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Nordea

PRI reporting framework 2017

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You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes

Implementation processes

LEI 03. Percentage of each incorporation strategy

New selection options have been added to this indicator. Please review your prefilled responses carefully.

03.1. Indicate (1) which ESG incorporation strategy and/or combination of strategies you apply to your actively managed listed equities and (2) the breakdown of your actively managed listed equities by strategy or combination of strategies (+/- 5%)

ESG incorporation strategy (select all that apply)

Percentage of active listed equity to which the strategy is applied
100 %
Total actively managed listed equities 100%

03.2. Describe your organisation’s approach to incorporation and the reasons for choosing the particular ESG incorporation strategy/strategies.

Norm screening strategy: Nordea wants to ensure that we do not invest in companies involved in thermal mining or producing illegal weapons or nuclear weapons. Further, we believe in the role as an active investor and strive to engage the companies we are invested in to improve their behaviour and follow internal norms. In order to do so, we need to screen our funds to identify which companies we need to exclude, and which we should initiate an engagement with.

ESG-integration strategy: Further, we believe in the means of ESG-integration. Not at least is this also an important principle in the PRI. We have therefore made ESG company specific information available to all our portfolio managers. We see this as an important part of being a responsible investor, delivering returns with responsibility, being compliant with the PRI principles and being a role model for peers within RI. Further, we believe that ESG information can make the PMs take better investment decisions, i.e improve return or not at least reduce risk.

03.3. Where assets are managed using a combination of ESG incorporation strategies, briefly describe how these combinations are used. [Optional]


LEI 04. Type of ESG information used in investment decision

04.1. Indicate what ESG information you use in your ESG incorporation strategies and who provides this information.

Type of ESG information

Indicate who provides this information  

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

Indicate who provides this information 

04.2. Provide a brief description of the ESG information used, highlighting any differences of sources of information across your ESG incorporation strategies.

We use our external service provider Ethix for screening. We further use MSCI, Oekom, Reprisk, Bloomberg, Data Stream, CDP and Solaron among others for ESG research, also to support our internal analysis.

04.3. Indicate if you incentivise brokers to provide ESG research.

04.4. Describe how you incentivise brokers.

ESG issues are scored when we choose a broker(s) to work with

04.5. Additional information.[Optional]


LEI 05. Information from engagement and/or voting used in investment decision-making

05.1. Indicate if your organisation has a process through which information derived from ESG engagement and/or (proxy) voting activities is made available for use in investment decision-making.

05.2. Additional information. [Optional]


(A) Implementation: Screening

LEI 06. Types of screening applied

06.1. Indicate and describe the type of screening you apply to your internally managed active listed equities.

Type of screening

Screened by

Description

Products and Sectors

Negative screening and exclusion of companies involved in thermal mining with 75% of revenues derived from sales of coal products, illegal weapons such as cluster munitions or companies involved in the development or production phase of nuclear weapon programmes are excluded from all funds. Further, several of Nordeas funds and mandates apply addition screening filters and exclude companies that have more than 5% of their revenues from tobacco, alcohol, gambling, pornography or other military equipment.

Activity

Nordea excludes companies violating international norms on human rights, labour rights, corruption and the environment if an engagement engagement does not lead to progress, or the company is unwilling to change. This is then done for all Nordeas funds (internally managed and WL). Further, several of Nordeas funds and mandates apply a norm exclusion screening filter rather than the engagement strategy for all other funds. This means that the fund will exclude all companies that can be identified to violate international norms instead of initiating engagement.

 

 

 

 

Screened by

Description

Nordeas ESG enhanced positively screened fund of family, the stars funds, assesses companies both based on the companys products contribution to sustainable development, how they behave (i.e if there are any controversies reported) but also how they in general manange ESG risks and opportunities. Included in the way we view a companys products contribution to SD, is also a positive or negative bias towards different sectors.

The ESG analysis and assessment looks at commitment from management, policies, management systems and targets/progress on targets related to key ESG issues within the company.

Screened by

          Rios declaration on development and the environment
        

Description

The annual screning we do with the support from Ethix, to identifiy companies that are violating international norms on the above mentioned, are based on the conventions and principles as indicated above. Ethix also has experts with key competence in specific areas that we use both to support in our work (i.e expert knowledge around occupied territory controversies), and which conventions and principles to look to as a basis and foundation for the screening. We also receive updates on the changes to Ethix assessment on ad-hoc basis.

06.2. Describe how the screening criteria are established, how often the criteria are reviewed and how you notify clients and/or beneficiaries when changes are made.

The screening criterias are rather fixed. Ethix may change or update the basis for screening, i.e new conventions for the norm screening. If Nordea wants to change the screening criterias we request Ethix to perform the screening after, this decision lies with the RI committee.


LEI 07. Processes to ensure screening is based on robust analysis

07.1. Indicate which processes your organisation uses to ensure screening is based on robust analysis.

07.2. Additional information. [Optional]


LEI 08. Processes to ensure fund criteria are not breached

08.1. Indicate which processes your organisation uses to ensure fund criteria are not breached

08.2. If breaches of fund screening criteria are identified - describe the process followed to correct those breaches.

All identified breaches are mandatory to report as incident to compliance for follow-up. 

08.3. Additional information.[Optional]


(B) Implementation: Thematic

LEI 09. Types of sustainability thematic funds/mandates

09.1. Indicate the type of sustainability thematic funds or mandates your organisation manages.

09.2. Describe your organisation’s processes for sustainability themed funds. [Optional]

Investments for the ESG enhanced stars funds are based on both a financial assessment and an ESG assessment. A company has to be "approved" by both parts before a company is investable.

Nordea also has an environmentally themed fund called Nordea Climate and Environment.


(C) Implementation: Integration of ESG issues

LEI 10. Review ESG issues while researching companies/sectors

10.1. Indicate if E, S and G issues are reviewed while researching companies and/or sectors in active strategies.

ESG issues

Coverage/extent of review on these issues

Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

10.2. Additional information. [Optional]


LEI 11. Processes to ensure integration is based on robust analysis

11.1. Indicate which processes your organisation uses to ensure ESG integration is based on a robust analysis.

11.2. Describe how ESG information is held and used by your portfolio managers.

11.3. Additional information.[Optional]


LEI 12. Aspects of analysis ESG information is integrated into

New selection options have been added to this indicator. Please review your prefilled responses carefully.

12.1. Indicate which aspects of investment analysis you integrate ESG information into.

12.2a. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis and/or portfolio construction.

12.3. Describe how you integrate ESG information into portfolio construction

For the ESG enhanced stars funds, only companies rated B or better on a scale from A to C in our in-house analysis are investable.

Integration key to managing risk:

Since ESG issues are an increasing source of risk and opportunity, we initiated a process to integrate ESG data, both positive and negative, as a factor in assessing investments. At year's end 2013, all investments were integrated. All portfolio managers in Nordea have access to ESG research and company specific information, which they can use as a basis in their overall assessment of a company, and in the investment decision process. We have for example seen than portfolio managers that look at two rather similar companies from a performance persepctive, chose highter rated companies from an ESG perspective over lower rated companies, as a way to reduce additional risk.

The ESG data can help control risk in an investment portfolio, and is a potential indicator of better performance. Full ESG integration will strengthen Nordea's profile as one of Europe's leaders in responsible investment.

12.4a. Describe the methods you have used to adjust the income forecast / valuation tool

discount rates, return forecasts, growth rates

12.2b. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis and/or portfolio construction.

12.4b. Describe the methods you have used to adjust the income forecast / valuation tool

discount rates, return forecasts, growth rates

12.5. Additional information.


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