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Mandatum Life Wealth Management manages customer assets responsibly, as responsibility is an essential part of the company’s risk management process.
Mandatum Life’s Wealth Management signed the UN’s Principles for Responsible Investment in 2011. Investment operations linked to the management of customers’ wealth are implemented according to these principles. In addition, Mandatum Life has a Policy for Responsible Investing, which is updated annually.
Mandatum Life Wealth Management’s investment strategy is to favor the best companies in each sector, while taking into account long-term return expectations. The ESG analysis of investment objects has been integrated into the investment analysis and decision-making process. When assessing the risks of an investment object, Mandatum Life considers ESG issues as part of the holistic risk analysis. The ESG risk analysis focuses on the sustainability of business growth and cash flow, costs, and the ability to uphold, prepare, and adapt to environmental, social, and governance norms and requirements.
In decision-making, Mandatum Life employs best-in-class screening and exclusion. Best-in-class screening is the predominant method used to manage carbon exposure and climate-related investment risk. A decision to exclude an investment object may be taken based on, for example, sector, business involvement, norm-based factors, or controversy.
Mandatum Life Wealth Management monitors its direct equity and fixed income holdings on a quarterly basis for possible failures to respect established norms, such as the UN Global Compact. If a failure or alleged failure is detected, the following actions are considered, depending on the severity and the scale of the failure: direct dialogue with the company management or collaborative engagement. As the option of last resort, divestment of the investment is possible, if the company is unresponsive to engagement and does not take action to remediate.
Mandatum Life has also set criteria for direct equity and bond holdings based on the business involvement of the issuer. Holdings are screened quarterly. If an issuer does not meet these criteria, the security is excluded or already existing investments are divested within six months. Sector and involvement-based criteria are categorized into three tolerance groups based on the nature of business involvement.
a) Zero tolerance: The issuer of a security held may not have any direct or indirect business involvement.
b) Low tolerance: The issuer of a security held may not have direct business involvement. Some indirect involvement (below 50 per cent of turnover) is tolerated.
c) Partial tolerance: The issuer of a security held may have business involvement of up to 50 per cent of turnover.
Direct involvement refers to direct sales from the product/ product group or line of business in question. Indirect involvement refers to an indirect revenue stream, such as subcontracting or distribution, from the product group or line of business in question. The information is based on publicly available data.
Taking ESG considerations into account when selecting and monitoring investment objects is part of the work profile of every person who is making investment decisions and analyzing investment objects at Mandatum Life Wealth Management. Portfolio managers and analysts are best positioned to gain an in-depth understanding of the ESG issues of companies they cover, and to engage in a dialogue with business executives to influence matters. Investment object analysis is based on ESG data collected from public sources. To back their analysis, portfolio managers and analysts at Mandatum Life also use ESG analyses produced by external service providers. Additionally, one of Mandatum Life Wealth Management’s engagement methods is the decision to participate or not to participate as a financier in primary bond and share issues.
Mandatum Life Wealth Management’s operating practices of responsible investment are assessed and improved as a part of an ongoing business development. With the availability of ESG data improving and data granularity increasing, the risk analysis and portfolio management processes are continuously being refined and the level of ESG risk integration deepened.
The responsibility for coordinating and integrating ESG practices and developing ESG tools within the organization lies with the Sustainable Investing Working Committee, which consists of members from the investment organization, Sales, Legal, and Risk Management and Development. Mandatum Life’s Risk Management and Development unit is responsible for monitoring and reporting on sustainable investment activities.
Further information can be found in the Corporate Responsibility Report (page 69).