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April 12, 2022

Nordea's fund re-assessed: a pioneer in sustainable investing

Nordea's Global Stars Equity Fund has been re-assessed through our impact methodology. Read our summary on how it performed and why it has a Bronze medal!

Every year The Big Exchange re-assess funds for their positive impact on people and the planet. The fund manager has to prove that the fund is continuing to walk the talk. We regularly update our assessment and will award new medal ratings for every fund. Every fund re-assessment gets an update for you to find out more.

Nordea 1 Global Stars Equity Fund re-assessed

We’re pleased to let you know that this fund passed its annual reassessment, receiving a bronze medal. As impact investing matures, it is becoming more demanding to meet the threshold for a higher rating under our impact methodology.

The main reason for Nordea moving from a silver medal to a bronze medal is down to what they invest in, with just 9% more in SDG (Sustainable Development Goals) solutions than the benchmark MSCI World index. (1) That said, we are still convinced that the fund delivers positive impact, and it scores very highly for its engagement efforts. 

This fund is likely to appeal most to investors seeking exposure to the world’s technology leaders, with the top 10 holdings including the US titans Alphabet, Microsoft, Amazon, and Apple.

Sustainability is in the Nordic DNA

Nordea Asset Management is part of Nordea Group, the largest financial services group in the Nordic region. (2) Over three decades they have developed solutions that combine financial returns and a responsible investing approach which is ingrained in their culture and business model.

In line with their conviction that active ownership can enhance long-term returns and promote positive change, the firm exercise voting rights as well as engaging with companies to encourage them to improve their ESG (Environmental, Social & Governance) performance.

Global Stars - what are they stars of?

The aim of the Global Stars Equity Fund is to provide long-term returns from companies which are international ESG leaders and offer superior growth prospects (i.e. the stars). A dedicated responsible investing team conducts a thorough ESG analysis to produce a score for each prospective investment. This includes an assessment of how sustainability trends impact the business. 

The fund has a bias towards large companies and 72% of the portfolio is invested in the US, which is known for technology innovation. The UK represents 5%, whilst China and France each account for 4%. At an industry level, 25% of the fund is invested in Information Technology (IT), 17% in Financials, and 13% in Healthcare. (3)

The funds maps most closely to SDG 1 (No Poverty), SDG 3 (Good Health & Wellbeing) and SDG 9 (Industry, Innovation & Infrastructure). These represent 5%, 12% and 10% of the portfolio respectively. (2)

5 areas of impact

Thematic engagement is undertaken with holdings that have the most exposure to one or more of five areas: climate, human rights, governance, water, and biodiversity. Nordea also demonstrates leadership in collaboration initiatives. For example, in 2020 they were a founding member of the Net Zero Asset Managers initiative, a global coalition working towards net-zero carbon emissions by 2050. They score of 3 out of 3 for positive influence.

On the other hand, although details were supplied, the impact justifications for several stocks are somewhat weak and the impact reporting could be stronger. That said, a quarterly ESG report for the fund and an annual responsible investments report for the firm are provided. However, the somewhat piecemeal public reporting means the fund scores 2 out of 3 for transparency.

Currently we estimate that around 40% of the portfolio is invested in positive outcomes, and the number of ethical exclusions is low. (1) Overall, the fund receives a bronze medal and is on the cusp of retaining its silver rating, but this could be improved with greater transparency on why holdings were selected. We would like to see a full impact report and impact rationale based on the core product or service of investee companies.

Impact stock example: Alphabet

This is where we take a company that the fund invests in and tell you more about what it does to show you how your money can count for more.

Alphabet’s Android operating system enables billions of people to access the internet whilst its industry-leading security, responsible data practices and privacy controls keep us safer online. Its search engine Google makes it easier to find sustainable options, such as eco-friendly travel, and as it is free to use, makes information widely accessible. Alphabet is a standard setter in energy efficiency, targeting net zero emissions by 2030 by powering its data centres with carbon-free electricity. The company is also an innovator in cloud computing and Artificial Intelligence (AI). Google Cloud offers a carbon footprint tracker to help customers reduce emissions of cloud usage, Verily uses AI to improve healthcare diagnostic tools, Calico addresses age-related diseases and Waymo is developing self-driving cars. Other projects include food delivery via drones, wind energy for smart cities, and cybersecurity. 

To learn more and read the full fund details, please take a look at our fund list. When investing, capital is at risk.

1  TBE Impact Assessment November 2021.

https://dkuk.org/profiles/nordea/

3  Fund factsheet end February 2022

Please remember that when investing, making money is not guaranteed and your capital is at risk. The value of your fund can go down as well as up. Tax treatment depends on an individual’s circumstances and may be subject to change. 

The Big Exchange (TBF) Limited is a wholly owned subsidiary of The Big Exchange Limited. The Big Exchange (TBF) Limited is an Appointed Representative of Resolution Compliance Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 574048). 

 

 

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