In the course of 2019 Storebrand developed a number of products and initiatives which are innovative within the RI field. The most important were
1. Storebrand Asset Management further developed its fossil free range of products
These funds exclude companies with over 5% revenue from fossil fuels and/or over 100 million ton CO2 embedded in fossil reserves. Despite the significant exclusion list this criteria entails (400+ companies) the fund is managed in such a way that the tracking error is <1. The funds also have higher sustainability rating and lower carbon footprint than their reference indexes.
New fossil free funds in 2019:
Storebrand Global Obligasjon B
Storebrand Likviditet A
2. Revised In-house Sustainability score
Storebrand has operated with an inhouse sustainability score for many years. In 2019 we revised the make-up of the score as a result of better access to external data sources.
We calculate the Sustainability Score on over 4500 companies and base it on a 0-100 scale. It is comprised of two main building blocks, ESG risks and SDG opportunities. On the ESG risk side, the score assesses companies' exposure to, and management of, financially material sustainability risks. On the SDG opportunities side, we analyse sustainability data sources, to find companies whose products and services contribute positively to the achievement of financially relevant SDGs. For products and services, we source FTSE Russel Green Revenue data, in addition to internal research, to identify solutions companies. The SDG opportunities section of the score also has a company operations dimension, particularly related to Gender Equality.
Fund Managers at Storebrand Asset Management are able to access the score on a number of levels. Total Score, Risk Score, SDG Score, and scores for underlying themes within these building blocks, are all readily available. The data sources underpinning the scores are external sources from quality controlled data providers, coupled with internal research. The following providers are currently in use:
ESG Risks: Sustainalytics ESG Risk Rating (50%)
SDG Opportunities - Products & Services: FTSE Russell Green Revenue Streams plus internal research (40%)
SDG Opportunities - Operations: Equileap data on Gender Equality (10%)
The Sustainability Score is relevant across asset classes. Implementation of the score is dependent on the style and risk profile of the fund/portfolio in question.
3. Storebrand Coal Exit Strategy (i.e. the exclusion of oil sand, coal, coal utilities and palm oil plantation owners) has been seen as innovative and a significant contribution to the international debate regarding climate risk with asset owners/asset managers.
In 2019 Storebrand set a goal for becoming effectively "coal free" in its investments. By 2026 Storebrand will not invest in comapnies with over 5% of revenues from coal production or distribution. Year on year reduction targets have been set in order to achieve this goal.
4. New Deforestation Policy
Storebrand’s ambition is to have an investment portofolio that does not contribute to deforestation by 2025. Storebrand will not knowingly finance operations that are illegal, fail to protect high conservation value forests/land or violate the rights of workers and local people.
We commit to use the tools that we as shareholders have at our disposal to induce companies to meet the expectations described in this document. We will cooperate with other financial institutions to promote standards for measuring, monitoring and reporting on direct and indirect deforestation risk. By 2020 we will map our portfolio exposure to deforestation risk and report on progress annually.
We encourage therefore companies to be transparent about the topics raised in this document. We use such information to identify how climate change may affect companies’ economic performance, and to assess whether management is taking relevant steps to develop a long-term business strategy to tackle climate change and avoid deforestation.
This policy applies to all relevant companies in our portfolio that are involved in production, trade, use or financing of forest-risk commodities, particularly palm oil, soy, timber and cattle products. The policy covers both upstream and downstream companies linked to forest-risk commodities through their operations and supply chains.
5. Storebrand finalised a new method for carbon footprint measurement of fixed income funds. The weighted average method is utilised. These types of funds have never been footprinted before and thus this approach is innovative and ground breaking. Results have been shared with clients and will be published on Storebrands fund list by the end of Q1 2019.
6. New Cannabis exclusion criteria
From Q3 2019, Storebrand excludes from all investments companies that derive more than five percent of their income from the sale of cannabis products intended for recreational purposes or from components exclusively designed for such products.
Definition: Storebrand applies the World Health Organisation’s (WHO) definition of cannabis products for recreational use; “psychoactive preparations of the plant Cannabis sativa. The major psychoactive constituent in cannabis is tetrahydrocannabinol (THC).”
Scope: The criterion applies to producers and distributors whose sale of cannabis products for recreational use, or components exclusively designed for such products, exceeds 5 percent of total sales. An example of components exclusively designed for cannabis products is rolling papers. This threshold also applies to companies involved in cultivating and processing of cannabis for recreational purposes. However, companies are not covered by this criterion if they supply other products or services to the cannabis industry, such as advertising, real estate or packaging.