Danish pension provider Velliv has redesigned the investment approach for its sustainability-focused pension product, adding asset classes, in a revamp that it says theoretically paves the way for stronger financial returns too.
VækstPension Aftryk (GrowthPension Impact), a lifecycle pension product launched by the mutual pensions firm in in June 2020, has been re-designed to rest on four investment categories – all of which the firm said are important in achieving the goal of the sustainable transition.
The Ballerup-based firm said the product, which previously invested mainly in ESG funds, is now based on the four categories which it terms frontrunners, changers, catalysts and ESG managers.
Asset classes within those categories will include listed shares, corporate and government bonds, social and green bonds, as well as alternative investments, impact investments and real estate, according to the DKK270bn (€36.2bn) pensions firm.
Sandra Metoyer, Velliv’s strategic head of sustainable investments, told IPE: “We have redesigned the product to have a more holistic focus on the sustainable transition, and what that means in terms of investments.”
Previously, she said, Vækstpension Aftryk mainly invested in ESG best-in-class funds, as well as select impact investments.
Velliv firmly believed all four of the investment categories it has picked play a role in the transition to a more sustainable society, she said.
“We have also added additional asset classes to the product, that also follow the concept of the four categories, where there is a different opportunity set within each asset class to support the sustainable transition,” she said.
“The purpose of the redesign was not to improve financial return prospects, as the product was already designed to generate robust risk-adjusted returns”
Sandra Metoyer, Velliv’s strategic head of sustainable investments
IPE asked Metoyer if redesigning the product improved financial return prospects, and allowed for a more diversified portfolio.
“The purpose of the redesign was not to improve financial return prospects, as the product was already designed to generate robust risk-adjusted returns,” she said.
“With that being said, having a broader approach to investing to support the transition to a more sustainable society in theory improves the return prospect as fewer restrictions leave more investment choices,” Metoyer said.
“This approach naturally also allows for a more diversified portfolio, both across and within asset classes,” she noted, adding that real estate was one example.
“With one of the highest carbon footprints of any sector, we see it as essential to invest in the transition of the sector,” said Metoyer.
“By allowing real estate investments in transition, as well as investments that are already EU Taxonomy aligned, not only do we get a more diversified portfolio, but we also have a greater contribution to real world decarbonisation,” the sustainable investments chief said.
As an example of a frontrunner – activities that help push the world in a more sustainable direction – Velliv cited Annapurna Finance, a financing firm mainly helping women entrepreneurs in rural areas with working capital and small loans.
A sustainability-related bond issued by Chile in 2022 that Velliv had invested in was an example of a switcher, Velliv said – a category the Danish pensions firm described as investments in change-ready companies in sectors society could not do without.
Australian mining company Pilbara Minerals, meanwhile, which mainly produced and developed lithium – a key component in batteries for electric cars — was given as an example of a catalyst.
Velliv said that its fourth category – ESG managers – encompassed many sectors, industries and countries, and helped to “create the necessary robustness and risk diversification in VækstPension Aftryk”.
It cited Danish government bonds as an example in this category, saying this was “because Denmark has generally come a long way in sustainable development compared to many other countries”.
Last week, Denmark’s largest occupational pension fund PFA announced it was making changes to its climate-focused pension product PFA Klima Plus – but warned the change, which will involve opting out of more stocks as Scope 3 emissions data is taken into account, might lower returns.
It was around five years ago that Danish commercial pension providers began launching ‘sustainable’ pension products alongside their existing ones.
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