Investment management and operations
Sampo Group is committed to responsible investment and signed the UN Principles for Responsible Investment (PRI) in 2019.
Environmental, social, and governance (ESG) issues, including climate change, have an impact on the performance, risks, and value of all companies. Taking these issues into consideration in the investment process is an important means of improving the risk-return ratio of investments, and it is a critical success factor for investment activities
At Sampo Group, responsible investment is defined as an approach to managing assets so that ESG issues are incorporated into investment analysis, decision-making, and reporting. Responsible investment also includes active ownership related to ESG issues. Responsible investment practices aim to combine better risk management with improved portfolio returns, and to reflect investor values. It complements traditional financial analysis and, therefore, ESG issues are considered in parallel with other factors affecting the risk-return ratio of investments.
The sustainability field is very broad and develops rapidly, which means that the list of criteria to consider in ESG analysis is growing. Environmental factors (E) cover e.g., climate change, deforestation, biodiversity, resource management, pollution, and waste management. Social factors (S) include e.g., human rights, labor rights, supply chain management, workplace health and safety, and the company’s relationship with different stakeholder groups. Governance (G) covers e.g., leadership, compensation, audits, internal controls, and shareholder rights.
Sampo plc, If, and Mandatum have a common group-wide infrastructure for investment management, which is managed by Mandatum Asset Management (MAM). Hastings and Topdanmark manage their investments independently according to their own investment policies and provide data for group-level reporting regularly. The ESG team at MAM provides support on responsible investment related matters and coordinates group-level reporting.
Investment management in Group companies
Sustainability is an integral part of If’s core business. In investment operations, If aims to be an active owner and to develop investment analysis, decision-making processes, and ownership practices. In 2022, If started developing climate-related targets for investments in line with If’s commitment to the Science-Based Targets initiative.
If’s investment policy describes If’s commitment to responsible investment and outlines the responsible investment strategies, such as ESG screening and integration, as well as the approach to active ownership. The policy is updated annually and approved by If’s Boards of Directors.
Topdanmark wishes to attain the biggest possible return on investments in relation to risk. Therefore, both risks and opportunities related to ESG criteria are integrated into the company’s daily investment activities.
Topdanmark wants to ensure that value creation is responsible and not in violation of the internationally recognised standards and principles or conventions adopted by Denmark. Topdanmark’s responsible investment framework applies to all assets. However, the proportional benefit of analysing different asset classes is assessed, to ensure that attention is directed to the areas where the perceived ESG risk is the greatest.
Commitment to responsible investing
Topdanmark has policies for responsible investment and active ownership, which describe the criteria applied to the company’s investment activities. The Board of Topdanmark Asset Management has overall responsibility for the policies, while Topdanmark Asset Management is responsible for implementing and continually monitoring them, and for ensuring that investments follow the principles set by the policies.
Commitment to set Science Based Targets
Topdanmark committed to the Science-Based Targets initiative in May 2022. Topdanmark also supports the Business Ambition for 1.5°C campaign led by the SBTi in partnership with the UN Global Compact. Topdanmark follows SBTi’s sector-specific guidelines for the financial sector and will set targets aligned with the Paris Agreement for investments, claims handling and own operations.
ESG integration
Topdanmark conducts quarterly ESG risk analysis of its holdings, based on ESG data purchased from an external service provider. The aggregate analysis, a market value weighted average of the ESG risk ratings, is done on equities, equity futures, and ETFs.
Besides the quarterly analysis, investments are regularly evaluated according to their ESG risk, both at company level and at an aggregate level through the service provider. While Topdanmark does not have a stated goal for the ESG risk rating, it is evaluated and monitored to avoid unnecessary risk and to understand company exposure.
Sector-based screening
Certain sectors can be considered controversial by nature and entail excessive costs for the surrounding society. According to Topdanmark’s approach, this applies to the sectors and activities listed in the table Controversial sectors.Topdanmark does not exclude companies that have only a limited exposure to controversial sectors. Instead, to monitor exposure, Topdanmark has set thresholds for the share of investee companies’ turnover arising from controversial business activities.
