Varma, one of two of Finland’s largest pension insurers, announced it has invested $240m (€198m) in Nordea’s ESG-focused Emerging Stars Equity Fund, saying the fund’s active management was key given the lacking availability of ESG data in emerging markets (EM).
The earnings-related pension provider said it made the investment because it supported the promotion of its climate goals, as well as the United Nations’s Sustainable Development Goals (UN SDGs).
Varma revealed last September that it is changing the way its sustainable equities portfolio invests, bringing investments closer to the UN SDGs.
Timo Sallinen, Varma’s CIO, said: “Nordea has a well-functioning process for responsible investing and the fund has a good return history.”
The Finnish institutional investor, which said around €2bn of its €47bn of total assets was invested in listed EM equities, had been looking for an investment target for emerging markets that suited its aim of being active and a responsible global investor, Sallinen said.
While Varma has made large investments in recent years in passive ESG investment vehicles it has developed itself in conjunction with asset managers, the investor said an active approach had been important in this case.
“Environmental, social and governance responsibility data are less available in emerging markets than in more developed countries,” said Kaisa Ojainmaa, portfolio manager at Varma.
“We therefore believe that active management of the fund is essential,” she said.
On top of this, Ojainmaa said Varma appreciated the Emerging Stars Fund’s goal of influencing the companies in which it invested, in order to develop the responsibility aspects of their operations.
Varma co-developed its own ESG ETF with Legal & General Investment Management and Foxberry in December 2019, into which it directed €500m for investment in US equities.
Three months prior to this, the pensions insurer invested €200m into another ESG-focused ETF it co-developed with the same partners, giving European exposure, which was listed on the London Stock Exchange.
Asked how Nordea had been chosen for this mandate, Ojainmaa told IPE that rather than putting out a tender, Varma had a fund selection process that screened for funds fitting its investments and meeting its criteria in the best way.
Juliana Hansveden, portfolio manager of Nordea’s Emerging Stars Equity Fund, said: “Emerging markets continue to offer a lot of opportunities, and we are looking forward to delivering long-term sustainable performance to Varma and its stakeholders.”
She said she believed responsibly-run companies were more likely to succeed over the long term, which meant it was crucial to analyse ESG risks properly.
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