Stockholm (NordSIP) – At the end of April, after a selection process that spanned from the beginning of the year through early March, Norway’s Gjensidige Pensjonsforsikring chose NN Investment Partners (NN IP) for a new listed-impact mandate. The Global Impact Equity strategy invests in high-quality companies that that make a clear contribution to the UN Sustainable Development Goals (SDGs). The strategy focuses on high economic returns, strong balance sheets and high earnings growth, supported by ESG integration and impact measurement.
“This strategy offers Gjensidige the chance to combine their financial targets with their social and environmental goals in one investment product. The strategy manages a concentrated portfolio of impact stocks focusing on businesses that make a measurable positive contribution to society,” Jaap Kraan, Nordics Director at NN IP, told NordSIP.
The Quest for an Impactful Investment Partner
Gjensidige Pensjonsforsikring found its new match following a request for proposals (RFP) launched via Global Fund Search (GFS), a platform that brings asset owners and asset managers together. “The initiative for a global impact strategy came when Gjensidige Pensjonsforsikring wanted to create new pension profiles with a clearer ESG focus,” Gjensidige Pensjonsforsikring’s Senior Investment Analyst Karoline Nakken explains.
“We wanted our new profiles to more actively contribute to the green shift by investing in companies who can facilitate reduction of climate emissions. Our clients, both institutional and retail, have shown increasing interest in sustainable funds and strategies over the last couple of years. However, I think the majority of clients in the Norwegian market are more familiar with exclusion-based strategies than impact strategies,” Nakken adds.
“In the Norwegian pension market, the challenge on the institutional side is that the employer pays the management fees for the employee’s pension savings. The institutional market, having a higher purchasing power than retail clients, has become increasingly price-sensitive in the last years, often leading to index pension strategies being chosen. Impact strategies require active management and active analysis to identify the right investments,” Nakken continues.
To focus the search and target the RFP at the right managers, Gjensidige had to define the right segment, which can be challenging when operating in a fast-moving segment such as listed impact strategies. To be able to use GFS as an anonymous place to request information can be of significant help. “We started the initial screening trying to identify fundamental strategies aligned with the ESG objectives set for the new pension profiles, using several databases and other market intelligence. Our search criteria included that the fund should have a clear ESG/impact strategy, that it should be actively managed and based on fundamental analysis. Another criterion was that the return should be consistent over time and reflect the management style. After several rounds of screening and filtration, we were able to narrow down to 30-40 funds which we sent RFI (Request for information) to using Global Fund Search,” says Nakken.
“Going through information from all of these funds, we were able to narrow it further down to a chosen few who we sent out RFP (Request for Proposal) to, which is a more detailed product specification. After receiving the RFPs, we held several meetings with all of the managers going through ESG policy, investment team/resources, investment strategy, process, risk management, portfolio construction and results. We have spent quite a lot of time on this search to make sure we find managers who are compatible with our ESG mandate and feel confident that we have found managers that meet our expectations. We are looking forward to launching our new ESG pension profiles,” Nakken adds.
Choosing Impact Strategies
With the popularity of ‘impact’ strategies growing and the limited scope of some of the earlier private impact projects, the term is often used and unfortunately also abused nowadays. Fund selection within this space requires a disciplined approach and carefully expressed expectations from the start.
“When choosing impact strategies, it is important that the managers have clear objectives. For us, it is important to evaluate that the manager has investment processes and resources in place to work towards these objectives. Another important part is that the manager reports on the progress made on meeting the objectives,” says Nakken.
“I general, it is difficult and time-consuming to avoid ‘impact washing’ and ‘greenwashing because managers have been able to label their strategies green without specific reporting criteria. New regulations and SFDR may be a small start to make this more transparent and comparable, however, it is still up to the manager to self-classify the fund,” Nakken continues.
For NN IP, the key to answering the needs of institutions such as Gjensidige is to provide a product that answers the need for a broad range of impact targets. “We often conduct research regarding the needs of investors in the Nordic region, in particular with respect to sustainable & impact products. When it comes to listed equities, some Nordic investors indicate a preference for global impact strategies targeting multiple SDGs. The reasoning for this is often a need to make a broad impact and the fact that strategies with a narrower focus can be more difficult to scale. Besides that, thematic funds and focused strategies that target one single SDG are also very much in demand, given the impact priorities such as climate,” explains Jochem Wiersma, Nordics Director at NN IP.
“Within fixed income, green bonds are by far the most popular impact vehicle. Growing global issuance and better regulation are set to further enhance the appeal of green bonds for an increasingly diverse range of investors. This is also shown by a new study we will soon publish,” Kraan adds.
Why NN IP?
“The process of choosing managers has been thorough, and parameters taken into consideration are ESG policy, investment team/resources, investment strategy, process, risk management, portfolio construction and results,” Nakken explains.
“We were grateful to be recognized for our clear and honest Impact Philosophy,” Wiersma and Kraan note, discussing their inclusion in the shortlist. The Dutch asset managers point to NN IP’s over 20 years of ESG investing experience and the strategy’s differentiating capabilities as a source of appeal for Gjensidige Pensjonsforsikring.
“After we received positive feedback, we were asked to illustrate the whole process with some stock examples. This gave us the opportunity to discuss our strategy in more depth and articulate differentiating features like our value chain analyst approach and proprietary database,” Kraan adds.
“We are proud of how we worked together in this digital environment and have been able to show Gjensidige the strengths of our impact equity capabilities and our organization. We know we set a solid foundation for a long-lasting relationship,’’ Wiersma adds.
“It is a real privilege for us to cooperate with people and institutions in the Nordics, which are willing to take responsibility and act as leaders and treat sustainability as a priority. The Nordics play a very important role in allocating financial resources in a sustainable way, and we are proud be able to play a modest role where we can,” Kraan concludes.
Picture credits: NN IP / Gjensidige / NordSIP