Download Engelsk PPT-mal

PENSION FUNDS’ ROLE AND
OPPORTUNITIES IN LONG-TERM
INVESTMENTS
Idar Kreutzer, CEO, Finance Norway
Nordic Conference on Green Investments and Nordic Pension Funds, May 27 2015
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Risk management - when risks collide
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Transitioning from high to low carbon economy require
significant investment
In the next 15 years…
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Source: Better growth, Better Climate – The New Climate Economy Report
Insurers are the largest institutional
investors in Europe
Source: ”Funding the future”, Oliver Wyman, 2013
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Liability driven investments
Valuing liabilities – and matching the duration
5,5
5
4,5
4
3,5
3
2,5
jan. 05
Assets
100
jan. 06
jan. 07
SEK
Liabilities
100
jan. 08
EUR
GBP
2 % point fall
in rates
Source: Bloomberg 20 yrs swap
30% increase
in liabilities
Stylistic example of liabilities
Example:
duration 15
If the liabilities' duration is 15, then a 2 percentage points fall in interest rates
alters the present value of liabilities with 30% if this change is simply carried
through for the purpose of liability valuation
Which assets (apart from too few long dated bonds) yield 30% with certainty over
4 months?
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?
Assets
100
Liabilities
130
Limited investments in
infrastructure
Source: ”Funding the future”, Oliver Wyman, 2013
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Changing framework conditions affect
insurers’ ability to invest long-term
A raft of regulatory changes are affecting insurers
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Source: ”Funding the future”, Oliver Wyman, 2013
Key implications
Regulatory asset risk will become a key driver
Asset-liability-matching strategically important
Increased focus on liquidity and rating
Affects insurers’ investment decisions
Moving away from long-term assets
Distorting effect on financial markets and the
economy
Higher cost of funding for corporates and
governments
Source: Oliver Wyman, ”Funding the future”, 2013
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A perfect match
Expected demand for investments in urban
infrastructure until 2030 (US$ 1000 billion)
Assets under Management, % of GDP
Water
Energy
Roads and railways
Ports and airports
0
10
20
30
Source: Deutsche Bank and G20/OECD Policy Note on Pension Fund Financing for Green Infrastructure and Initiatives
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The responsible investment
framework