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AP1 wants external managers to do own ESG analysis, not rely on others' data

Sweden state buffer fund AP1 wants external managers to conduct their own ESG analysis, rather than simply relying on third-party data providers.

Photo: Miriam Dalsgaard

Swedish state buffer fund AP1 wants its external managers to use their own analysis, their own data and not rely on third-party providers like Sustainalytics, MSCI or another of provider of data, according to head of Majdi Chammas, head of external equity managers at AP1.

Speaking to data provider Evestment, Chammas says that all of the pension investor's managers ask what AP1 thinks in term of best practice on ESG integration.

"And unfortunately I have the most boring answer: there is no one way, everybody should to do it their own way, but a couple of things are important, even when you do it yourself," he says in the podcast.

Chammas highlights that managers have to have what he describes as a chain of belief through the organization, meaning that management, portfolio managers, analysts believe that ESG is important.

"We would like to see the managers use their own analysis, their own data and not rely on third-party providers, because it’s consensus, it’s out there, everybody has it and it’s always most often backward-looking. So we’d like to see the managers do the analysis themselves and do it in a way that fits into their philosophy and into their process," he says.

Hesitant to onboard managers by Zoom

Like many other of the largest pensions investors in the Nordics, AP1's manager selector says it difficult to initiate new partnerships based on solely virtual meetings as on-site due diligence is considered important.

"When we have those meetings, we get in front of people from the whole company, from the analysts, risk management, operational, administration, back office, you name it. And that’s something that’s very hard to get in Zoom (...) I would be very hesitant to rely on just Zoom meetings to make any new investments," Chammas says.

"Part of it is watching the play between different people in the team, so when you have the PM and the analyst, or you have the CEO, CIO, and you see how they interact and how they behave in the same room and answer the questions, that is something that’s very hard to pick up on Zoom," he says.

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