This Tuesday, September 15th, RankiaPro had the pleasure of hosting its second Conference Call with Selectors, where we were joined by Susanne Bolin Gärtner from Danske Bank, Anders Bertramsen from Nordea, and Arnaud Bergeot from ABN Amro, to discuss the investment trend of the year, ESG. Across the asset management industry, the terms Impact investing, ESG investing and Sustainable investing have been used often and interchangeably, highlighting the importance of the theme integration, if not a united stance on terminology.
Our three guests represented the markets at the forefront of this paradigm-shifting investment strategy, with Susanne and Anders representing the Nordics, respectively based in Stockholm and Copenhagen, and with Arnaud representing the French market in Paris. As fund selectors, we asked them to each present two funds on their radar that have successfully integrated sustainability criteria into their fund management process.
Our three guests did not disappoint in relaying their perception of where the fund industry currently stands on sustainability measures, and where there is still work to be done.
Continue reading below to see the funds they chose, and why.
The evolution of an ESG standard
When asked on the evolution of ESG standardization within the investment industry, Anders beautifully summarized the consensus opinion that there will never be a true industry-wide standard due to the qualitative nature of ESG criteria, saying:
“You cannot take something as complex as ESG and turn it into one magic score and a standardization will not make our job much easier, since asset manager can easily design their fund management process around any label.”Anders Bertramsen, Head of External Products at Nordea AM
The fundamental selection work of interviewing investment teams and understanding if sustainability is at the core of their thesis is an inherently qualitative process. Anders added “It’s actually beautiful for guys like us that there is a lack of standard, because it means we have an important job to do.”
Susanne Bolin Gärtner, Head of Fund and Manager Selection at Danske Bank
At Danske Bank, where Susanne leads the fund selection team and manages the offer of both in-house white-label funds, and external funds. This mix is essential, she says, because of the differing client needs even within Nordic countries, with Swedish clients requiring a wide array of external funds, whereas the Danish market is often satisfied with a mostly in-house offer.
Susanne added that when it comes to a sustainable fund offering, she takes a complete view of their offering at Danske, believing that investors should not have to choose specific funds that are characterized as sustainable, and instead select to invest in a bank knowing that the whole offer will be, on some level, sustainable.
The two ESG funds highlighted by Susanne:
- NN Global Sustainable Equity Fund (LU1938548184): A forward-looking fund seeking to identify tomorrow’s winners, and that actively engages on material ESG factors with every company in the 40-50 company portfolio.
- C WorldWide Global Ethical Equity Fund (LU0122292674): A fund that began as an ethical, exclusion-based fund at the early stages of ESG investing, but that has since evolved to become a highly engaged manager, concentrating on 25-30 companies and actively challenging portfolio companies on their own sustainability measures.
Anders Bertramsen, Head of External Products at Nordea AM
Anders leads a large team of 24 experts on external fund selection, where they focus on white-label funds and third-party fund research within the equity, fixed income and alternative asset classes. He also oversees two teams who focus on private credit and private equity FoF investments.
His team at Nordea began looking into ESG criteria in manager selection about 4 years ago, and have since developed and implemented a proprietary rating model that was inspired by the UN PRI rating, transitioning from a framework they previously employed, which used a letter designation when comparing fund managers according to how much ESG his team fundamentally believed each manager was conducting, and which Anders described as subjective, varied, and lacking a clear framework. Their new framework, based on a comprehensive and expansive questionnaire that is sent out to mangers, looks into a wide array of subcomponents such as policies, investment procedures, monitoring, exclusions and engagements.
Although this new framework standardizes their approach, Anders admitted that it still has a level of subjectivity and ultimately it comes down to developing a personal relationship with managers to better understand their management process.
The two fixed income funds Anders highlighted are:
- Nordea-2 US Corporate ESFG Bond Fund (LU1933824366): A Nordea internal fund that was co-created with, and currently managed by MacKay Shields. This ESG fund is both exclusion and integration-based and very importantly, remains a great option as an asset allocation building block, instead of a niche option.
- Nordea-2 US High Yield ESG Bond Fund (LU1937721881): Another co-created Nordea fund, managed by Aegon US AM, and that integrates ESG throughout the analysis through the use of their own evaluation framework.
Arnaud Bergeot, Analyst on US Equities Strategies at ABM AMRO
Arnaud focused his discussion on the ESG regulation environment, and how changes in the coming months will impact the fund landscape in Europe. The launch of the European Union Sustainable Disclosure Regulation Project, with the aim of issuing a regulation applicable at the European Union level and which will hope to harmonize the ESG disclosure standards across the countries.
Through this new regulation and the resulting fund classification method, Arnaud explained that there should be additional transparency provided to fund selectors like himself, and for their clients, who research managers and their respective funds, due to marketing and reporting requirements, for example, put in place through this regulation.
The two ESG fund strategies presented by Arnaud are:
- ABN AMRO – Parnassus US Sustainable Equities Fund (LU1890796649): Launched in 2017, this ABN AMRO fund is a mandate partnership with US- based Parnassus Investments, an independent, employee-owned firm that has been a pioneer in the ESG space. Arnaud described the belief at ABN AMRO that many of the best investment professionals are within independent boutiques like Parnassus, where equity is distributed amongst the entire investment team and thus aligning the interests of clients.
- Candriam SRI Bond Emerging Market Fund (LU1434519689): A leading fund SRI manager in Europe that launched their first SRI fund in 1996, this EM fixed income strategy is managed by a team of six professionals and works closely with Candriam’s ESG research team in analyzing prospective portfolio companies through the four main domains of human capital, natural capital, social capital and economic capital.