Sweden’s historical approach to socially responsible investments in asset management is set to undergo a change, according to industry experts.
The long road ahead
It is this new demand that has resulted in Nordea working hard over the past year. The move towards fourth and fifth-generation products implies that SRI objectives will become more embedded into mainstream products, but Beslik admits this poses a challenge to the industry. "The financial markets have been bad at communicating with investors," he says.
Communication and tools must both improve if retail and institutional investors are to be able to compare mainstream products for their respective levels of commitment to particular SRI objectives. "We have worked hard on this in order to develop just such a tool," Beslik says, adding that Nordea has begun to inform and integrate SRI into product for the institutional investor in 2011, but that it could take another couple of years for the idea to spread to all customers in Sweden.
Here, too, he notes some particular aspects of the local market, saying that private clients are more likely to drive SRI questions on the continent than they might do in the Nordic markets. Aviva Investors, which is a member of the Swedish Investment Fund Association, backs up the view that institutional investors will be the driving force. Peter Michaelis, head of sustainable and responsible investment at Aviva Investors, and Tove Bångstad, Aviva’s business development director - Sweden, both point to SRI being led by institutional investors.
"There is definitely demand there," Bångstad says, noting the likes of the AP pension funds and institutional investors such as MISTRA.
Like others, she has noticed the shift from pure negative screening towards positive screening and dialogue-led initiatives, as well as the broad-based application of UNPRI. For example, local authorities will now invest only on SRI principles, Bångstad says.
The development towards a model of engagement which brings SRI into mainstream funds, rather than simplistic negative screening applied by ‘green' or ‘ethical' funds is some- thing Michaelis sees happening.
"It is probably where the Swedish market is going in future," Michaelis says.
Bångstad adds: "That's definitely the next step. SRI is coming up in every meeting with clients I'm having."
Michaelis points to two factors that will encourage this change: it helps if funds actually do outperform, while providers will need to offer a broad range of investment products to enforce the mainstream idea.
Further evidence of the push to make SRI more mainstream is in a survey of RFPs (request for proposals) from Aviva Investors' institutional clients last year. Michaelis says the survey looked for queries on areas such as application of PRI and how environmental, social and governance issues were applied as part of the management process.
The research suggested that these were important considerations in about 90% of cases. Although this finding was on the basis of all RFPs not just applicable to Sweden, it supports the idea that others may follow where Sweden leads.
Michaelis says the challenge to asset managers of the predicted shift of SRI into mainstream products will be to understand what is right for investors in particular products.
"It will be a bit like coffee," he says. "The question will be: ‘How strong do you like it?'"
There will always be a place for SRI funds, but the discussion around them will change.