Stockholm (NordSIP) – On a few weeks’ break from his office in Leiden, the Netherlands, Henrik Lundin, Chief Investment Officer of the IMAS Foundation, is still working, only from the more relaxed environment of his summer house outside of Stockholm. After all, a portfolio worth over 12 billion euros does not take care of itself, and there are only seven people in the whole investment team. Well, cost-efficiency was always among Ingvar Kamprad’s best-known value propositions, and although IMAS and IKEA are independently run, they both proudly share the founder’s heritage.
Taking the opportunity to catch up with Lundin, NordSIP learns about the way IMAS integrates ESG into their investment process, the foundation’s recent targeted investment in the high-profile Northvolt project, as well as about the CIO’s take on sustainability.
To start, he helps us disentangle the complicated structure of the giant IKEA group. Lundin explains that IMAS Foundation is a sister foundation to the INGKA Foundation – the owner of INGKA Group – which in turn owns and operates most of the furniture giant IKEA’s department stores globally. “We achieve our charitable purpose by ultimately providing funds to the IKEA Foundation, which is a purely philanthropic grantmaking organisation,” he says, adding that he expects the grantmaking to add up to around 400 million euros annually over the next few years. “Most of it will be directed to climate-related projects,” he adds.
According to Lundin, sustainability is at the core of IMAS’ investment process and runs across all asset classes. “That said, there is no ‘one-size-fits-all’ solution,” he comments. “We have everything from index funds to active strategies, co-investments, and direct investments in our portfolio. Depending on asset types, constraints and the liquidity profile, the strategy and the implementation will look different. Still, the objective to aim for the highest risk-adjusted sustainable return remains the same,” he concludes.
Reflecting upon the evolution of ESG integration in IMAS portfolios over time, Lundin describes an impressive journey since the start, back in 2013. “The first year, it was all about getting the market exposures, typically through replicating broad indices. A consequence of such a strategy is that you also end up with some assets that you wouldn’t necessarily want to be a long-term owner of. Step by step, we have used passive instruments to fund active strategies and sustainable investments, both in public and private markets.”
“Back in 2015, we set a target of 20% sustainable strategies within developed markets, but today we try to look for a sustainability angle in everything we do,” continues Lundin. “For the non-listed strategy, we have focused mostly on infrastructure projects. We have always excluded oil and gas in the infrastructure portfolio, but today there is a clear focus on renewables and the energy transition theme. It’s fair to say that we are now much broader in our sustainability strategy, across more sectors and asset classes, including private equity and direct lending.”
Speaking of direct investments, the question of IMAS’ involvement in the Northvolt project comes up. Earlier this year, the somewhat media-shy foundation made big news when it became known that they were one of the institutional investors backing up the Swedish battery manufacturer.
Lundin tells us that IMAS got involved in the Northvolt project already in 2018. “Back then, we didn’t have too many direct investments in the portfolio. The risk was significant, and the plans were bold, but the project also had some unique features. There was a clear need for a European battery producer to fulfil the growth of electric vehicles. The demand-supply gap was enormous, and you could also question how sustainable ion-lithium batteries were. Northvolt aimed to produce the greenest battery on earth through green energy and an ambitious supply-chain strategy, and it had staffing, especially the tech team, that could live up to the ambition.”
“What made us go for it, in the end, was Northvolt’s ability to lock in client commitments early through huge take-or-pay agreements and the involvement of numerous industrial partners in the capital structure,” explains Lundin. “My concern was that batteries would become ‘stapled goods’, with poor pricing power – especially compared to the Asian competitors. But it looks like the battery will be a differentiator and that Northvolt is in a good position to be a European market leader.”
Lundin acknowledges, however, that the company is yet to produce its first battery for the mass market. “But sometimes you just have to be willing to take risks. In the end, investments are about taking the right risks,” he says and goes on to quote IKEA’s founder, Kamprad: “Only while sleeping one makes no mistakes. The fear of making mistakes is the root of bureaucracy and the enemy of development.”
The due diligence required when investing directly in projects like Northvolt strains IMAS’s slim investment team immensely, which means that Lundin does not foresee too many such posts in the portfolio going forward. “But you have to be ready to take the chance if the opportunity occurs,” he adds.
“We have also invested in the first round of H2 Green Steel, although it is too early to say if we will commit to the next rounds,” says Lundin. However, the theme seems well-aligned with his belief that excluding certain companies from sustainable investing altogether is dangerous. High-energy consumers in the industrial sector are companies that are often overlooked by investors, according to him. “We have increasingly steered the focus to these companies and strategies. We would like to invest in areas that really can make a change.”
Other issues with sustainable investing also worry Lundin: “I’m concerned about herd mentality, overvaluation and green-washing. In the end, I’m passionate about purpose-driven entrepreneurs who really want to make a change, less so about people who see sustainability as a way of making quick money. Sometimes it’s difficult to distinguish one from the other,” he admits.
That said, Lundin seems optimistic about the future and convinced that sustainable investing will eventually become mainstream and contribute significantly to achieving the ultimate goal of saving the planet. For his part, he is determined to keep IMAS on course by honouring the values imprinted in the IKEA group’s DNA: ‘caring for the people and the planet’, ‘simplicity’ and ‘different with a meaning’.
Image courtesy of Henrik Lundin