As the landscape for sustainable finance continues to evolve, the preferences of institutional investors become increasingly detailed and specialised. To assist clients with their needs, asset managers need to be nimble and able to draw from an ever more sophisticated toolkit of sustainable investment options. Arnaud Bruyneel, Head of Nordics for State Street Global Advisors (SSGA) shared his thoughts about the risks and opportunities available to clients and SSGA’s ability to navigate these.
A Sustainable Asset Manager in the Nordics
“SSGA’s value proposition stands on our established track record, expertise and ability to offer a customised service,” Bruyneel says. “Our existing relationships with global asset owners are grounded on our reputation and the credibility of our commitment to address their investment needs.”
“SSGA’s dedicated Nordic Team assists clients with a wide range of investment solutions, across various asset classes, with different risk strategy and return profiles. We have been active in the Nordics for many years, managing US$ 45 billion on behalf of clients in the region, with our team travelling regularly to assist with bespoke investment solutions,” Bruyneel continues.
“We have a strong presence across the Nordics. We also have a long and successful history of launching strategies on the back of specific requests from Nordic clients, such as Finnish pension fund Varma, which was a seed investor in our Sustainable Climate Corporate Bond Fund in 2021,” Bruyneel explains. “We have since upgraded our climate investment framework with forward looking metrics. In our recently published case studies on climate-thematic investment solutions, we include an example for a Nordic client”, Bruyneel adds.
Customisation is Key to Providing Tailored Solutions
According to Bruyneel, the key to SSGA’s success lies in its ability to provide investors with flexible solutions that can be tailored to their requirements. “Asset owners need us to be able to incorporate new information about financial conditions, sustainability factors and their evolving needs. The ability of an asset manager to develop flexible and tailored solutions is crucial to meeting the wide range of requirements investors face” Bruyneel argues.
“When sustainable investing was just starting, the focus was on exclusions, so we would often focus on segregated mandates. But now the market is a lot more sophisticated. Some investors might want to benchmark their passive portfolio to a third-party index, while others might instead prefer a Custom Manager Solution, where the client’s restrictions and targets are an integral part of the portfolio construction process. We have developed a proprietary climate investment framework across asset classes that you can compare to a sustainable menu. Clients can eat à la carte or tweak an existing strategy to focus on some metric, theme, or specific SDGs,” Bruyneel says.
“The breadth of our sustainable investment capabilities enables us to meet a wide spectrum of investors’ objectives, from tracking an off-the-shelf index, through a customised version of an index with sustainability objectives integrated into its design, to an active strategy with sustainability features that remains benchmarked against a standard index,” Bruyneel adds. “Finally, we are also product agnostic as we can offer funds, including UCITS structured as mutual funds as well as ETFs, or segregated mandates, whichever wrapper is preferred by the client,” Bruyneel continues.
Data is Key to a Bespoke Offering
Bruyneel uses the example of a customised climate bond strategy with forward-looking metrics developed for a Nordic pension fund at the end of 2023 to illustrate the power of bespoke solutions.
“A Nordic pension fund wanted to align its existing US corporate bond indexed strategy with a robust sustainable investing framework that incorporated both forward- and backward-looking metrics into a customised version of the State Street Sustainable Climate Corporate Bond Strategy,” Bruyneel says.
“In Q2 2024, the customised climate bond strategy successfully aligned the Nordic pension fund’s investment approach with its sustainability framework, while also meeting its financial objectives,” Bruyneel argues.
The success of this case study would not have been possible without SSGA’s Sustainability Data Platform, which includes more than 50 data sets from 10 data providers, leveraging thematic information from leading third-party vendors. “The data covers a range of metrics, including sustainability ratings and scores, thematic sustainability topics such as climate, corporate governance, controversies, product involvement, and impact. Combining a multi-source data architecture with our proprietary sustainability insights provides us with the expertise and flexibility needed for extensive data collection and integration,” Bruyneel says.
