Handelsbanken: ESG investing driven by Swedish church

Handelsbanken has become the first Swedish provider to launch structured products linked to the Solactive Oekom Ethical Low Volatility Index. Both Aktieindexobligation Europa Hållbarhet Extra 116AX and Aktieindexobligation Europa Hållbarhet Extra 117AX have a term of just over three years and offer 110% and 100% participation, respectively, in the rise of the index, subject to six months back-end averaging.

The Solactive Oekom Ethical Low Volatility Index is the latest green index available to Swedish investors who, in recent months, have also had access to BNP Paribas’s Ethical Europe Equity, Finvex Sustainable and Efficient Europe 30 and, since last month, ING’s Sustainable Europe Low Risk Equity, although the last has not been used as an underlying for structured products in Scandinavia yet.

“We are a smaller market in the structured products space,” said Joakim Alpius (pictured), vice-president, business and product development, at Handelsbanken. “Our selection of the Solactive Oekom Ethical Low Volatility Index was a result of the fact that two current strong trends – smart beta and sustainability – were combined and that BNP Paribas, as a risk provider, was there to offer exposure to the index,” he said.

Sustainability and environmental, social and governance (ESG) investing has been popular in the Nordic region for many years, said Alpius. “I think that’s mainly being driven by the Swedish church, which is active in this space,” he said. “It’s a trend.”

However, it is not the first time Handelsbanken has launched structured products linked to sustainable indices, said Alpius. “We have done many non-linear trades for many years linked to ethically screened indices on Swedish underlyings.”

The demand for structured products linked to sustainable underlyings is clearly increasing, according to Alpius. “Five to ten years ago only institutional clients linked to the Swedish church were demanding these products,” he said. “It is more standard now. Many participants have acknowledged the UN Global Compact and comply with PRI [principles for responsible investment] within the actively managed community and focus is now increasing on the passive side as well.”

The Solactive Oekom Ethical Low Volatility Index, which was launched on May 6, 2015, was created to track the price movements of low volatility stocks passing the ESG screenings of Oekom research. The index universe is provided to Solactive by Oekom research on a quarterly basis, consisting of European companies which meet minimum sector-specific sustainability management requirements. BNP Paribas has licensed the index to launch structured products designed for both retail and institutional clients in Germany, Austria and Scandinavia.

Handelsbanken has launched 68 structured products worth SEK3,464m (€372m) in Sweden so far this year, according to SRP data. The bank currently has a share of 15% of the Swedish market, which makes it the third-biggest provider behind Garantum Fondkommission (20%) and Swedbank (18%).

Industry Insights

Data Insights

Webinars

Special Reports

Market

Handelsbanken: ESG investing driven by Swedish church