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„ Engaging is a key part of our

INSIDE NORDEA 17

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.

ISSUE 01.2022

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