On occasion of the listing of the first three futures on leading European benchmarks of responsible-investment criteria, climate impact and low-carbon focus, our colleagues at Eurex spoke with Magnus Linder, Head of Derivatives at Swedbank Robur, about the benefits of having a futures markets for environmental, social and governance (ESG) strategies.
Swedbank Robur, one of Scandinavia’s largest asset managers, has 125 billion euros under management, of which about a third are placed in ESG-related funds.
Futures contracts on the STOXX® Europe 600 ESG-X Index, EURO STOXX 50® Low Carbon Index and STOXX® Europe Climate Impact Ex Global Compact Controversial Weapons & Tobacco Index will be listed on Eurex on Feb. 18.
What does ESG mean for Swedbank Robur?
Swedbank Robur´s vision is to be a world leader in sustainable value creation. Therefore, ESG principles are naturally included in the way we work. We are continuously working to integrate, and have done so for many years, sustainability issues and the ESG perspective throughout our whole business.
What role does ESG investing play in your portfolio management? Seek more alpha or ‘just’ to manage unwanted sustainability risks?
ESG provides both. Portfolio management is very much about shouldering the responsibility and taking the opportunity to drive companies towards a positive and sustainable direction. In this context, ESG provides an extra tool for us to understand, mitigate and handle unwanted sustainability risks.
Is this just a short-term hype or a lasting trend?
For us, ESG is not a short-term hype or trend. It is integrated in the way we work and do business. We have been working with ESG issues for nearly 25 years. In the early days, ESG was mostly focused on environmental issues. The scope, though, has evolved over time. What we have noticed is that over the last couple of years retail customer interest has steadily increased and that institutional investors are helping to drive these issues and possibilities forward in many areas. The overall interest and engagement for ESG issues from all parties clearly contribute to a positive change in these matters.
How do you foresee the evolution of ESG in the financial industry? Will there be further/more stringent regulations to impose stricter ESG mandates?
Regulations evolve continuously, as they should. In this case, it evolves in parallel to the broader scope of ESG. A lot more regulation is coming, and we only see it increasing further over time. This is a good development. We believe that we have to work together, across companies and borders, to solve climate issues. In that sense, regulations can help push the sustainable development forward by driving investors and companies to implement more structure into the process for everyone.
How important is the performance in ESG investing?
It is vital for us to understand and secure that the companies we invest in maintain a positive direction aligned with responsible and sustainable principles. ESG provides us with a valuable tool to further identify and understand both the risks and possibilities that companies face. Moreover, for companies, it is increasingly a must-have to include the sustainability perspective into their business, products and services. If they don’t, their clients will choose another company or product. Hence, the focus on ESG-issues is now also customer-driven.
How do you decide which ESG product to invest in and why would futures fit?
It depends on which type of fund, and its mandate. We have over 85 funds, and they all have different mandates. We always try to find the cheapest way to get the exposure we seek. For the same index, the holding time can determine if it is a basket, future or ETF.
How will you combine ESG futures with other investments, for example, combinations with specific stocks or long short with other indexes?
Our overall view on STOXX ESG products is that we hope that they will become the easiest and cheapest way to get a sustainable exposure. For us, a functioning EFP market is important.
How can you avoid that your ESG strategy is disturbed by unintended risks or cyclicality?
By continuously working to secure and maintain a high quality of Robur’s own sustainability work. Together with other players in the market, we intend to participate and drive the market forward with liquid and market-accepted products using known and credible counterparties such as STOXX and EUREX.
What role do Eurex ESG futures play? (Compared to ESG ETFs?)
It gives us the opportunity to be fully invested in a cost-efficient manner, while at the same time be able to handle in- and outflows in our sustainable funds.
What convinces you about STOXX’s ESG index concept? What would be the next logical steps for you?
We like the concept for the established companies it covers and for the analyses and application of rules. This results in neutral and credible futures. We, of course, also like the benefits we get from netting the margin requirements against our other Eurex positions.
