Handelsbanken sees significant growth in ESG index funds
Index provider Solactive recently reported that Swedish asset manager Handelsbanken had released five new Paris-aligned index funds tracking the Solactive indices.
Solactive wrote that, right from their inception, the new portfolios would exceed the minimum requirements of Paris-aligned Benchmarks and start with a reduction of greenhouse gas emission levels of 55 per cent.
Emma Viotti (pictured), Head of Passive Investments at Handelsbanken Fonder, commented at the time: “Reallocating capital to sustainable investments is a cornerstone of the EU Action Plan and for us it was a given, as it has been throughout the years, to move our current AUM in a more sustainable direction rather than creating new offerings. Shifting our core global index offering to Paris Aligned Benchmarks supports our target to reduce the carbon intensity of our portfolios by 50 per cent until 2030 and is an important step on our journey towards net zero.”
Handelsbanken was formed in 1871, and is the oldest company on the Swedish Stock Exchange. Viotti explains that Handelsbanken’s fund business has assets of EUR85 billion for Swedish and other Nordic clients. The ETF business is smaller, and arrived largely through the 2004 purchase of XACT ETFs.
“Climate change has been a strategic area of focus at Handelsbanken Fonder for many years. We have excluded investments in coal-based companies since 2015, and have had a restrictive approach to the entire fossil-fuel industry for many years,” Viotti says. “In 2018, in our Policy for shareholder engagement and responsible investment, we undertook to expand our exclusion strategy regarding fossil fuels to cover the majority of our funds.”
The last 10 years have seen positive growth in assets for Handelsbanken, with net inflows at twice their market share, and 40 per cent of the net inflows in the Swedish market in 2020.
Handelsbanken’s asset management business is divided into three main business areas focusing on passive management including ETFs, under the brand name XACT, active equity and fixed income and solutions.
Viotti says: “By the end of the first quarter, we had roughly EUR84 billion in total AUM divided over 104 funds. Over 95 per cent of our AUM is invested with sustainability criteria, and our investor audience is mixed. On the index fund side, the audience is large Nordic institutions whilst retail flows have gone mainly into our solution’s offering.”
The passive business index funds, ETFs and passive solutions built on Handelsbanken’s index funds are roughly 28 per cent of our AUM.
“Incorporating ESG factors in our index offering has been our main focus for several years,” Viotti says. “We started already in 2005 with our first ‘Ethical’ index fund and since then we have moved more and more funds into benchmarks and strategies incorporating ESG factors. Our Nordic clients have, in my opinion, also been in the forefront with regards to sustainability and today I would say ESG is prerequisite to be an eligible provider to these clients.”
The driver behind ESG growth is, Viotti says, that the firm believes it is their responsibility as an asset manager to create financial returns and at the same time also promote a sustainable future.
“It is driven by the sustainability goals that we have set within the Asset Management on Paris Aligned Portfolios and reducing our emission intensity by 50 per cent to 2030, but also we see that sustainability is important for our clients. Many of our large institutional customers set sustainability goals of this type, so this is also a way to help them achieve their goals given that our products have a clear commitment relative to the Paris Agreement.”
Looking forward, Viotti says that the firm aims to continue to the move to Paris Aligned Benchmarks for more funds. “Another very important part as an asset manager is engagement and active stewardship,” she says. “Being an active owner, partnering and also pushing companies to develop their sustainability strategies. We have a strong focus in 2021 on strengthening our engagement activities, especially to be clearer on targets in order to achieve results and real-world outcomes. I also think collaboration with other investors will be key for successful engagement outcomes.”