Consultant Cerulli Associates' latest analysis of the European fund market has pointed out that managers seeking to compete in the Swedish institutional market must be able to show competencies in integrating ESG into products and processes - or risk losing business there.
The point is highlighted in the latest issue of The Cerulli Edge—Europe Edition,which notes that reforms to the PPM platform, intended to provide greater guidance to long term savers selecting funds within the Swedish pension system, are strengthening the position of asset management firms with "strong ESG capabilities".
"Managers without an integrated ESG investment process are unlikely to be hired," warns Justina Deveikyte, associate director, European Instititional Research.
"Large investors are also moving toward impact investing, where they take a more active role throughout the investment process."
She suggests that aboslute return funds with a clear ESG message may be among the first to benefit from the changes to the PPM platform - which are also seeking to reduce the number of funds available and place greater emphasis on the provenance of fund providers following a number of financial scandals in which savers lost money to funds that were either mismanaged or used to commit outright fraud.
"Responsible investing is key in Sweden. This was further emphasized in the revised investment rules for the buffer [AP] funds, which came into force at the beginning of the year. The funds have to increase their focus on sustainability and show how sustainable development can be promoted without compromising overall return objectives."
"The good news is that managers providing niche capabilities at reasonable prices continue to see inflows. The most recent proposal to redesign the government's default fund, AP7, is likely to lead to diversification of asset classes, which should benefit foreign managers," Deveikyte added.