Mercer has entered into a collaboration with Ortec Finance to use its climate change scenarios data.

Ortec develops a broad range of scenarios and long-range projections on how the climate crisis could impact investments, from a rapid transition that limits warming to 1.5°C to a failed transition with warming above 4°C.

Mercer said the collaboration enabled it to provide its institutional investors with rigorous analysis to compare the risks and opportunities of their current allocations with potential allocations to other sectors and asset classes, such as private equity where much of the technological development for climate transition is being developed.

Steven Sowden, principal at Mercer and investment consultant (actuary), said: “Combining Ortec Finance’s advanced climate change scenarios data and experience with Mercer’s industry leading investment expertise provides clients with a deeper level of granularity, allowing them to consider whether climate impacts are fully priced into every asset class and economic sector before making reallocation decisions.”

Willemijn Verdegaal, co-head climate and ESG solutions at Ortec Finance, added: “An unrivalled amount of academic rigour goes into the scenarios, including input from Cambridge Econometrics, and being able to combine that with Mercer’s scale and the depth of expertise of their people is formidable recognition of the credibility of what we deliver to clients around the world.”

Nordic pension investors steer steady ESG course post-Russia invasion

IPE asked a range of pension funds in the Nordic region last week if they had reconsidered their ESG approach since the Russian invasion of Ukraine on 24 February. While most reported they had not done so, PensionDanmark said it had reacted through its ESG work in three ways.

Jan Kæraa Rasmussen, the pension fund’s head of ESG, said PensionDanmark had already decided to divest state-controlled Russian companies and sold all its sovereign debt in January amid the Russian military build-up near Ukrainian borders. “After 24 February we sold our remaining holdings of equity and debt in non-state Russian companies,” he said.

Secondly, Kæraa Rasmussen said the labour-market pension fund had had dialogues with several companies with significant operations in Russia to understand their options for withdrawing and shutting down their activities in the country – including discussions about how the companies could “back innocent employees in both Russia and Ukraine affected by the war”.

Thirdly, the ESG chief said the invasion of Ukraine had highlighted the need to achieve energy security in Europe and elsewhere, and the pension fund was taking part in discussions with peers in global forums for climate-friendly investors about possible implications for implementing net-zero strategies.

“One implication is clearly for societies to massively speed up the transition to a fossil-free energy supply, enhance investments in energy efficiency and move the scaling of new technologies like Power-to-X and green hydrogen forward quickly,” Kæraa Rasmussen said.

Meanwhile, a spokeswoman for AP1 told IPE the Swedish buffer fund followed geopolitical developments on a daily basis, but had not changed anything in its long-term ESG strategy. 

“However, the war has several indirect consequences for how we view our investments in the short and long term,” she said.

AP1 has a very small share of Russian holdings in the portfolio, she said, which amounted to less than 0.1% of the portfolio, adding that the fund had decided to sell these as soon as possible.

At Denmark’s ATP, head of press Stephan Ghisler-Solvang said: “We have continued our intense dialogue with Danish companies during the war. In general we are satisfied with our ESG set up as it has proven itself strong in this crisis.” He said ATP had no Russian government bonds, Russian stocks or corporate bonds before the war.

In Norway, a spokeswoman for Folketrygdfondet said the firm – which manages the Government Pension Fund Norway – had not adjusted its ESG approach this year. Similarly, Finland’s largest pension fund Keva has not re-considered its ESG approach, and has no plans to do so, according to a spokeswoman for the Helsinki-based institution.

Green, social and sustainability bonds acceleration

European green, social and sustainability (GSS) bond issuance will reach between €1.4trn and €1.6trn by 2026, PwC has forecast.

This would see the labelled bonds account for close to 50% of total European bond new in a high-growth scenario, it said.

The consultancy’s forecast draws on a survey of investors and issuers plus analysis of regulatory and market developments. PwC said issuance, rather than demand, would remain the binding constraint on the growth of the market: 88% of investors surveyed said they would further increase their allocation to GSS bonds in the next 24 months, with three out of four targeting allocation increases of over 5%.

At the same time, PwC said its analysis suggested a major acceleration in issuance by new and existing private and public sector issuers, drawn by reputation benefits and access to a broad and committed investor base.

The main challenge, it said would remain the identification of a pool of compliant assets that can be eligible for GSS bond issuance, and the expertise needed to go through the issuance process.

Pictet picked for biodiversity research programme

Pictet Asset Management has been selected as a founding partner for a new four-year global research programme geared to helping the financial industry develop strategies to protect natural capital and halt biodiversity loss.

The initiative, which will receive around €5m in research funding from Mistra, the Swedish Foundation for Strategic Environmental Research, will be overseen by the Stockholm Resilience Centre (SRC) at Stockholm University.

Pictet AM said it was the only asset management company in the Biodiversity Finance (BIOFIN) programme, chosen for its track record in “innovative thinking” in sustainable finance.

As an ‘Impact Partner’, the asset manager’s role is to provide investment expertise and to contribute to transdisciplinary research that can help bring about nature-positive changes in the financial system.

Pictet AM already has a nine-year relationship with the SRC, whose Planetary Boundary Framework provides the analytical underpinning for the Pictet-Global Environmental Opportunities investment strategy.

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Susanna Rust is deputy news editor at IPE, having joined the publication in 2015. She has been a financial journalist since 2008 – around the time of the collapse of Lehman Brothers, as it happens. It was only supposed to be a stepping stone on a path towards launching her own youth sports publication, but Pfandbriefe and wider debt capital markets reporting seem to have proved too compelling.

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