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Storebrand ASA

PRI reporting framework 2017

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ESG incorporation in actively managed listed equities

Implementation processes

LEI 03. Percentage of each incorporation strategy

New selection options have been added to this indicator. Please review your prefilled responses carefully.

03.1. Indicate (1) which ESG incorporation strategy and/or combination of strategies you apply to your actively managed listed equities and (2) the breakdown of your actively managed listed equities by strategy or combination of strategies (+/- 5%)

ESG incorporation strategy (select all that apply)

Percentage of active listed equity to which the strategy is applied
100 %
Total actively managed listed equities 100%

03.2. Describe your organisation’s approach to incorporation and the reasons for choosing the particular ESG incorporation strategy/strategies.

At Storebrand we believe that a multi-layered approach to sustainable investing is required in order to adequately address all risks and investment possibilities in the ESG area.

Screening: Is used as a basis for our strategy. Storebrand has one of the markets most stringent minimum standards and applies it to all assets under management, without exception. Screening of companies avccording to this standard allows us to capture operational ESG risks and to assure our clients that their assets not invested in companies that breach fundamental norms and conventions. The Sustainable Investment team is responsible for screening with input from an external data provider, and results are made available to fund managers in a quarterly report. Compliance is run daily. In 2016 Storebrand has extended the standard specifically in the area of coal exclusions.

In addition Storebrand has established an extra criterion on production of fossil fuels. This criterion excludes all companies with over 5% of revenue from the production or distribution of fossil fuels and applies to a range of fossil free funds offered in Sweden; SPP Plus Sweden, SPP Global Plus and SPP Emerging Markets Plus. The criterion is designed to meet increasing demand for fossil free investments from institutional clients.

Integration: The objective of integrating ESG into all investment activities is based on our belief that understanding ESG risks and opportunities will be a prerequisite for securing long term returns. Storebrand own literature reviews in 2016 have revealed that there is mounting evidence in international studies that the link between ESG performance and financial returns is strengthening. Our own internal analysis have also identified long term ESG trends that we believe will influence companies financial performance over the long term. Thus we see ESG integration in mainstream management of equities as necessary to capture the risks and market possibilities that apply to individual sectors/industries/companies. It is also a matter of strategic positioning to the Storebrand Group, and is utilised as a differentiating factor. Fund Managers are responsible for incorporating ESG factors into management with input from the Sustainable Investment team.

The launch of the SPP fossile free Plus funds from March-September 2016 marked a significant milestone in integration at Storebrand. Product development was fund manager driven and integrated ESG elements (carbon footprint/fossil screening and sustainability rating) into existing quantative management models. the result is a family of funds that are low risk (<1 in tracking error) but that still manage to be fossile free, have a high sustainability rating and a low carbon footprint compared to the reference index.

Thematic: Storebrand does ESG analysis on specific themes and incorporates results into investment decisions. Themes are identified on a sector basis in annual sector analyses conducted by the Sustainable Investment team. Access to Medicine in Health Care, Rnewable Energy Mix in Utilities and share of green buildings in real Estate are all examples of themes that directly affect investment decisions in these sectors. 

In the light of the Paris Agreement on Climate Change Storebrand has had a focus throughout 2016 on climate risk and adjustment. Storebrand has strengthened its exclusion criteria on coal, developed fossil free criteria and launched fossil free funds, engaged with palmoil companies, explored the possibility of setting Science Based Targets for our portfolio and begun a research project financed by Vinnova in Sweden that seeks to quantify the effects of coal exclusions. The reccomendations of the taskforce on Climate Related Financial Disclosures will be followed up in 2017.

03.3. Where assets are managed using a combination of ESG incorporation strategies, briefly describe how these combinations are used. [Optional]

The exclusion strategy comprises all assets managed in-house, and thus reduces the investment universe for all portfolio managers. On average 6-7% of the reference index is excluded.

The main tool of integration is the Sustainability Rating 0-100 which is made available to fund managers in their internal systems. The rating is utilised in various ways by different teams. Active managers have lower limits for sustainability scores for individual companies. Holdings in companies with scores below this limit (for example 25% in Developed markets funds) triggers a discussion with the Sustainable Investment team and a collaborative decision on further investment in the company. Passive managers of selected index funds/portfolios have begun to utilise methodology to optimise the sustainability rating of index near funds up til + 10%.

The global equity fund Storebrand Trippel Smart/SPP Global Topp100 is Storebrand's flagship Sustainability fund and selects companies based on the Sustainability Rating; i.e. investing only in top performers of each sector, combining thematic and screening methodology.

