Industry

Dropping Asset Managers Without Net-Zero Targets a “Last Resort” – Nordea

Targets must be made by 2024 as part of €67 billion pension provider’s 2025 climate targets.

As part of its climate action policy, Nordea Life & Pension has posed an ultimatum to its asset managers, requiring them to commit to net-zero greenhouse gas (GHG) emission targets in line with the Paris Agreement’s 1.5°C scenario by 2024 at the latest.

Asset managers that don’t comply will no longer be allowed to manage assets on behalf of the asset owner, according to Nordea’s Head of Sustainability Peter Sandahl.

“Our new requirement should come as a natural extension to their existing plans and actions,” Sandahl told ESG Investor.

However, achieving net-zero is a journey, said Sandahl, adding that Nordea will be engaging with its asset managers to support them in setting out realistic milestones.

The process will be a collaborative continuation of existing engagements which the insurer and pension provider is having with its managers regarding climate change, he explained.

“We know from our own experience that this is a complex topic and everyone has their own starting points and considerations. We will do our utmost to support in this process, but it’s clear that, as last resort, we will withdraw from managers unwilling to recognise the importance of transitioning their assets to net-zero,” he said.

Asset managers are a vital part of the process towards global decarbonisation, said Sandahl, and must therefore align their own targets with those of the asset owners they work with.

“Asset managers and asset owners both have important roles to play and it is crucial that we align long- and short-term objectives across the investment value chain.”

As a co-founder of the UN-backed Net Zero Asset Owner Alliance (NZAOA), Nordea’s announcement to its asset managers follows the publication of its climate targets for 2025. Other members of the Alliance include Allianz, the Church of England Pensions Board and Aviva.

Nordea’s targets include reducing the carbon intensity of its portfolios by at least 25% by 2024, which is within the 16% to 29% five-year reduction range agreed upon by NZAOA members.

“The coming ten years are crucial. Long-term net zero targets must contain short-term concrete goals and transparent reporting. We have, in the past few years, been working persistently to reduce the carbon intensity of our portfolios. This work continues with our target to reduce the carbon intensity by at least an additional 25 per cent by the end of 2024”, said Katja Bergqvist, CEO of Nordea Life & Pension.

The Nordea Group plans to reduce its internal carbon emissions by at least 50% by 2030, achieving net-zero by 2050, Nordea reported.

Separately, the Universities Superannuation Scheme, the UK’s largest private pension scheme has announced its intention to reduce portfolio emissions by 2050 at latest. USS Investment Management, the principal investment manager and advisor to USS, will develop a strategy in line with the scheme’s fiduciary duties. USS IM will establish short, medium- and long-term targets, but will not rely on offsets.

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

Copyright © 2021 ESG Investor Ltd. Company No. 12893343

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