NordSIP (Stockholm) – Finnish pension company Ilmarinen announced it seeded AXA IM’s new mutual fund, the AXA WF US High Yield Low Carbon Bonds Fund, which follows an ESG-integrated approach focused on the carbon and water intensity scores of bond issuers. The €170 million investment is part of Ilmarinen’s overall responsible investment strategy.
ESG at Ilmarinen
Ilmarinen manages €53 billion of pension fund assets and has aims for its portfolio to become carbon neutral by the end of 2035. “The offering of products representing responsible investing is also expanding in Fixed Income. Fund managers have recently launched new ETF products, where ESG issues are integrated to the products. In addition, the product development of active funds is accelerating. This new fund is one of the first of its kind globally. Thus, we wanted to invest as a pioneer in this product,” says Harri Vuorinen, Senior Portfolio Manager at Ilmarinen.
During the past years Ilmarinen has increased its investments in ESG ETF, investing €5 billion, equivalent to 90% of the passive investments in the listed equity portfolio, ESG ETF funds integrating climate issues.
“We are currently developing our climate strategy further, especially regarding asset class-specific roadmaps. We are happy that more sustainable products are starting to be available also in Fixed Income. These products are lucrative alternatives for an institutional investor,” says Karoliina Lindroos (Pictured, Left), Head of Responsible Investment at Ilmarinen.
The New Fund
The new fund aims to achieve a significant reduction of carbon footprint compared to the benchmark index and is aligned with Article 9 of the EU Sustainable Finance Disclosure Regulation (SFDR) and applies AXA IM’s Sectoral Exclusion and ESG standards policies.
“The fund builds on AXA’s over 20 years of fundamental bottom-up investment process consisting of three major components centred on assessing, valuing and managing risk,” Henrik Donner (Pictured, Right), Co-Head Nordic Markets AXA IM, tells NordSIP. “As with all of our high yield strategies, ESG analysis is embedded into our research process. This includes ESG engagement with Portfolio companies and the AXA IM’s Responsible Investment sectorial exclusion policies. However, this new strategy integrates additional ESG factors into the Low Carbon investment process.”
“The carbon intensity and water intensity of the overall strategy will be significantly lower than the benchmark,” Donner explains. “The fund can include companies that offer credible plans for reducing carbon and water intensity in the future and/or products that help other businesses improve their environmental footprints. AXA IM will also leverage its ESG engagement capabilities to encourage these companies to improve.”
“We recently announced that 90% of funds and strategies within Equities, Fixed Income and Multi-Asset fall into Articles 8 and 9 of the Sustainable Finance Disclosure Regulation (SFDR), the most demanding and stringent of the EU regulatory disclosures for sustainable investment funds. We strive to be a leader in sustainable investing both in traditional asset classes as well as alternative asset classes. Our approach to investment as a firm is active, long term and responsible,” Donner adds.
“There is strong Nordic demand for ESG in all asset classes. Many large Nordic investors are sophisticated and demand solutions that integrate ESG and push the industry to develop further. The emphasis has been on the environment with a focus on Carbon and Biodiversity, but recently we have also seen interest for the social aspect,” Donner concludes.