In this interview International Investment's Gary Robinson caught up with Thede Rüst - lead Portfolio Manager of Nordea´s Emerging Stars Bond Strategy for a quick Q&A to look back at 2020 and ahead to 2021 in world of ESG investing.
GR: How has covid-19 and 2020 impacted in ESG generally?
TR: We believe that the importance of ESG is only more pronounced during times of crisis. It has definitely brought more attention towards the Social aspects of ESG, but also in general it has highlighted the importance of good ESG management from the risk perspective. The pandemic did not slow down the money flowing into ESG products, quite the opposite. According to Morningstar, ESG flows represented almost a third of all flows in Europe during second quarter of 2020.
GR: How can an ESG fund or provider stand out in an increasingly crowded marketplace - what are the key drivers to look for?
TR: By being consistent with ESG and truly dedicated to fostering positive change you can stand out in the market where new ESG products are constantly being launched. We believe that
- Experience matters. For example, Nordea has been doing this for over 30 years and we acknowledge that it is a journey and not something you can do overnight.
- Transparency is key when it comes to ESG. We have made our policies publicly available, and we regularly communicate on our ESG approach, policies, active ownership efforts, and funds' sustainability aspects on our website and through other public channels.
- A dedicated in house ESG team in combination with driven investor teams are crucial factors in having ESG truly integrated in the whole organisation and investment process
- Being an active owner shows true will to foster positive change
- Actively promoting best practices by participating in and leading international investor initiatives is important.
- Staying at the forefront of RI requires active approach to improving the processes and policies. ESG is a fast moving space and you need to follow the pace.
GR: How can the industry counter and remove green-washing from the agenda?
TR: Without clear industry wide standards it is hard to define what is truly ESG and what is not. Therefore, as it is currently up to investors to define what ESG means for them, transparency on ESG matters plays a key role.
Reporting on ESG KPIs and comparing your results to peers or index benchmark gives tangible information to investors. Another way to seek for extra affirmation on if the fund is truly ESG is to look into different ESG labels. Especially in Europe, many markets have their own label for SRI funds.
However, while the labels can give investors some guidance, as the labels use different guidelines and KPIs to measure ESG, they are not ultimate proof. In EU the regulator is currently trying to give some clarification regarding this matter, as the new EU taxonomy asks fund providers to categorise their products based on the level of sustainability.
This however only looks into the E in ESG, and is not as such fully covering the need for industry wide standards.
GR: What will 2021 look like for the ESG market and has ESG interest peaked? If not when will this happen if at all?
TR: The demand for ESG just keeps increasing and we believe it will not slow down anytime soon. The PwC report states that the flows into European domiciles sustainable funds tripled in 2019 compared to the previous year.
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