The Nordic Stars Equity Fund recently launched by Nordea highlights Nordic companies from various sectors that combine solid financial performance with a strong sense of corporate responsibility, explains Nordea investment expert Antti Savilaakso.
“We use a specific research methodology to analyse the corporate responsibility track record of each company up for investment. We look at the company’s policy on climate change and use of natural resources and water, for example, and assess how its actions affect these issues.”
UPM’s Biofore strategy fits the bill to a tee. When it comes to generating energy, UPM uses reliable, low-emission, cost-competitive energy sources.
The product portfolio, too, is based on renewable raw materials and sustainable sourcing. The majority of UPM products can be recycled, and the company reuses many of its products in paper and biocomposite production and in generating energy.
“We also evaluate the company’s relationship with its most significant stakeholders, such as its personnel, subcontractors, customers and investors, as well as how it deals with the local environmental impact of its production facilities,” Savilaakso adds.
Other factors up for consideration include the company’s policy on R&D investment – an area where UPM’s focus is on environmentally innovative products such as wood-based renewable diesel, biochemicals and biocomposites.
“We also carried out a general corporate responsibility analysis and found that UPM is a perfect fit for our ethical portfolio,” Savilaakso notes.
Sound ethics is smart business
Savilaakso emphasises that corporate responsibility evaluation is carried out in parallel with financial analysis.
“The market often mistakenly views good management of corporate responsibility and high returns as being mutually exclusive. In most cases, however, the truth is completely the opposite. Essentially, companies that act responsibly make a sound investment thanks to their high-quality management and long-term strategy,” Savilaakso points out.
An efficient management system enables the company to anticipate risks, assuring investors of a better return and fewer unpleasant surprises.
“Prudent management of corporate responsibility also leads to wiser investment decisions over the long term. This facilitates the work of the company’s financial managers, too, as investors are less prone to immediately sell their stock at the first sign of market fluctuation,” Savilaakso confirms.
“Ideally we look for companies that perform extremely well in both areas to include in our investment portfolio.”
Coming soon for private investors
Compared to traditional equity funds, responsible investment funds have a slightly smaller number of stocks and a lower stock turnover.
“Stocks are usually held in a portfolio for an average of 3–5 years, but in practice, the portfolio manager carries out a daily evaluation that forms the basis for stock purchases,” Savilaakso explains.
Nordea's Nordic Stars Equity Fund has initially been marketed to institutional investors, but will also be introduced to private investors on a gradual basis.