30.03.2016.

Socially responsible investing: is it possible to care about the planet and also to get profit?

Today Nordea Baltics has two products in focus that are offering responsible investment approach. In this article we would like to provide you a brief explanation about socially responsible investing.

People are making investments into their future, but more and more often by investments in future not only personal wealth is meant, but also future of own city, country, nation or even planet. Increase of supporters of socially responsible investments is one of the most optimistic global trends.

Socially responsible investing is a process of making right investment decisions that minimizes any negative social or environmental consequences. In other words socially responsible investors are making bigger contribution to corporations that are environmentally friendly, that promote consumer protection, human rights, and diversity.

Many responsible investors avoid businesses involved in alcohol, tobacco, gambling, weapons and fossil fuel production. The areas of concern of socially responsible investments organizations are often mentioned under ESG heading: environment, social and corporate governance.

ESG concept

ESG criteria are set of environmental, social and governance standards for company operations that are screened by socially responsible investors.

  • Environmental criteria examine company’s energy use, waste, pollution, natural resource conservation and animal treatment.
  • Social criteria looks on how a company manages relationships with its employees, suppliers, customers and the communities where it operates.
  • With regard to governance, investors want to know that a company uses accurate and transparent accounting methods and avoids conflicts of interest.

Today, the greatest concern for the socially oriented investors is environmental threats: accidents at hazardous productions, especially in nuclear power plants, thinning of the ozone layer, global warming – all that involve the risk to the life on our planet. Another priority for socially responsible investors is the employment relations: fair employment policy, equal treatment of employees, decent working conditions and the observance of human rights.

Today more and more investors are getting convinced that the concept of ESG in the assessment of the investment project does not involve additional costs, i.e. “conscious investments” does not imply to bad investment or the investment with detriment to potential income. Recent studies show that investment in accordance with personal values and ethical principles doesn`t necessarily have a negative impact on financial results.

Studies

In 2015, Deutsche Asset & Wealth Management and Hamburg University published an article about connections between ESG and Financial performance. The team conducted a meta-analysis of over 2,000 empirical studies since the 1970 and found that the majority of studies show positive findings between ESG and corporate financial performance. “The results show that the business case for ESG investing is empirically very well founded. Roughly 90% of studies find a nonnegative ESG–CFP relation. More importantly, the large majority of studies reports positive findings. We highlight that the positive ESG impact on CFP appears stable over time.”

Study, made by Oxford University and Arabesque Partners in 2015 showed, that “88 percent of reviewed sources find that companies with robust sustainability practices demonstrate better operational performance, which ultimately translates into cash flows.” Furthermore, “80 percent of the reviewed studies demonstrate that prudent sustainability practices have a positive influence on investment performance.”

In addition, many analysts today believe that the company that pays higher attention to solving social and environmental problems in the long run will be more competitive and, therefore, investments in them have greater allure.

Development and distribution of social investments is mainly connected with understanding of investors, that corporations have a major impact on the quality of our lives and our future. And there is no doubt that the growing number of socially conscious investors is a positive effect on business practices of companies and stimulates positive changes in global society.

ESG and Nordea


Savings Latvia team leader Anželika Dobrovoļska

“In Nordea we believe that ESG integration in our investment management principles will enable us to take returns with responsibility to the next level and we have already come a long way. In reality this means that all Nordea Asset Management’s products now include environmental, social and governance data as one of the factors used in assessing investments,” says Savings Latvia team leader Anželika Dobrovoļska.

Beside ESG integration in Nordea investment processes, we pay attention to businesses that offer climate solutions contributing to the transition to a low carbon sustainable economy, enhancing resource productivity while reducing pollution, waste and emissions. Investors also are starting to acknowledge that climate change presents serious global risks and demands and urgent worldwide response. Today we see many investors allocating capital to sustainable investments that will outperform in the long run.

Today Nordea Baltics has two products in focus that are offering responsible investment approach. The products are with and without capital protection. Please check out our new environmentally friendly index linked bond offer and Climate and Environment equity Fund.


Additional information:
Edgars Žilde, Communication project manager, Nordea Latvia, tel.:6 700 5434, mob.:28 452 975, edgars.zilde@nordea.com