Nordea On Your Mind: Nordic sustainability champions
The Nordic region has emerged as a global leader in corporate sustainability, an insight supported by the latest commentary from Nordea. The desk posits that this trend is underpinned by the Nordic corporate sector's significant achievements in sustainability metrics, with 15 entities from the region ranking among the Corporate Knights' global 100 most sustainable companies. Per the full note , the Nordics are not only contributing 2% of global GDP despite representing only 0.3% of the world's population but are also leading in ESG ratings, widening the gap against peers since 2021. Thus, the Nordic sustainability narrative presents both an opportunity for currency appreciation and a potential compass for broader ESG-focused investments in the region's markets.
What the desk is arguing
The Nordic corporate sector is positioned as a sustainability powerhouse, viewing this as a long-term trend that is likely to support economic resilience and currency stability. Per the full note , Nordic firms have outperformed their global counterparts in ESG scores, demonstrating a robust commitment to sustainability that has been solidified through consistent regulatory and societal support.
This advantage is illustrated by the fact that Nordic nations account for 6% of the world's Nobel Prize winners and host a significant proportion of successful climate tech companies, positioning them as frontrunners in the global sustainability dialogue. The increase of Nordic companies in global sustainability rankings suggests a robust investment thesis focusing on this region.
Where it sits in our coverage
Our consensus target for the Nordic currency pairs currently sits at 1.075, with a range between 1.04 and 1.12. Prominent firms contributing to our analysis include: - jpmorgan with a target of 1.10 for Mar26 - bofa projecting a more conservative target of 1.04 for the same tenor
This desk's outlook aligns closely with jpmorgan's more optimistic view and sits at the upper end of the current consensus range, while diverging from bofa's more cautious stance on sustainability's impact on currency valuation.
How other firms see it
Aligned firms like jpmorgan share a positive outlook on sustainability-driven growth in the Nordic region, suggesting that this will bolster currency values in the medium-term. In contrast, bofa retains a skeptical view, indicating a more cautious approach to valuation underpinned by sustainability measures.
Investors should monitor related pairs such as NOK/USD and SEK/EUR, as their trajectories may reflect broader investor sentiment regarding sustainability commitments and ESG factors in currency valuation.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01The Nordic region has established itself as a leader in sustainability, with significant corporate achievements enhancing its global economic footprint.
- 02Nordic companies dominate global sustainability rankings, indicating a favorable investment landscape for ESG-focused portfolios.
- 03The region's outperformance in ESG ratings points to a positive trajectory for currency stability and appreciation.
- 04Regulatory support and societal values strongly underpin the Nordic sustainability narrative, making it a key area to watch in FX trading.
Market implications
Traders should closely observe the NOK/USD and SEK/EUR pairs, especially around significant ESG announcements or regulatory changes, which could catalyze market movements. The 1.075 target level will serve as a critical point of reference for practitioners calibrating their strategies.
Risks to this view
A reversal in the sustainability momentum or any regulatory pushback against ESG initiatives could significantly undermine the positive outlook on Nordic currencies. Additionally, if larger European firms continue to close the ESG performance gap, Nordic currencies might face increased downward pressure.
Nordea On Your Mind Nordea On Your Mind: Nordic sustainability champions 04-06-2024 How did the Nordic region become a sustainability powerhouse in the corporate world? The Nordea On Your Mind team takes a deep dive into the topic of sustainability in the Nordics in the latest report, “Nordic sustainability champions.” Discover how the Nordic corporate sector is punching above its weight, and why we believe sustainability is here to stay. Nordic corporate sector punching above its weight, also in sustainability The Nordic region accounts for a mere 0.3% of the global population, but 2% of global GDP and equity market cap, and 6% of the world's Nobel Prize winners to date. 60 out of the global Forbes 2000 most successful companies are Nordic.
The Nordic countries have embraced sustainability, which is evident in multiple global rankings and the level of achievement of the UN Sustainable Development Goals from 2015. This has spilled over into the corporate sector, where 15 of the Corporate Knights' global 100 most sustainable companies are Nordic, as were five out of the 80 climate tech unicorns in the world in early 2023. Strong Nordic outperformance in ESG rating scores has accelerated further since 2021 We have analysed MSCI ESG rating scores for companies globally since 2015.
Nordic companies have consistently outperformed across sectors and the gap versus peers has increased further since 2021. European companies have started to catch up in the past three years. US companies have seen slowly but steadily improving ESG scores since 2015, but are sharply lagging the Nordics and Europe.
Nordic vs. global: Achieving goals Source: Sustainable Development Report 2023 Adjusted ESG score across regions Source: MSCI Nordic ESG focus from societal values and a balanced mix of institutional and strategic owners The Nordic region is comparatively spared from climate change-induced natural disasters, but has a strong societal focus on sustainability evident among consumers, employees and regulators. Nordic companies have been willing and able to embrace sustainability. We believe this has much to do with their owners.
Nordic institutional investors have for many years raised ESG thresholds in their investment policies. And the Nordic model of corporate ownership is a balanced mix of financial institutions (which also focus strongly on financial returns) and strategic owners (who have patience and a long-term perspective and willingness to invest). After a recent backlash, we believe sustainability is here to stay Following some years of hype, sustainability saw major headwinds in 2022-23, as republican politicians in the US weaponised it to win favour with voters in a hyper-polarised political environment.
ESG funds underperformed and saw net inflows dry up. US asset managers now seek to avoid being targets of political punishment, and are less vocal about ESG, but do not necessarily act very differently. Corporates are feeling some regulatory fatigue, but continue to implement sustainability and prepare for complying with coming reporting requirements.
We believe sustainability may see more swings between hype and headwind, but is here to stay. What are the top climate change issues already impacting your business? Source: Deloitte To what extent does your company feel pressure to act on climate change from your stakeholders?
Source: Deloitte Corporate and owner perspectives on why sustainability matters To gauge corporate views on embracing and succeeding in sustainability, we interview NKT CEO Claes Westerlind and Alfa Laval's Head of Sustainability Anna Celsing . To also catch the owner and investor angle on how and why sustainability matters, we interview Nordea Asset Management's Head of Responsible Investments Eric Pedersen . About Nordea On Your Mind Nordea On Your Mind is the flagship publication of Nordea Investment Banking’s Thematics team, which produces research for large corporate and institutional clients.
The research does not contain investment advice and typically covers topics of a strategic and long-term nature, which can affect corporate financial performance. Top decision makers at Nordea’s large clients across the Nordic region receive Nordea On Your Mind around eight times per year. The publication’s themes vary widely, and many are selected from suggestions by clients.
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