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.