By Hamlin Lovell, NordicInvestor
Skandia’s ESG policies apply consistently to multiple entities within the group, such as Skandia Life Insurance, Skandia Funds, and Skandia Investment Management. Collectively, they have SEK 863 billion (USD 81 billion) invested on behalf of their clients as of the 2024 year end results.
Anita Lindberg heads ESG across all of these entities, which share resources, processes, philosophy and criteria for ESG. Before joining Skandia in 2019 her prior experience included being a Senior ESG Analyst at Alfred Berg Asset Management, an SRI Analyst at Swedbank Robur, and a Research Analyst at GES Investment Services. She has also spent a few years chairing Sweden’s Sustainable Investment Forum (Swesif).
Measures to meet sustainability preferences
Through Skandia Link, 117 different funds are offered, of which 24 from Skandia Funds. Most of them are reporting under SFDR article 8; 18 report under Article 9 and only two funds report under Article 6.
“Funds that Skandia designate as ‘sustainability focused’ on our platform, need to demonstrate how they systematically integrate sustainability aspects in their strategies and processes. Clients can also use a set of filters to analyze funds from different sustainability perspectives,” says Lindberg.
“Currently, we do not focus on EU green taxonomy alignment as a key indicator for funds’ sustainability characteristics but rather prefer to use our own combined criteria,” she adds. She says that the taxonomy is still too incomplete as a measure, and also stresses that the EU sustainability disclosure regulations, SFDR, is not particularly helpful when it comes to managing clients’ sustainability preferences, nor is the sustainability guidance by the Insurance Distribution Directive (IDD). It should be noted that the regulations are still evolving.
Absolute minimums and peer group comparisons
In the early days of sustainable investments, the “best in class” approach was common. Current practices, including regulatory concepts, place more emphasis on setting absolute minimums for companies’ sustainability levels. “Nonetheless it can be informative to compare leaders and laggards within some sectors. If a company is a leader in its peer group, we can be rather confident that at least they have invested time and resources over time in getting there,” states Lindberg.
Can SBTi keep up with change?
Companies’ commitments to Science Based Targets Initiative (SBTi) is an example of a forward-looking data signal. “Forward looking statements and ambitions are key to the analysis though the first step does need to be demonstrating what has already been achieved in terms of ESG management and performance,” points out Lindberg.
“The SBTi is a useful framework for assessing companies’ climate ambitions, though we do sometimes ask how SBTi as such can stay relevant in the fast-changing world we are currently living in,” argues Lindberg.
Skandia Life Insurance has a triple target approach with targets to cut fossil fuel exposure by 75% in 2025 compared with a 2018 baseline; to double green investments during the same period and have also introduced a third emissions-related target in 2024. “Our target is that at least 70% of our so-called financed emissions shall be covered by SBTi or other science-based targets by 2030, with shareholder engagement as our main tool to get there,” says Lindberg. She stresses however, that it is hard to say how the current geo-political situation will play out. “It has never before been more challenging to foresee the outcome of climate agendas of countries and companies,” she says.
“The green investment target was achieved already in 2023, thanks to significant contributions from infrastructure, green bonds and real estate investments. The fossil fuel target is somewhat more impacted by market dynamics around energy, but we have introduced some thoughtful measures to achieve a stepwise and prudent phase down, in line with established climate scenarios. The emissions-related target is still a bit early to comment, but performance will of course be linked to the future of ‘science based’ as a concept, particularly the SBTi, but is also impacted by dynamics like asset allocation, sector valuations and absolute CO2-emissions from holdings,” explains Lindberg.
Firm-wide and client chosen exclusions
Skandia has reduced exposure to fossil fuels, partly by excluding specific names in the Energy and Electric Utilities sector. Exclusions of thermal coal companies were introduced already in 2016. In contrast, defense policy is discussed in light of geopolitical events but has so far not changed. In common with many European asset owners, controversial weapons are excluded but some defense companies such as Sweden’s SAAB can be invested in by most mandates. “There are however sustainability focused funds that will also exclude conventional weapons where clients want to go further than the minimum policies,” points out Lindberg.
International norms and conventions such as the UN Global Compact are important for exclusions. In the 1990s, Skandia was the first asset manager in Sweden to exclude tobacco, including oral snuff tobacco.
“We also like to listen to evolving client preferences to inform changing exclusions,” says Lindberg.
Exclusion criteria have been consistent over the past two years, companies have been added to and taken off the list. “Some companies are borderline where our assessments can change over time”, points out Lindberg.
“We develop position statements on the website to describe our thinking about specific sectors or issues, going beyond basic criteria to more in-depth descriptions. In some cases, we simply exclude and in others we express our expectations on companies’ behavior. If they clearly do not comply, we engage or exclude,” she elaborates.
Active ownership
Skandia actively vote at 150-200 AGMs every year, mainly Swedish, based on their own policy and analysis, and supported by external analysis. Engagement is mainly bilateral for Swedish companies, but they collaborate with other investors to share insights and reach more companies. Through a mix of approaches and engagement themes, Skandia engages with around 600 individual companies on environmental, social and governance issues a year.
“Engagement can provide laggards with examples of best practices drawn from leaders. For example, in the food industry we have engaged with some of the leaders and can therefore approach laggards better informed and with clear expectations,” says Lindberg.
Direct company data and third-party data
It is easier to gather data directly from Swedish companies, based on proximity. “We are more likely to use external data for non-Swedish holdings,” she says.
For carbon reporting, there are special challenges in measuring Scope 3 emissions, which can be significant for some sectors. “Scope 3 data is most often based on estimates, impacted by many factors,” explains Lindberg
This article will feed into NordicInvestor’s upcoming special report on Sustainable Investing
