Offering sustainable investment is first and foremost about ensuring investors that moral values and negative externalities, as well as financial aspect, will be taken into consideration when investment decisions are made. However, these considerations should not necessarily come at the detriment of return and risk. Early on, Informed Portfolio Management (IPM), the Swedish systematic investment manager, understood the importance of minimizing the effect of ESG integration on performance. While the firm is mostly known for its macro systematic strategy, it has also been offering long-only equity products with a sustainable profile since 2007. The firm has integrated ESG factors into the investment process thanks to a number of specifically tailored investment models. For example, IPM’s investment process penalize companies that are not ESG compliant, while systematically recovering the lost exposure with the help of an optimizer, leading to a “best in class” approach rather than solely exclusions. When it comes to the risk side of the equation, the longer-term effects of sustainable investing are easier to understand. Avoiding investments with poor governance or that are environmentally damaging is likely to reduce risk in the long term. HedgeNordic sat down with IPM CEO Stefan Nydahl and Anna Frimodig, the Chair of IPM’s ESG Committee, for a discussion of their unique approach to sustainable investing.
In the current economic environment, even the strongest companies will face challenges from the impact of the COVID-19 pandemic. Perhaps now more than ever, understanding the factors that could have a material impact on a company’s sustainability will play a role in investment decision-making.