Climate change prompts Nordea fund to make its biggest investment shift

STOCKHOLM (Reuters) - Nordea's NDAFI.HE Swedish pension fund moved 22 billion Swedish crowns ($2.34 billion) into investments with a lower carbon footprint and strict sustainability criteria in the first half of the year, saying the move was its biggest asset shift.

FILE PHOTO: The Nordea Bank AB logo is seen at the SIBOS banking and financial conference in Toronto, Ontario, Canada October 19, 2017. REUTERS/Chris Helgren/File Photo

A number of institutional investors, including Sweden’s national pension funds, have started to divest from fossil fuel companies due to the risk their assets will become stranded as the cost of renewable energy falls.

Investors have also ratcheted up the pressure on governments with those managing over $34 trillion in assets, nearly half the world’s invested capital, demanding urgent action when leaders of the world’s 20 biggest economies met last month.

Nordea Liv & Pension Sverige, which managed 131 billion crowns as of the end of 2018, said on Thursday it had moved funds out of carbon-intensive sectors during the first half, cutting its portfolio’s carbon footprint by about 50%.

The shift related mainly to listed equities and to some extent also fixed income, Peter Sandahl, sustainability manager at Nordea Liv & Pension Sverige, a pension and life insurance subsidiary of Nordic lender Nordea, told Reuters.

“The shift is part of a broader strategy on climate and sustainability and also of how we view and manage risk and long-term returns. We can also see an increased customer demand for more sustainable pension products,” he said via email.

“We are humble about the fact that we are on a learning journey where we need to work ... across the industry to develop standards and models that can help us in this transition, and create transparency toward customers and stakeholders,” he said.

The fund has a goal that all its investments together should not contribute to global warming exceeding 1.5C, in line with the Paris Agreement.

It had last year shifted 7 billion crowns of investment from carbon-intensive sectors to companies it deemed to be at the forefront of integrating sustainability in their operations.

Sandahl said shifts made in 2018 and 2019 meant that a vast majority of the fund’s listed equity exposure was now in low-carbon footprint and sustainable investments and about 40% of its total assets managed was in this area.

Reporting by Esha Vaish in Stockholm; Editing by Edmund Blair