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Can socially responsible investments be profitable?

When you want your investments to be for the good of society, you often need to reconsider the importance of returns. The Social Empowerment Fund aims to achieve both by focusing on vital needs, inclusion, and empowerment.

Social hug with diversified people

The idea of the fund is to invest in companies whose profitable business improves people’s ability to lead a good life. Among its international investments are, for example, a bank that grants microloans to female entrepreneurs in Indonesia and a company that produces healthy snacks for children.

Profitably making the world a better place

Nordea’s Global Social Empowerment Fund has three objectives: to provide investors with above-market average returns, to promote the development of the businesses it invests in, and to improve people’s lives by investing in companies that make their customers’ lives healthier or safer.

There have not been many funds available that combine the social perspective with competitive investments in the long term. When the Social Empowerment Fund began its operation the worst of the COVID-19 pandemic was behind us and Thomas Sørensen, the fund’s portfolio manager, considered it a forerunner in the field:

- The COVID-19 pandemic plunged a huge number of people around the world into poverty. At the same time, it reminded us of the importance of helping others. Socially responsible investing is one way we can help, Sørensen said when the fund was founded in 2021.

Thomas Sørensen

Thomas Sørensen

Portfolio Manager, Nordea 1 – Global Social Empowerment Fund

Investments selected based on three societal themes

Finding suitable investments for a socially responsible investment fund requires more thorough preparation from the portfolio management team than a traditional new fund would. Roughly fifty equity investments of the Fund are selected to reflect societal themes:

Vital needs companies provide services related to clean water, produce healthy food or, like UMH Properties, offer affordable housing for as many people as possible.

The fund also invests in companies that contribute to inclusion through better connectivity and education. Kenya’s largest telecommunications provider Safaricom is not only one of the most profitable companies in East and Central Africa but also enables people to connect as Smartphones serve as the basic medium to connect to the internet for Kenyans.

In Indonesia, a substantial part of the population is still at risk of falling into poverty and does not have access to traditional financial services. Bank Rakyat provides microfinancing to small businesses and financial education to low-income clients and thereby contributes to their empowerment for a better financial future."

Time to focus also on social issues

Nordea assesses the responsibility of the companies in investment funds through a so-called ESG analysis. ESG comes from the words environmental, social, and governance, and Nordea’s ESG analysis team is one of the largest in the Nordics.

Michaela Zhirova, who has worked in the team for more than 10 years, has witnessed the rapid growth of more climate-friendly investments in her work.

- I’m glad to see that social issues are also given more attention nowadays. We have an urgent need to prepare for climate change, which means we also need to make environmentally responsible investments.  We must also create a more balanced and equal world, Michaela Zhirova says.

- Fortunately, there are many socially beneficial companies in the world that are also interesting for us as investments, she concludes.