Sustainability is surely the most important challenge we face on a global scale. At the individual level, people can face this challenge through numerous initiatives, such as recycling or the use of public transport. However, as investors we can go further. Currently, responsible investment is gaining popularity and seems to be a trend that will remain in the long term.
Responsible investment, also known as investment based on environmental, social and good governance (ESG) criteria, is an important way to integrate sustainability factors and encourage positive changes. There are numerous indications that these factors can positively affect long-term profitability and, therefore, companies are increasingly aware of the importance of managing them properly in their activity. The risks and potential rewards associated with ASG areas can easily translate into significant monetary gains or losses. For example, companies that do not meet accepted social standards may face monetary damages and their reputation may be tarnished, which would have a real impact on their balance sheets. Conversely, companies that prioritize ESG criteria often derive financial benefits from efforts related to sustainability, such as reducing energy consumption and generating waste. There is no doubt that the economic incentive associated with investing in ASG solutions has reached a turning point for consumers and companies. What was once considered a niche concept is becoming a legitimate megatrend.
The commitment of Nordea Asset Management (NAM) to responsible investment is deeply rooted in the business culture, philosophy and the Nordic business model. This is our essence. Taking into account all the important factors for customer investments, including non-financial issues, is a fiduciary obligation for us. Since we became one of the first signatories of the UN Principles of Responsible Investment in 2007, we have adjusted our framework and responsible investment tools based on a broad mix of approaches related to it.
Profitability: There is an economic incentive associated with sustainable investment
At the corporate level, NAM applies several responsible investment strategies to the funds we manage, including active interaction with companies with the aim of encouraging them to improve. Although interaction is always NAM's preferred approach, we have taken the corporate decision to exclude certain values, sectors and practices from our full range of funds (for example, companies actively involved in the production and maintenance of illegal or nuclear weapons, or who obtain more than 30% of their income from coal mining). All our funds are subject to regular scrutiny, which identifies companies allegedly involved in breaches of laws or in disputes related to international regulations on environmental protection, human rights, labor standards and anti-corruption. If a company is exposed in the scrutiny process, our ASG analysis team initiates an internal evaluation and undertakes the appropriate actions.
NAM has numerous responsible investment strategies. STARS strategies are at the forefront of our responsible investment offer and present a unique approach to generating profitability by meeting advanced ASG standards. Since the launch of the first STARS equity strategy in 2011, we have developed a set of specialized ASG solutions covering emerging, global, European, Nordic and North American markets. In addition to the STARS family, our Global Climate & Environment strategy has a portfolio based on the theme of sustainability, focused on the efficiency of resources and environmental protection, and invests in companies that address climate change.
In short, investment in ASG strategies offers many advantages and is especially suitable for long-term investors. For example, those with an investment horizon of more than 5 years. Although the investment in variable income instruments is associated with certain volatility, we believe that responsible investment allows obtaining better returns adjusted to the risk. Companies that manage the risks and opportunities related to ESG tend to be better equipped in the long term because they expose their activity to fewer risks, such as scarcity of resources or stricter environmental regulations. . (tagsToTranslate) investments (t) mark (t) difference