RI Annual Report 2021 Foreword
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Signs of the times
Sustainable investing is the new normal – what’s next?
Our planet is on track to surpass a 1.5° C temperature increase and investors are concerned. As more investment dollars flow toward the net zero transition, companies play an increasingly important role in decarbonizing the global economy. New innovations and solutions present myriad opportunities for investors – and with those opportunities, comes responsibility.
ESG isn’t just mainstream, it’s driving the market 2021 was a watershed year for ESG. A record USD650 billion poured into ESG-focused funds globally, and ESG funds now account for 10% of worldwide fund assets.2 ESG AUM is expected to reach USD50 tn by 2025.3 It’s clear that when it comes to sustainable investment, the market is clearly moving from the “why” to the “why not?”. As I look back on 2021, I am encouraged by the gains Nordea Asset Management made in deepening our active ownership activities and ongoing commitment to Responsible Investment. Specifically, we expanded our ESG reach as well as our geo- graphic reach with a new ESG hub in Singapore and raised €900 mn in commitments for the first fund of our private equi- ty venture Trill Impact. This was one of the largest first-time funds raised by an independent investment firm during the global pandemic. Decarbonizing portfolios is a vital component of driving the necessary transition toward a lower carbon future. To that end we set Net Zero targets for all of our ESG STARS equity prod- ucts. Moreover, with a handful of exceptions, all of our Article 8 and 9 funds adhere to our Paris-Aligned Fossil Fuel Policy. We also stepped up our engagement efforts, even amid social distancing restrictions, and joined the Finance for Biodiversity Pledge initiative. To create real-world impact, we engage NAM doesn’t take the easy way out. To effectuate meaningful change through our investment activities, we must reach beyond exclusion. It’s not enough to cherry-pick sustainable companies, we have to influence the behaviour of those with poorer sustainability performance, such as heavy carbon emit- ters. Active ownership – using both engagement and voting to influence companies – is paramount. The ShareAction Voting Matters 2021 report ranked us shared first in voting for climate resolutions among members of Climate Action 100+ and the Net Zero Asset Managers initiative and first in the Nordics in terms of overall voting activity. We’re ready for the new regulations As our industry shifts toward ESG integration, there is an increasing need for consistent, high quality data and disclo- sures. As more asset managers jump on the ESG bandwagon,
greenwashing is creating challenges – however, ongoing regu- latory change will mitigate this. Beginning in August 2022, reg- ulators in Europe will require distributors and financial advisors to offer MiFID-eligible ESG portfolios to clients with sustain- ability preferences. We are fully ready to embrace this new regulation with a strong track record in responsible investing, and the scale and the experience investors need. Last year, we concentrated a great deal of effort into classifying our funds according to SFDR (Sustainable Finance Disclosure Regulation). We closed out the year with 224 Article 8 funds, of which 12 are ESG STARS funds, and 5 Article 9 funds, including our Nordea 1 – Global Climate and Environment Fund, which is the largest Article 9 fund in Europe (and thus globally). All of our Article 8 and 9 funds, which represent 66% of our total AUM, will be eligible to be distributed under the MiFID II regulation. We’re fit for the future The accelerating climate crisis is concerning, but there are many reasons for optimism in 2022. Our world is waking up, and inves- tors are getting active. NAM’s 2021 ESG Survey of 1200 Euro- pean individual investors revealed 73% want advisors to offer them more ESG products. 76% increased their ESG investment in the past year, and 71% plan to increase their ESG allocation over the next 12 months.4 2022 will likely see a sustainable investment boom that favours the agile and the prepared. As always, we are working hard to stay at the forefront of ESG through engagement, regulatory expertise and development of new solutions. Since 2020 the pandemic has shone a light on ESG issues, driv- ing interest and investment in sustainable solutions. The momentum continues to increase in 2022, and we’re ready. I invite you to read our RI Annual Report to find out more about our ongoing commitment to Responsible Investment.
Nils Bolmstrand, Chair of the Responsible Investments Committee and Head of Nordea Asset Management
2) Reuters, How 2021 became the year of ESG investing, 23 Dec 2021. 3) Bloomberg, ESG by the Numbers, 3 Feb 2022. 4) Data from July/Aug 2021.
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