Customised Approach Helps Navigating Complex Landscape
“SSGA’s guiding principle is its belief in the power of choice,” Bruyneel argues. An asset manager’s ability to offer the right products depends on its ability to leverage its technical expertise. However, Bruyneel also acknowledges the importance of cultural sensitivity for a global asset manager navigating a wide range of specific perspectives on sustainability for a variety of client groups.
“SSGA has been engaging with portfolio companies through our stewardship program since 2011, and our long-standing commitment to provide sustainable investing products to our clients is underpinned by our investment expertise and reporting capabilities. We have developed tools and solutions to implement strategies for clients seeking to achieve net zero emissions. We are able to help them achieve this goal through a combination of portfolio decarbonisation, increased investment in climate solutions or green technologies, and/or, improved engagement, reporting and disclosures,” Bruyneel explains.
SSGA continues to develop its array of investment products and strategies, including ETFs, mutual funds, institutional funds and customisable SMAs across different asset classes, driven by its client centricity approach.
“We believe all investors deserve the opportunity to build investment portfolios matched to their goals and preferences. Besides bespoke strategies, SSGA’s proxy voting choice program, available to some clients, empowers them to direct the proxy voting of shares owned by the eligible funds in which they are invested in,” Bruyneel adds.
The Power of Engagement and Stewardship
SSGA’s sustainability capabilities extend beyond the construction of solutions that take into account principles of the Paris-Accord to also include climate considerations in engagement and stewardship.
“Companies across markets and industries are exposed to varying levels of physical, regulatory, economic, and transition risks related to climate change, but they can also benefit from opportunities associated with the transition to a lower-carbon economy,” Bruyneel says.
“For clients that appoint us to interact with companies and execute their voting rights at shareholder meetings, SSGA’s Asset Stewardship program focuses on engaging with investee companies to mitigate risk to our clients’ portfolios and seek long-term value creation. For clients that wish to take a different approach, we can in some instances, offer a Proxy Voting program that gives investors the choice to select from a variety of voting policies for a select group of funds,” Bruyneel adds.
“Clients and regulators have become increasingly detailed in their approach to accurate reporting, which is key to ensuring strategy effectiveness. To this end, our voting and engagement guidelines address the need for companies to provide quality climate-related disclosure in alignment with established reporting frameworks,” Bruyneel continues.
SSGA is also creating a new Sustainability Stewardship Service. “This is an innovative solution to support clients who wish for more active engagement with portfolio companies on sustainability topics. This new service will be available for institutional clients to opt in globally,” Bruyneel explains.
Beyond the Horizon
Looking ahead towards what we can expect from the future in sustainable finance, Bruyneel wants to continue leveraging SSGA’s historical relationships and offer increasingly sophisticated products to clients in an increasingly complex world.
“I look forward to us increasing our coverage of strategies we can offer. There’s a lot of positive momentum and we are looking to expand our range to cover all asset classes. We want to continue to invest in our historical relationship with our clients to ensure that we are there to partner with them and continue to help them finding sustainable and financially sound solutions going forward,” Bruyneel concludes.
Information Classification: General
Marketing Communication. For institutional/professional investors use only.
State Street Global Advisors Worldwide Entities
Investing involves risk including the risk of loss of principal.
The information provided does not constitute investment advice as such term is defined under the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell any investment. It does not take into account any investor’s or potential investor’s particular investment objectives, strategies, tax status, risk appetite or investment horizon. If you require investment advice you should consult your tax and financial or other professional advisor.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the applicable regional regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
This communication is directed at professional clients (this includes eligible counterparties as defined by the appropriate EU regulator) who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication.
The views expressed are the views of the State Street Global Advisors Sustainable Investing Strategy Team through October 3rd, 2024, and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance, and actual results or developments may differ materially from those projected.
Bonds generally present less short-term risk and volatility than stocks, but contain interest rate risk (as interest rates raise, bond prices usually fall); issuer default risk; issuer credit risk; liquidity risk; and inflation risk. These effects are usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified sustainable investment criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s sustainable investment criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
© 2024 State Street Corporation – All Rights Reserved.
7092802.1.1.EMEA.INST EXP: 30/10/2025
