Issue 5, 2021

The Nordic Fund Selection Journal #05 (2021) highlights several key topics in institutional investing, with a focus on human rights integration, climate reporting, and systematic equity strategies. Sweden’s AP2 pension fund has advanced methods to manage human rights violations systematically in its investments, following the UN Guiding Principles on Business and Human Rights. AP2 emphasizes leveraging investments to influence companies and countries positively rather than defaulting to divestment, illustrating a pragmatic approach to balancing ethical concerns and returns. The pension fund also navigates complexities like engagement with countries such as China, underscoring the challenges of aligning investment goals with human rights objectives.

In Denmark, several pension companies are pushing for sustainability disclosures within the new EU Sustainable Finance Disclosure Regulation (SFDR), aiming notably for Article 9 “dark green” labels indicating fully sustainable products. Although perspectives differ on timeline and scope, the movement toward standardization and transparency in ESG disclosures is accelerating. Meanwhile, the Danish pension industry has adopted a joint climate reporting framework to enhance comparability and drive collaboration on reducing carbon footprints, though challenges around ESG data quality and coverage remain.

The journal also explores systematic equity investing, with experts discussing the strengths and challenges of quantitative strategies, including factor investing and ESG integration. There is broad agreement that systematic approaches require disciplined, evidence-based frameworks and careful risk management, with diversification and robust data critical to success. Although incorporating ESG factors and climate considerations remains complex, ongoing efforts aim to refine methodologies and definitions, balancing performance goals with sustainable outcomes. Overall, these themes reflect a Nordic investment community deeply engaged in integrating responsible investment principles amid evolving regulatory and market landscapes.

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Table of content

Introduction to Human Rights Integration in Investments

Discussion of the UN Guiding Principles on Business and Human Rights, the slow adoption by institutional investors, and the need for prioritizing human rights within ESG frameworks.

Sweden’s AP2 Pension Fund’s Approach to Human Rights

AP2’s development of systematic methods and processes to manage human rights violations in investments, emphasising engagement over divestment and using UN principles to guide actions.

Managing Human Rights and Leverage at AP2

Screening companies and countries for violations, engaging in dialogues when leverage exists, and considering divestment only as a last resort, with particular focus on countries like China.

Danish Pension Companies and Sustainable Finance Disclosure

Exploration of Danish pension funds targeting Article 9 “dark green” labels under EU regulation, varied industry interpretations, and challenges in broad vs. focused pension products.

Challenges and Critiques of EU Sustainable Finance Regulation

Concerns about the limitation of Article 9 to environmental factors, potential underweighting of emerging markets and transition-critical industries, and debates on comprehensive ESG integration.

Investment Leadership Transitions in Nordic Institutions

Updates on key personnel changes including appointments, resignations, and retirements at institutions like Pensionsmyndigheten, BlackRock, AP2, Folksam, and Finnish seafarers’ pension fund.

Interview with Veritas’ CIO Kari Vatanen

Insights into shifting towards faster, more active investment strategies, the challenges of modern markets, adoption of agile frameworks, and the role of intuition alongside quantitative models.

Danish Pensions Introduce Joint Climate Reporting Framework

Overview of the industry-led initiative in Denmark to create common climate reporting standards among pension funds, aiming for transparency, comparability, and alignment with EU taxonomy and Net Zero alliances.

Systematic Equities Roundtable Discussion

Key points from a roundtable on systematic equity investing including definitions, advantages, risks such as headline risk and backtesting limitations, factor timing challenges, and ESG integration complexities.

External Manager Relationships and Diversity Focus at AP6

AP6’s private equity investment strategy emphasizing strong manager relationships, navigating COVID challenges, focus on diversity and inclusion, and setting gender equality targets in portfolio companies.

ETF Trends: Balancing Scale with Sustainable Customisation

Discussion of the rapid growth of ESG ETFs, client demand for tailored sustainable investment solutions, challenges in data quality and regulation, and the evolving role of fixed income and green transition strategies in ETFs.

In the Spotlight: Curo Capital’s Malene Bason

Profile of Malene Bason focusing on impact investing challenges, liquidity issues, the need for better ESG product standards, and personal insights on work-life balance and career choices.

In Conversation: Sasja Beslik on ESG Trends

Sasja Beslik shares perspectives on the future evolution of ESG, social media activism alongside professional responsibilities, the incompatibility of short-term economic models with real ESG progress, and his role at PFA.

Nordic Fund Selection Forum 2021 Summary

Recap of the live event featuring discussions on manager selection during the pandemic, presentations on various asset classes with sustainability focus, and trends affecting asset management and fund selectors.

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