Ilmarinen axes €1.3bn from emerging market ESG ETFs

The Finnish pension firm is a major investor in ESG-focused ETFs

Finnish pension insurer Ilmarinen has stripped around €1.3bn of its assets from two emerging market ESG ETFs managed by BlackRock and Amundi, having initially provided the seed capital for the latter fund. 

According to its 2021 annual reports, Ilmarinen exited BlackRock’s iShares ESG MSCI EM Leaders ETF and the Amundi MSCI Emerging ESG Leaders UCITS ETF towards the end of last year. The firm’s investment in the two funds were valued at €659m and €654m respectively as of end-2020.  

The capital has been reallocated across Ilmarinen’s existing developed market fund investments, with Europe-focused funds receiving significant inflows. 

In December, Ilmarinen confirmed that it had exited the iShares ESG ETF after public data revealed that the fund had experienced significant outflows, resulting in a tenfold drop in assets under management. Prior to its exit, Ilmarinen had been the largest investor in the fund. 

Now, holdings data show that Ilmarinen has also ditched a major stake in an ESG emerging market ETF fund which it had co-developed together with Amundi. The Amundi MSCI Emerging ESG Leaders ETF is billed as providing investor exposure to large- and midcap companies across 26 emerging markets with strong ESG performance. 

Ilmarinen provided a total of €500m in seed capital at the fund’s launch in 2020. At the time, Ilmarinen EM portfolio manager Juha Venäläinen, said: “Emerging market exposure is a key component of our portfolio and we are delighted to offer our beneficiaries exposure to responsible investment opportunities in this space.”  

According to Morningstar, the Amundi ETF lost around €9m or 8% of its value between Q1 and Q4 of 2021.  

Amundi did not respond to a request for comment. 

“The decision to exit the two funds were purely allocative due to our view that risks in the emerging markets have increased, leading us to reduce our EM weighting. Unfortunately, those two investments were among our most liquid so they were first to go – it had nothing to do with the sustainability aspect,” said Ilmarinen’s Venäläinen to RI. 

If and when the insurer decides to reinvest in EM stocks, it is likely that ESG funds will be significant beneficiaries, although such a decision has not yet been taken, he added. 

ESG allocations continue to be a core part of Ilmarinen’s ETF portfolio, accounting for upwards for 90% of the insurer’s current passive exposure. Ilmarinen’s accounts show that it reduced overall EM exposure from 7%, in 2020, to 3% in 2021.