AP1 and TOBAM Adopt Fossil-Free Strategies


Stockholm (NordSIP) – Investors considering sustainability as a criterion for their investments often express concern that by adopting such strategies, they might be foregoing returns in more traditional opportunities. In the hope of addressing this concern, TOBAM partnered with AP1, the Swedish public pension manager, to announce the adoption of a new fossil-free approach that they claim does not give up market premium.

According to the announcement, TOBAM has adopted a 100% fossil-fuel-free approach to the Anti-Benchmark® Emerging Markets Equity and Global High Yield strategies funds, which employ TOBAM’s proprietary Maximum Diversification® methodology. As a result, companies with significant involvement in the production, sales or extraction of fossil fuels, such as coal, coal power generation, oil and gas, are now excluded from both strategies.

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“We believe this initiative represents a real milestone, with TOBAM’s analysis clearly demonstrating that ESG can be incorporated via a systematic approach in vastly different asset classes, without sacrificing returns or the nature of an underlying investment thesis,” Majdi Chammas and Tina Rönnholm, External Partnerships and Innovation at AP1 explain. “This approach aligns perfectly with AP1’s commitments to both supporting sustainable development and secure optimal investment returns for the benefit of our scheme’s members. We have been invested in the Maximum Diversification strategy for many years. This new development reconfirms the robustness of the approach”.

TOBAM is a French research-driven quantitative asset manager that manages $7.3billion (as of June 2020) and is composed of 47 professionals in 4 offices. Its Maximum Diversification® approach focuses on building robust portfolios exposures rather than the result of the details of individually selected securities. The firm is a PRI signatory since 2011 and was recently awarded an A+ rating, by the international organisation for its strategy and governance.

“The further integration of ESG into our investment process while preserving the integrity of our approach is a significant achievement,” Tatjana Puhan, Managing Director and Deputy CIO at TOBAM added. “Our research indicates that excluding assets involved in fossil fuel activities does not significantly affect the profile of our approach in terms of performance, volatility, drawdowns, or the diversification benefit characteristics as measured by the Diversification Ratio®. Most interestingly our research has demonstrated that risk exposures remain virtually unchanged. This is one of the core properties of the Maximum Diversification approach: its capability to remain evenly exposed across all effective independent sources of risk available in the market.”

Image by Magnascan from Pixabay

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The coronavirus epidemic has further accelerated the rise of ESG into the investment mainstream. As deficits skyrocket, bond investors have an opportunity to engage with governments on climate change, argues Thomas Dillon, Senior Macro ESG Analyst at Aviva Investors.

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