Skandia ups sustainable investments as AUM rise amid 'stable' recovery

Swedish pension company, Skandia, has upped its commitment to sustainable investments, after its portfolio showed signs of a “stable” recovery during Q3.

The group’s assets under management (AUM) rose to SEK 690bnm during Q3, increasing from SEK 664bn at the end of the first half of 2020, as its financial accounts for Q3 revealed a “stable” recovery following previous market volatility amid the Covid-19 pandemic earlier this year.

AUM for the group life insurance company amounted to SEK 505bn, which, whilst still lower than the SEK 508bn recorded at the start of the year, is an improvement on the SEK 492bn reported in July.

In addition to this, AUM in the traditional life portfolio amounted to SEK 495bn, compared with SEK 498bn at the start of the year, although this is again higher than the mid-year AUM of SEK 483bn.

The total returns amounted to 0.7 per cent during the first three quarters of the year, although the five year average was 6.2 per cent.

Skandia President and CEO, Frans Lindelöw, noted that the traditional life portfolio has shown “stability” during the year, proving that it is a “safe form of savings even during troubled times”.

The group also noted that, as a result of the recovery in the financial markets and the positive development of the stock market during Q3, the bonus rate on the traditional management was raised from 2 to 3 percent on 1 September.

Meanwhile, the group’s mutual funds saw AUM in unit-linked and custodian insurance amounting to SEK 167bn, compared with SEK 157bn for the first half of the year, and SEK170bn at the start of the year.

Lindelöw, said that the development of the coronavirus had continued to dominate news reporting and affect movements in the financial markets during the third quarter, clarifying however, that there are signs of progress.

He stated: “The world's economies and our traditional life portfolio are recovering stably after the cases that occurred earlier in the year.

“Stock markets fell sharply in March and then recovered. Economic activity bottomed out in the late spring and the world economies are recovering stably.”

The group has also boosted its sustainable investment offering in order to meet its customers’ “growing expectation” of Skandia as a sustainable company, and to contribute to a “sustainable transformation” in the industry.

Lindelöw stated: “During the year, we launched several actively managed funds with a focus on sustainability, and during the third quarter, fossil-free index-linked funds were launched with the market's lowest fees in the sustainability category.

“Furthermore, as part of the work to increase the share of climate investments, we have invested SEK 425m in the government's first green bond. The bond will help accelerate climate change in order to achieve Sweden's environmental and climate goals.”

At the end of the quarter, Skandia launched a “climate roadmap” aimed to support the two-degree goal, which would see the traditional life portfolio's holdings in fossil fuels decrease by 75 percent by 2025.

Furthermore, the group has also excluded 25 companies in fossil energy, which applies to both the traditional life portfolio and its own fund offering, explaining that owning these companies would mean both a financial and climate risk.

Lindelöw emphasised that by “sharply reducing” its investments in fossil fuels, the group can free up capital for greater renewable energy and green technology investments.

He concluded: “Through the change, the traditional life portfolio will be stronger and able to contribute to climate change.

“We were able to quickly change operationally as a result of the changes that the pandemic has brought so far, both internally and to support our customers, and are stable in a situation that continues indefinitely.

“We have a long-term perspective and run the business responsibly to ensure good returns, contribute to sustainable value creation and create security for generations."

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