External Managers Must Adopt Net-Zero Emission Strategies

    Share post:

    Stockholm (NordSIP) – According to Handelsbanken Fonder’s latest climate report, the Swedish asset manager will reduce the intensity of its portfolio emissions by 50% and double the proportion of investments in climate solutions by 2030. To accomplish these goals,  external managers must adhere to Handelsbanken’s sustainability framework, including the adoption of a net-zero carbon emission strategy.

    “Reaching these targets will bring us closer to our overall goal of net zero emissions by 2040. We believe in the power of collaboration in the fight against global warming, and we are actively involved in the efforts being made to meet the goals of the Paris Agreement. We are also keen to contribute to greater transparency, in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)”, says Simon Park, sustainability analyst at Handelsbanken Fonder.

    - Partner Message -

    ”Setting interim targets, to be fulfilled before 2040, will be key when doing a transition to net zero,” says Karin Askelöf, Head of Sustainability Handelsbanken Asset Management. ”Today, the emission intensity of our portfolios is about 45-60% below the global economy, with a high exposure to the Nordic region, a rich region that by all means needs to lead the way, as we think that we need to contribute our fair share with further reductions.”

    ”We will also continue to focus on increasing our investments in climate solutions. Investments in companies in transition in the energy sector (transitioning from fossil fuel-based energy to renewable energy) will be key as well as other solutions within energy efficiency,” she adds.

    Challenges Ahead

    ”The greatest challenge, as we see it, will be to achieve real-world emission reductions through engagement with companies that are heavy emitters. Here we for sure will seek collaboration with other investors,” Askelöf says.

    ”In our work and our analysis to set the goals and targets we have been waiting for the net Zero Investment Framework to take shape. We have been part of developing this framework through our engagement in IIGCC. As many other Net-zero signatories, we will lean towards this framework and the ongoing work among investors as we further develop our net-zero strategy.”

    Askelöf also mentions the need to get asset managers onboard with net-zero emissions goals. ”Several of our external managers are signatories of the Net-Zero Asset Manager Initiative. We will engage with those who have not yet made commitments.”

    A New Reality for Asset Managers

    Handelsbanken Fonder is the latest investor to demand external managers adopt net-zero goals. At the start of May, Nordea Life & Pension had already published a similar requirement. Just last week, reports emerged that Storebrand was imposing similar demands.

    “For us and our customers, sustainability is essential, and as an asset owner, we have a great opportunity to influence how the assets are managed. We are now requiring asset managers to have committed to a net-zero target in line with a 1.5-degree scenario no later than in 2024 to be able to manage assets on behalf of Nordea Life & Pension’s customers”, says Katja Bergqvist, CEO of Nordea Life & Pension.

    Storebrand CEO, Odd Arild Grefstad, was quoted as external managers need to commit to net zero emissions by 2050 and that they need to set immediate targets to reduce emission and work actively to mitigate climate change or else they would face divestment.

    Laggards may wish to look to Legal & General Investment Management (LGIM)’s experience on how to pursue net-zero targets. The asset manager was one of the original signatories of the Net-Zero Asset Manager Initiative. In a recent report, LGIM reported that it “will divest its holdings in Industrial and Commercial Bank of China, AIG, PPL Corporation and China Mengniu Dairy for unsatisfactory responses to engagement and/or breaches of ‘red lines’ around coal involvement, carbon disclosures or deforestation. These companies are in addition to China Construction Bank, MetLife, Japan Post, KEPCO, ExxonMobil, Rosneft, Sysco, Hormel and Loblaw, all of whom remain on LGIM’s existing exclusion list and who have yet to take the substantive actions required to warrant reinstatement.”

    On a positive note, LGIM also announced that “US food retailer, Kroger, previously on its exclusion list, will be reinstated in relevant funds following improvements in its deforestation policies and disclosure, as well as efforts to promote plant-based products which have a lower climate impact. It joins companies such as automaker Subaru and oil major Occidental Petroleum, that have been reinstated in previous years.”

    Image courtesy of Handelsbanken Asset Management

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.
    - Partner Message -

    Nordsip Insights

    From the Author

    Related articles