Swedbank introduces sustainable development standards in all its pension plans
Swedbank has started gradually applying sustainability principles in its 2nd and 3rd pillar pension plans from June this year. This entails stricter control of environmental, social and corporate governance aspects in investments going forward, including whether the investments facilitate environmental protection, respect for human rights and rights of workers, ensures as high business ethics as possible, and other sustainability principles.
In addition to the traditional criteria concerning safety, development potential, reliability of companies and other considerations, the sustainable investment policy requires careful assessment of various sustainability criteria, such as environmental and climate impact of the company in question. Hence, in sustainability-based investments, Swedbank will refrain from investing in companies violating the principles outlined above or in economic sectors not compatible with sustainability. Also, the sustainable investment policy entails a possibility to influence thinking in the business environment not only through its investment policy but also by educating corporate customers about the application of sustainability principles in their operations.
“Although it may seem at first that a sustainable investment policy does not directly concern us, in fact by our choice of who will manage our pension plans we can impact sustainable future business development as our pension funds invest our pension capital in companies of various countries. Global practice shows that environmental responsibility, issues of social nature and good governance principles matter particularly for the young generation of entrepreneurs, incl. millennials, and the biggest investment funds adapt to this trend. We at Swedbank too see a role for us in encouraging sustainability; hence we will apply sustainable investment policy to all our 2nd and 3rd pillar pension plans. In practice this means that, for example, we will not make direct investments in companies that don’t respect human rights, that produce chemical, biological or similar weapons, and will avoid investments in tobacco product makers and coal mining companies whose income from this exceeds a certain revenue threshold. A list of such companies and industries is regularly reviewed and updated. Likewise, for instance, when investing in corporate bonds, we will give preference to green bonds, if available. We will also give preference to investment funds whose management companies have joined the UN Principles for Responsible Investment, thereby demonstrating commitment to sustainability in their operations. Admittedly, transition to sustainable investing will take time as this requires a sufficiently large range of investment funds with sustainable and responsible approach that have incorporated these principles in their day-to-day work,”
– says Pēteris Stepiņš, the CEO of Swedbank Ieguldījumu Pārvaldes Sabiedrība.
How will the application of sustainability principles affect yield performance?
“Firstly, it should be underlined that ensuring as high long-term yield as possible is one of the most important goals for us as a pension manager. The keyword here is ‘long-term’ which compels us to carefully assess companies with higher operational risks, including those which are oblivious to environmental, social and governance matters (and that way stay outside the universal shift towards sustainability). Consequently, avoiding companies that are essentially subject to sustainability-related risks minimizes the risk and potential losses in investments. Moreover, observations show that sustainability-aware companies perform better in business. Sustainable companies look for creative solutions to technologies of the past, which in turn prompts development of new technologies with much higher added value. So we believe that in the long-term, such an investment policy will indeed improve the return on pension capital and is good news for all pension savers,”
– highlights Pēteris Stepiņš.