Exclusions, passive approaches and ESG the Icelandic way
At the end of last year, Tell Media Group, in co-operation with Baillie Gifford, Franklin Templeton and Pimco, invited Icelandic investors to discuss ESG integration. Tell Media Group founder Niklas Tell and Nordic Fund Selection Journal editor Caroline Liinanki moderated the roundtable.
The discussion, which was held at Canopy by Hilton in Reykjavik, kicked off with Caroline Liinanki asking the Icelandic participants how their policies relating to ESG and responsible investing have changed over the years.
SIGURBJÖRN SIGURBJÖRNSSON: “I remember the time in the early 2000s when we had the first discussions about the PRI and at that time it was just starting. We saw a number of international funds focusing on responsibility but at the time, they were not able to compete on returns. Things have changed a lot. A few years ago, some clever politicians decided that it would be good to have one sentence in our pension fund guidelines that we should look at ethical issues. There were no additional explanation or guidance and nobody knew exactly what to do with that. It has been a really interesting journey since. For us, we’ve increased what we’re saying about responsible investing every year and right now we’re working to put our policy into practice and things are moving fast.”
HREGGVIÐUR INGASON: “We had a policy in place some three years ago but as it’s such a fast-moving area, we’re constantly rethinking what we should do. To answer your question about what has changed over the past years, I would probably have to say ‘everything’. Exclusions used to be a big thing for us but that has changed and today we only have a short list of exclusions.”
HREFNA ÖSP SIGFINNSDÓTTIR: “We started in 2010 when we established an overall policy for Landsbankinn – to first put pressure on ourselves and then others. In the beginning, it was all about our internal processes of how we lend money and how we invest. I represent the investment side at Landsbankinn and we established a policy on responsible investing in 2013 and since 2015 we’ve actively interviewed listed companies in Iceland and sent them questionnaires on ESG. Now we’re co-operating with a local company in Iceland to get ratings on our assets, both of the mother company and of all the funds that we run in the subsidiary of Landsbankinn. We’ve come a long way but there are still a lot of things to be done.”
ARNE VAGN OLSEN: ”We signed the PRI in 2005 so it has been on the agenda for some time now. That said, I think we probably could have moved quicker in this area. Personally, I would also have liked to show more of what we’ve done. A lot of things have happened in the background. We still have a long way to go and we feel increased pressure from ourselves as well as from our peers, which is a good thing.”
NIKLAS TELL: “WHAT ARE THE DYNAMICS THAT HAVE PUT ESG INTEGRATION HIGHER ON THE AGENDA IN ICELAND? IS IT PRIMARILY THE PENSION FUND LEGISLATION AROUND SUSTAINABILITY OR IS THERE OTHER CONTRIBUTING FACTORS AS WELL?”
HREFNA ÖSP SIGFINNSDÓTTIR: “I feel that the development in Europe has been driving the change and we’re of course a part of Europe.”
HREGGVIÐUR INGASON: “The legislation is actually fairly soft so I would agree with Hrefna that other factors are driving this change.”
ARNE VAGN OLSEN: “The more you dig into this area, the more you realise that it’s a tool to help you make better investment decisions. That’s really why it’s catching on so fast as it will help you identify risks that you weren’t addressing to the same extent before.”
SIGURBJÖRN SIGURBJÖRNSSON: “At the end of the day, we have an obligation to make our members better off and we do that by investing and receiving good returns. As I said earlier, when we started to look at this area, returns were not good enough. That has changed and today it’s companies that are taking ESG into consideration that perform better and are more likely to perform better going forward.”
The roundtable discussion is published in issue 01 of Nordic Fund Selection Journal and a PDF of the story can be found here.
// Roundtable participants
- ARNE VAGN OLSEN (Chief investment officer of Lífeyrissjóður verzlunarmanna)
- HREFNA ÖSP SIGFINNSDÓTTIR (Managing director markets at Landsbankinn)
- HREGGVIÐUR INGASON (Chief investment officer of Lífsverk lífeyrissjóður)
- SIGURBJÖRN SIGURBJÖRNSSON (Managing director of Söfnunarsjóður lífeyrisréttinda)
- ANDREW CAVE (Head of governance and sustainability at Baillie Gifford)
- FIONNUALA O´GRADY (ESG analyst at Franklin Templeton)
- TINA ADATIA (Executive vice president and product strategist at Pimco)