The family of Plus funds described above combine the following strategies

.- screening based on Storebrand standard, fossile free criteria, and additional criteria

- optimisation based on carbon footprint and sustainability rating

- selection of "climate solution portfolio"

 


LEI 04. Type of ESG information used in investment decision (Private)


LEI 05. Information from engagement and/or voting used in investment decision-making (Private)


(A) Implementation: Screening

LEI 06. Types of screening applied

06.1. Indicate and describe the type of screening you apply to your internally managed active listed equities.

Type of screening

Screened by

Description

The Storebrand Standard applies to all internally managed funds and portfolios, and covers:
1) Product related exclusions: controversial weapons (landmines, cluster munitions, nuclear weapons, chemical/biological weapons) and tobacco
2) Controversial issues: human rights and international humanitarian law, corruption and economic crime, environmental degradation
3) Sector specific exclusions: lowest performing companies in high risk industries + climate related (companies with more than 30% of revenues from coal, oilsand companies,  palm oil companies involved in extensive deforestation)

Extra ethical criteria in addition to the Storebrand standard applies to some dedicated Sustainability funds. The extended Storebrand standard is has additional screening criteria such as revenues from alchohol, pornography, gambling and defence contracts. There is also extra fossil free criteria that excludes all companies with over 5% of revenues from the production and/or distribution of fossil fuels. Companies with over 100 million tonnes CO2 embedded in reserves are also excluded on this criteria.

Screened by

Description

Our in-house ESG team analyses the constituents of MSCI All Country World Index + largest companies listed on the Oslo and Stockholm Exchanges with respect to ESG performance. The Sustainability Rating is 0-100, sector based and comprises:


A) ESG management systems (policies, practice and performance) (40% of score)


B) Positioning for shifting business frameworks and global sustainability trends (40% of score) These trends are

- Population Growth and Resource Scarcity

- Growth in Emerging Markets

- Increased demand for Sustainable Products

C) Financial robustness (20% of score): based on Piotroski F-score

The companies that perform best in this screen can generally be said to demonstrate:
- solution based products and services relative to exposure to growth markets by sector/region
- risk management quality relative to risk exposure (sector/region)
- efficient use of resources relative to resource constraints
 

Screened by

Description

The Storebrand Standard is described under negative/exclusion screening above, which is based on a range of international conventions (all relevant conventions are listed in a detailed framework document for each topic).

06.2. Describe how the screening criteria are established, how often the criteria are reviewed and how you notify clients and/or beneficiaries when changes are made.

The negative and norms-based screening criteria have been developed over the past 20 years, mainly by in-house ESG analysts, with the support of external expert advice. Important clients have also been included in the development of criteria.

The Storebrand Standard has been approved by the Executive Committee. Clients are informed of major changes through news letters, KAMs, and/or tailored reporting. The standard is reviewed continually with changes being made to existing criteria or new criteria being implemented. In 2016 the standard was strengthened further regarding coal exclusions and also product safety criteria which was implemented as an extension to our human rights criteria. Both changes have resulted in additional exclusion in the course of the year.

The sector research (positive screening) has been developed over the past 20 years, mainly by in-house ESG analysts, in cooperation with CIO and portfolio managers. continuously improved by the ESG research team. In 2016 more focus has been put on opportunity/product based indicators which apply to a smaller number of companies within a sector.

The extra fossil free criteria to the Storebrand standard was further specified during the course of 2016 in response to ongoing client dialogue. Definitions of fossil production and distribution have been clarified and explained in greater detail.


LEI 07. Processes to ensure screening is based on robust analysis

07.1. Indicate which processes your organisation uses to ensure screening is based on robust analysis.

07.2. Additional information. [Optional]


LEI 08. Processes to ensure fund criteria are not breached (Private)


(B) Implementation: Thematic

LEI 09. Types of sustainability thematic funds/mandates

09.1. Indicate the type of sustainability thematic funds or mandates your organisation manages.

09.2. Describe your organisation’s processes for sustainability themed funds. [Optional]

The mutual fund Storebrand Trippel Smart/SPP Global Topp 100 is a global equity fund, investing in the top 100 performers across sectors and regions (sector neutral). Companies are selected on the basis on their Sustainability Rating, relative to sector peers. Please see previous descriptions of ESG sector research and Sustainability Ratings.

The family of Plus funds SPP Sweden Plus, SPP Global Plus and SPP Emerging Markets Plus are fossil free funds that were launched between March and September 2016. These funds are low risk (<1 in tracking error), model based equity funds that have the following characteristics

- Fossil free: Based on a screen from data provider Trucost that excludes all companies with over 5% revenue from the production and/or distribution of fossil fuels

- Optimised on sustainability rating (higher average sustainability score than index)

- Optimised on carbon footprint (significantly lower than index)

- Invests in 5-10% climate solutions portfolio


(C) Implementation: Integration of ESG issues

LEI 10. Review ESG issues while researching companies/sectors

10.1. Indicate if E, S and G issues are reviewed while researching companies and/or sectors in active strategies.

ESG issues

Coverage/extent of review on these issues

Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

10.2. Additional information. [Optional]

Our In house Sustainable Investment team  performs annual analyses of

- The most important ESG international trends, based on literature review

- The KPI's used (E,S and G) used in sector analyses. The sector analyses conducted are the basis for the internal Sustainability rating 0-100.

External financial research providers only occasionally review the potential significance of ESG issues.

The Norwegian equities team performs an ongoing analyses of portfolio companies, primarily on corporate governance issues.


LEI 11. Processes to ensure integration is based on robust analysis (Private)


LEI 12. Aspects of analysis ESG information is integrated into (Private)


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