Published

7 January 2015

Mistra’s exemplary sustainable
asset portfolio

Mistra has long striven for sustainability in its asset management. This profile has proved successful in several ways. The carbon footprint from Mistra’s equity fund investments, for example, is 60% lower than the benchmark index this year. Nevertheless, the return is good.

‘This year, our equity fund holdings have risen in value by more than 20% to date, and the return on the whole portfolio has exceeded 12%. These are figures you have to be very pleased with these days,’ says Mistra’s Chief Executive Åke Iverfeldt.

On 3 December Mistra held a seminar on sustainable asset management, with speakers including David Blood from Generation Investment Management, one of the world’s leading managers of sustainable investments. Mistra was the first equity owner to invest in Generation’s funds, and this decision has proved a wise one in terms of return.

Iverfeldt noticed great curiosity in the financial sector both before and after the seminar.

‘Interest in long-termism in asset management has well and truly taken off. Sustainability aspects are a matter of improved potential return and reduced risks,’ he says.

Long history of sustainable investments

Mistra’s ideas about sustainable investments started developing some 15 years ago. The idea was that the benefits derived from its research programmes should not be offset by an asset-placing strategy with negative effects on societal development. From the start, it was a matter of eliminating undesirable investments, i.e. investing responsibly. Today, the work is based on finding the best investments in terms of both return and sustainability. It means placing funds in assets that are sustainable not only in terms of climate, but also in other respects — regarding resource efficiency, biodiversity and dispersal of toxic chemicals, to name just a few.

Diversified portfolio

Mistra invests its capital in various funds provided by external asset managers, with whom an active dialogue is pursued to keep trying to reduce the carbon footprint of equity investments. This, according to Åke Iverfeldt, is not entirely uncomplicated. Simply choosing certain sectors that naturally have a smaller footprint than others is not enough. Just investing in the financial sector and getting out of the materials sector undoubtedly reduces the footprint of our own portfolio, but does nothing to enable us to join in making the materials sector more climate-smart.

Investing instead in what is best in particular sectors, in terms of both return and climate, pushes development in the right direction in each of them. Mistra therefore now invests in funds that have a normal diversification among various sectors and that select the best companies in each. It is this strategy that has given the portfolio a carbon footprint 60% lower than the benchmark index.

The method affects the result

Nordea has helped Mistra to work out the carbon footprint of the equity portfolio on the basis of a method developed by the company TrueCost. As Åke Iverfeldt is well aware, this is one of several current international methods and results may vary depending on which method one has chosen. The results are affected by method choices, assumptions and system limits — and one must, in his view, be aware of this.

‘But every method works if you stick to it and want to follow the trend of a footprint, or compare it with a benchmark index developed by the same method. However, there’s definitely a need for standardisation,’ he adds.

How, then, has Mistra’s notion of sustainability affected its return over the years? Mistra started 20 years ago, with SEK 2.5 billion (bn) in assets. To date, SEK 4.5bn has been distributed in research support and Mistra still has more than SEK 3bn left.

‘That means that Mistra’s asset management strategy has performed well. It shows that there’s no contradiction between sustainability and return. Our first priority is nonetheless to get a good return so that we can fund more research,’ says Åke Iverfeldt.

Text: Thomas Heldmark, Vetenskapsjournalisterna

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