1. Sustainable investment – big business
Søren Larsen, Head of ESG
Thursday the 2nd of March 2017

2. The model company
A company where revenue exceeds cost combined with satisfied customers, engaged employees and stakeholders that see the company as part of a solution
26. december 2018

3. ESG: Environmental, Social and Governance factors
Rational data driven approach
The MSCI ESG database
KPI’s need to be material: - finansially relevant to the company - different sector to sector Global challenges Local limitations Customer potential Upcoming regulation Controversy Data from governments, EU, UN, OECD, NGO’s, media og companies themselves
5000+ companies 80+ sectors Ratings go from AAA to CCC Ratings are normal attributed sector by sector
26. december 2018

4. 2007-16: Returns a mixed feeling, lower standard dev.
Wealth development for equally weighted rating portfolio’s,
Source: Nykredit/ MSCI ESG Research 2016

5. … however something changed: Now better rating equals better returns and even lower standard deviation
Wealth development for equally weighted rating portfolio’s,
Source: Nykredit/ MSCI ESG Research 2016
26. december 2018

6. Green transition: Three scenarios with different implications
Which one do you find the more likely?
1. Disruption
Fossil fuels obsolete before 2030
New technology will reduce demand drastically
2. COP21: Goal < 2°
Individual targets country by country
EU: 43% cut by 2030
DK fossil free 2050
3. Business as usual
US-government will cancel climate change
Demand for fossil fuels will continue to grow

7. Two approaches to green transition with limitations
Engagement
Carbon footprint
Dialogue + voting
Exclusion
Coal producers
Coal and oil
Fossil revenue
26. december 2018

8. Nykredit approach to green transition engagement
Carbon foot print as risk management
Green transition engagement and voting
Comparing portfolios foot print to benchmark Scope 3 exposure? Sovereign debt and covered debt?
BP and Shell decided to embrace shareholder resolution on climate change in 2014 Battle with Chevron and Exxon on going, close race at AGM’s
ESG-risk management to fill in the gaps
Green transition dialogue/ active ownership
Risk to regulation on company level Risk from climate change Risk for disruption
Part of ESG integration/ evaluation ESG dialogue with companies where green transition or climate change is material to business
26. december 2018

9. Nykredit solution to green transition exclusion approach
Exclusion of controversies
Weapons, tobacco, alcohol, gambling and pornography
Breach of international norms i.e. Global Compact
Exclusion of fossil fuels
Coal, oil, gas producers and service of these
Producers of electricity or heat if more than 50% derives from coal
Active ESG selection
Rating of companies ESG-performance part of selection, evaluation and risk monitoring
Active ownership/ stewardship part of day to day management and voting
Afdelingen må ikke placere sine midler i følgende typer virksomheder:
Virksomheder, der har mere end 5% af sine indtægter fra produktion eller distribution af enten alkohol, tobak, våben, pornografi eller hasard.
Virksomheder, der har mere end 5% af sine indtægter fra produktion; distribution; levering af udstyr til eller servicering af produktion af fossile brændsler (termisk kul, olie og gas).
Virksomheder, der har mere end 50% af sine indtægter fra produktion af energi (kul eller varme) fra termisk kul.
Virksomheder, som krænker internationale ret defineret som konventioner tiltrådt og ratificeret af hovedparten af verdenssamfundet, herunder FN’s deklaration af menneskerettigheder, OECD Guidelines for multinationale virksomheder, ILO’s konventioner for arbejdstagerrettigheder og Global Compacts 10 principper for bæredygtig virksomhedsadfærd.
Virksomhed defineres som moderselskab, datterselskaber med mere end 50% ejerandel.

10. Disclosure and disclaimer
DISCLOSURE This material has been prepared by Nykredit Asset Management, which is part of Nykredit Bank A/S. Nykredit Bank A/S is a Danish public limited company subject to the supervision of the Danish Financial Supervisory Authority. This material is used in connection with investment advisory services to the investors for whom we have prepared the material. This material has been produced for marketing purposes and cannot be considered as investment research, for which reason no prohibition applies to trading in financial instruments referred to in the material prior to distribution. DISCLAIMER This material has been produced by Nykredit Asset Management for the personal information of investors to whom Nykredit Asset Management has distributed the material. The material is based on information available to the public and own calculations based thereon. Nykredit Asset Management does not accept any liability for the correctness, accuracy or completeness of the information in the material. Recommendations are not to be considered as offers to buy or sell the securities in question, and Nykredit Asset Management accepts no liability for transactions based on information presented in the material. Information on previous returns, simulated previous returns or future returns presented in the material cannot be used as a reliable indicator of future returns, and returns may be negative. Information on price developments presented in this material cannot be used as a reliable indicator of future price developments, and price developments may be negative. Gains may increase or decrease due to foreign exchange rate fluctuations. If the material contains information on a specific tax treatment, it should be borne in mind that the tax treatment depends on the investor's individual situation and may change in future. If the material contains information based on gross returns, however, fees, commissions and other costs may reduce returns. Nykredit Bank A/S and/or other companies within the Nykredit Group may buy, sell or hold positions in the securities referred to in the material, just as these companies may be involved in corporate finance activities or other activities for companies referred to in the material. The material may not be reproduced or distributed without the prior consent of Nykredit Asset Management. Nykredit Asset Management – Otto Mønsteds Plads København V Tlf Fax