Nykredit's sustainable investments policy

Nykredit's sustainable investment policy is based on the same awareness as Nykredit's business concept of "Financial Sustainability": That sustainability may be a catalyst for higher returns and lower risk.

This is why Nykredit is committed to both Global Compact and UNPRI; accordingly, our investment policy not only pertains to Nykredit's investment funds, but also to the Group's investment of its own funds.

Two legs

Nykredit's policy rests on two legs. One leg is to push for a solution when a company violates national legislation, generally accepted UN conventions or Global Compact's principles. We see this as taking active ownership. The other leg is our objective to use knowledge about corporate sustainability performance (environment, social and governance criteria) in the investment process.

Screening of portfolios

Each quarter we screen with the assistance of our advisors all issuers of equity or bonds in our internally and externally managed portfolios of Nykredit's investment funds, as well as Nykredit's and its subsidiaries' own funds.

Active ownership

When we receive confirmed information on breach of conventions etc, we take active ownership of the relevant company in order to make it change its conduct. We may cooperate with other investors, or we may choose to cast our vote at the company's general meeting. Should the dialogue prove unsuccessful or are the company's core operations in violation of international law, we will exclude the company (see list of companies).

If the Sustainable Investment Committee decides to exclude a company, an evaluation will be undertaken within two years of the decision in order to determine whether exclusion of the company is still warranted.

Naturally Nykredit is also an active owner as part the management of assets in a broader context. Nykredit will vote on its equity positions as part of its active ownership. With attention paid to efficiency Nykredit will prioritize voting on the largest positions and in any circumstance of principal importance. Nykredit aims to vote on more than half of its equity position.

Financial instruments such as financial derivative instruments and listed index-linked funds are not subject to this policy.

Government bonds

Nykredit's ambitions of sustainable investments also include government bond investments. Our investments are based on compliance with international law. Also, we believe that democracy and human rights may improve returns.

Government bond investments may contribute positively to the development in a country, but this requires that investors are vigilant. Therefore, Nykredit's guidelines are based on three steps:

1. Exclusion of countries that are subject to financial transaction sanctions or sanctions against the leaders of specific countries. 
2. Inclusion of democracy and human rights in the investment process.
3. The OECD country risk classification is used for continuous monitoring of investments.

If a portfolio manager or an external manager wants to buy government bonds from a country in the lowest or second-lowest category of the OECD country risk classification, the portfolio manager or external manager must make a sustainability assessment of the investment. Nykredit's Sustainable Investment Committee will then decide, on the basis of the sustainability assessment, whether the investment is in compliance with Nykredit's policy. If not, the country is excluded.

Sustainability (Environmental, Social and Governance criteria) in the investment proces

Nykredit believes that sustainability can be a driver for reduced risk and better performance. This is why Nykredit uses data describing the companies’ sustainability performance (environmental, social and governance criteria) as part of its investment process. These criteria are used as part of the risk surveillance and more and more so also as part of the selection process.

Analyses on sustainability are also used in the selection and evaluation of our external managers as well as selection and surveillance of alternative investments.

Nykredit offers specialised products to customers that have another approach to responsible investments. As a minimum, all such products comply with Nykredit's sustainable investment policy.

Nykredit's Sustainable Investment Committee

Nykredit's Sustainable Investment Committee operates within the framework of Nykredit's sustainable investment policy. The Committee meets four times a year to decide on active ownership and exclusions, and to further integrate sustainability in the investment process. 

Knowledge sharing and development

Sustainable and responsible investment are not an exact science. Consequently, part of our work in the area of sustainable investment is to understand new trends, develop methodology and share our knowledge, which we do in UNPRI, Dansif and through the direct contact with our customers.

Relevant links

CSR Publication 2016

Climate and environment report 2015

Financial Sustainability

Sustainable Investments

UNPRI Public Transparency Report 2016