of sustainable investments. To help distributors and advisers to prepare for this, Nordea Asset Management (NAM) has put together three information packages.

Nordea’s RI e-learning First and foremost is Nordea's Responsible Investment (RI) e-learning offering, a free online tool developed specifically with advisers in mind. The tool, which is available in eight different languages, offers advisers a quick and easy intro- duction to the world of ESG and provides them with a solid foundation on a variety of ESG topics. The training covers different ESG approaches and relevant vocabulary, as well as an introduction to ESG regulation. The goal is to equip advisers to talk to their clients about responsible investment and answer their questions. In order to prepare in particular for the upcoming changes in MiFID II and the associated new challenges, NAM has expanded the existing training programme with five new videos:

With the help of the information packages offered by Nordea, advisers have the opportunity to relax and prepare for the challenges ahead.

Sustainable Finance Disclosure Regulation (SFDR)

The programme is rounded off with two new video training units focusing on climate change, which is still the number one ESG concern for retail investors. Apart from educational videos, Nordea’s ESG e-learning programme includes animations, case studies and a glossary. Upon completion of the training programme, participants receive a personalised certificate and are in several markets awarded Continuing Professional Development (CPD) credits.

The video puts the spotlight on SFDR: How does the SFDR product classification work and how can it help minimise greenwashing? What information do asset managers have to disclose under the SFDR to show that their products are truly sustainable? Changes to MiFID II The upcoming regulatory changes are the focus of this video. How will they impact advisers? How far will the new MiFID II requirements be met by SFDR requirements? Principle Adverse Impacts (PAI) The third new video focuses on PAI: What are they and how can advisers use them to objectively evaluate and compare sustainable products?

Interested? Find out more:

Instructor-led presentations For those who prefer to learn under guidance and with a contact person for direct queries, NAM offers instructor-led training sessions. A three-part series of educational presentations aims to equip financial advisers with basic and easy-to-apply

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“The changes to MiFID II will drastically change the way distributors and advisers interact with their clients,” says Christophe Girondel, Global Head of Institutional and Wholesale Distribution at NAM. ”Advisers need to prepare for this. But the time is short. Therefore, we want to help. With more than 30 years of experience in ESG and sustainability at the core of our Nordic DNA and business model, we are well posi- tioned to assist our distribution partners.” 

knowledge about ESG, the new taxonomy, regu- lations (SFDR, MiFID II) and the effects on their business. The training courses (approx. 45 minutes each) are free of charge and carried out by Nor- dea’s experts. They cover the following topics: Module 1: “Your kickstart to ESG” An introduction to the central aspects of ESG, the driving forces behind its rapidly growing impor- tance and the reasons why sustainable investing offers financial advisers numerous opportunities to generate new business. Module 2: “ESG and regulation: SFDR – how does it impact you?” Learn about why the EU sees transparency as a central tool to fight greenwashing and how the SFDR fund classifications and reporting require- ments can help advisers to compare financial products and find sustainable investments. Module 3: “Changes to MiFID II – what do they mean for you?” A detailed analysis of why the SFDR product requirements do not match the requirements for sustainable products under the amended MiFID II regulation and a guide on how to identify a MiFID-eligible ESG solution.





Regulation: sustainability is not optional (anymore)

The Sustainable Finance Disclosure Regulation - the SFDR - requires asset managers to reveal how they integrate ESG factors into their portfolio management processes and how their products consider key potential negative impacts on sustainability. Additional disclosures apply to products expressly marketed as ESG focused in order to avoid greenwashing.

The clock is ticking...

From August 2022 the way you and your advisory team speaks to your clients will drastically change. High time to get prepared.

The taxonomy regulation aims to establish a com- mon EU-wide classification system or taxonomy for environmentally sustainable economic activities, or put bluntly: what is green and what is not. But one of the most important legislative measures that will impact the distribution of investment products is that MiFID II 1 is also being updated to align with the ESG regulation. A key fundamental aspect is the requirement to integrate sustainability preferences into the suitability assessment when providing investment advice or discretionary portfolio management. Sustainability preferences need to be assessed alongside the usual aspects of financial risk suitability. From 2 nd August 2022 it will become mandatory for distributors and advisors to assess to what extent a client should be steered towards an ESG-focused product or not. As a consequence, they should be able to explain and offer their customers various options if they want to invest in an ESG product. This will require training and knowledge about sustainability and sustainable products. We hope that this booklet will help you understand how to support your team in overcoming any ESG hurdles along the way and how to get them in shape for the long run.