Controversial sectors
Topdanmark
| Sector | Threshold (percentage of turnover) |
| Fuel based on tar sands | Maximum 5% |
| Thermal coal | Maximum 5% |
| Production of smoking tobacco | Threshold for deselection 0-1% |
| Controversial weapons | Threshold for deselection 0-1% |
Norms-based screening
Topdanmark screens and evaluates existing and potential investments for any breaches of the UN Global Compact, the OECD Guidelines for Multinational Enterprises, and The UN Guiding Principles on Business and Human Rights. The company’s objective is that investment return is created without deliberate breaches of these principles. Topdanmark also has procedures for the exclusion of investments in companies with a verified breach.
Active ownership
As an active owner, Topdanmark aims to support the long-term value creation of the companies in which it invests. Therefore, Topdanmark will conduct active ownership activities to a greater extent by voting at the investee companies’ AGMs and by entering into dialogue with companies that have breached the principles of the UN Global Compact. Topdanmark will also start dialogue with investee companies if there is a contradiction with Topdanmark’s investment policy. The dialogue is typically conducted in collaboration with an external service provider. If the dialogue does not lead to a change in conduct, it can lead to divestment.
The key objectives for Hastings’ investment strategy are strength and predictability. The company aims to achieve these objectives while also driving change for good through its investment decisions.
Commitment to responsible investing
Hastings views responsible investment as a process of continuous development and improvement. The company has a Responsible Investment framework and is a signatory to the UN PRI since 2022.
Hastings has also committed to reducing the environmental impact of the investment portfolio and has pledged to reduce carbon intensity in the core investment portfolio by 50 per cent by 2030 and to be net-zero by 2050. Progress and the action plan to reach these targets will be monitored and reviewed by the Investment Committee.
Commitment to set Science Based Targets
Hastings has made a commitment to set science-based targets (SBTs) approved by the Science Based Targets initiative (SBTi) in accordance with the Paris Climate Agreement to limit global warming to 1.5°C. The commitment will see Hastings develop both short-term (5-10 years) and longer-term net-zero targets for both its own operations and investments over the next two years, with targets being disclosed to SBTi in 2024. Once the targets have been disclosed and validated, Hastings will regularly report on progress to SBTi and through annual sustainability reports.
ESG integration
Hastings aims to incorporate ESG criteria into the investment portfolio without negatively impacting returns, diversification, or the overall quality of the portfolio. Hastings’ investment managers integrate ESG criteria into their investment process, in which they seek to identify factors that they believe are key to determining whether a company would outperform or underperform the market. They deploy capital in a manner that integrates ESG criteria, while preserving and growing financial assets.Hastings has set a target ESG rating for its fixed income portfolio following consultation with investment managers and a review of the benchmark rating. Hastings is committed to maintaining an average ESG rating of “A” on its fixed income portfolio, based on MSCI ratings (scale CCC–AAA).
Negative screening and norms-based screening
At Hastings, negative screening focuses on three sectors: tobacco, controversial weapons, and coal. These sectors have been excluded following internal considerations, stakeholder demand, industry review, and consultation with investment managers.
Norms-based screening is also undertaken, and there is quarterly reporting to the Investment Committee on companies that do not meet the principles of the UN Global Compact. The Investment Committee then makes decisions on further actions together with investment managers.
Active ownership and external investment manager selection
As Hastings does not have any direct equity investments, it does not partake in voting activities.
UN PRI status and ESG practices are included as part of external investment manager selection. All of Hastings current external investment managers are signatories to the UN PRI and have responsible investment policies.
Reporting
Hastings reports quarterly to the insurance subsidiary’s Investment Committee. The reporting includes ESG ratings and confirmation of exposure to excluded or sensitive sectors, facilitating a review of the guidelines, and allowing changes to controversial positions. The Investment Committee may also report to the subsidiary’s Board of Directors when breaches arise or when recommending changes to the Responsible Investment framework.
Mandatum’s Responsible Investment Policy outlines the responsible investment policies and guidelines of Mandatum Asset Management (MAM) and Mandatum Life Insurance Company (Mandatum Life), together referred to as Mandatum. The policy describes Mandatum’s commitment to responsible investment, climate strategy related to investments, and organisation structure and responsibilities. The policy also outlines the responsible investment strategies, such as ESG screening and integration, active ownership, as well as methods used in fund investments and outsourced asset management. The policy is updated annually and approved by the Mandatum Group companies’ Boards of Directors.
Mandatum’s voting rights and engagement policy sets out the legal & regulatory requirements that Mandatum will comply with in order to meet its obligations regarding shareholder engagement and the exercise of voting rights in accordance with the Shareholder Rights Directive and other relevant regulatory requirements.
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