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Supplements » ESG Report Spring 2020

ESG roundtable: One shot at refinancing a fit-for-purpose economy

Basketball_hoopHumanity has a one-off opportunity to address the climate crisis head-on and reshape the global economy. With transition risks and opportunities imminent, setting up the winning shot is everything. Chaired by Romil Patel.

François Millet (head of ETF strategy, ESG & innovation, Lyxor Asset Management)
Eric Pedersen (head of responsible investments, Nordea Asset Management)
Patrick O’Hara (senior responsible investment analyst – public markets, USS)
Niina Arkko (responsible investment analyst, Ilmarinen)
Tomi Nummela (principal, responsible investment, Mercer)

Funds Europe – What is your key investment focus over the coming 12 months and where are you identifying good, long-term opportunities that deliver a sustainable critical mass?

François Millet, Lyxor Asset Management – Our key investment focus in the coming 12 months will be in promoting some investment schemes for which we have made products available to the market, for example the thematic exchange-traded funds (ETFs) on the digital economy, especially in the post-Covid period, on new mobility, smart cities and other thematic things. What keeps us busy is new product development with data and index partners, and, because I cover the passive management side of things, the climate-aligned benchmarks as well. 

Since the first half of 2019, we have been working on making climate transition benchmarks and Paris-aligned benchmarks available to investors and interacting with the European Technical Expert Group and various parties, including consultations on reacting to EU proposals on these benchmarks. We will be very active as we have started rolling out a climate-aligned investment solution that would be one step beyond the legacy low carbon indices. This will be a very important area of focus over the coming months for us and the big index providers – S&P Dow Jones, MSCI and so on. In terms of investment in products, those will be our main areas of investment. 

Niina Arkko, Ilmarinen – Ilmarinen is one of the largest pension insurance companies in Finland and we must invest the pension assets in a profitable and secure manner. We have applied a third dimension to this, which is sustainable manner, because over the long-term the companies that take ESG into consideration will provide better risk-adjusted returns. Over the next 12 months, we will continue our basic work and investing in this way. 

At the end of last year, we came out with climate targets and stated that we are aiming for our investment portfolio to be carbon-neutral by 2035, which is in line with Finland’s target and because of that, we have a strong focus on the climate. Rather than excluding certain sectors, we try to engage with companies to reduce their emissions. We believe that we still need certain sectors like steel – society still needs steel but it’s a heavy emitter, so rather than excluding that sector, we try to impact the companies to be as efficient as they can or support them in any new developments in carbon-free steel production. This way, we can really create change rather than excluding these sectors.

Aside from the reduction of emissions, we also look into supporting new ways of using renewable energy or energy-efficiency developments, so looking for the opportunities and impacting companies to reduce their emissions at the same time. Aside from the climate, we take a holistic view on ESG and it is integrated into all our investment decision-making, so it’s also taking into consideration social and governance aspects, and this is done in all asset classes. Over the next 12 months, we will continue this work with a strong focus on climate change.