New requirements:

The ESG playbook ESG is not a simple topic. Often, it can be complex and as it is a rela- tively new development in the industry , it is constantly evolving. There are many nuances, varied approaches and jargon that can make things hard to understand – for financial advisors as well as clients. To be successful, every team must first have the right motivation, equip- ment and fundamental command of the ESG topic. In order to get your sales team fit for the ESG marathon, you should consider a few points that we have summarised on the following pages.

The SFDR requires asset managers to classify investment products as Article 6 (not marketed as ESG products), Article 8 (products with ESG characteristics) and Article 9 (sustainable products). Different reporting requirements apply to each category.

While we have seen a definite shift from investors in their attitudes towards sustainable investing, they aren’t the only ones. The area has taken on greater focus for policy makers, leading to a concerted regulatory push towards sustainability. New EU regulation on sustainability is making responsible investing a mandatory consideration for industry players. So, what does this mean for fund distributors and financial advisors? Following the 2018 EU’s Action Plan on Sustainable Finance, an EU legislative package was released including key regulations regarding corporate disclosure, taxonomy and – most important for distributors and advisors – how to incorporate sustainability into investment advice.

Let’s call it the ESG playbook.

1 MiFID (Markets in Financial Instruments Directive) II is a legislative framework instituted by the European Union (EU) to regulate financial markets and improve protections for investors. Its aim is to standardise practices across the EU and restore confidence in the industry.


ESG playbook

Nordea Asset Management

All the building blocks you need

Not only does NAM support advisers in getting ready to advise their clients on ESG matters, NAM also ensures that it provides them with all the building blocks they need to construct their sustainable offerings: from NAM’s solid ESG framework and decades of experience in sustainable investing to its wide range of ESG strategies including the ESG STARS funds, which cover various asset classes and geographical regions. In addition, NAM has ensured that all its current Article 8 and 9 products, as well as any other ESG and sustain- ability-aligned launch, will qualify as suitable for clients with sustainable preferences once the new MiFID eligibility requirements are in place. This makes the choice much easier for advisers and distributors.

For more information:

If you are interested, please contact your responsi- ble sales representative.

Let’s come together!

Nordea’s ESG playbook Last but not least, Nordea provides advisory teams with an ESG handbook to help them get their sales teams ready for the challenges posed by the amendments to MiFID II. Since time is passing and August is fast approaching, it is important for heads of advisory to get their teams fit now. To this end, Nordea has updated its “ESG playbook”. The booklet was designed as a compact, easy-to- read and hands-on guide to matters around ESG. In light of the upcoming regulatory changes, NAM has now updated the handbook and supplement- ed additional tips and tricks on how advisory teams can overcome major ESG hurdles such as: How can advisers communicate the complex topic to their clients in an easy-to-understand way? How to evaluate potential responsible investment solutions and make appropriate recommendations? It’s not long now until 2 August, when the starting signal is given for the actual ESG marathon. The sooner teams start to prepare for what lies ahead, the greater the chance of success.

Nordea Asset Management (NAM) is pleased to be able to invite clients, partners, friends and colleagues once again to the traditional Midsummer festivities. Midsummer is a major event in the Nordic social calendar. On this day, families and friends in Sweden come together to celebrate the end of the long, dark winter months and to wel- come the summer by enjoying good food and drink, dancing and singing. “This year’s Midsummer celebrations are the perfect occasion to reconnect after two years apart. We are very much looking forward to meeting our partners and clients in person again,” says François Passant, Global Head of Marketing and Business Management.

Once again, NAM invites partners, clients and friends to join the Midsummer festivities.

Accordingly, the motto of this year’s festivities is: “Let’s come together!” It is the ninth time that Nordea has in- vited clients and partners from across Europe to join the festivities and enjoy the unique Midsummer atmosphere. Watch your inbox for your invitation! 

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