At Storebrand Asset Management 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 2019 Storebrand has made certain modifications to the standard. 1) One important modification was the cannabis criteria. Storebrand will not invest in companies where the sale of cannabis products for recreational use, or components exclusively designed for such products, exceeds 5 percent of total sales. The criterion applies to producers and distributors as well as companies involved in the cultivating or processing of cannabis for recreational use. The criterion does not apply to income from cannabis products that are not classified as recreational. 2) Second modification to the Storebrand standard was the introduction of absolute threshold for coal exclusions. Storebrand will not invest in companies which produce over 20 million tons of coal annually or operate more than 10,000 MW of coal-fired capacity.
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 over the past few years 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. With the adoption of a new Rating in 2019, we calculate the Sustainability Score on over 4500 companies and base it on a 0-100 scale, for the use of all Fund managers in their selection of companies.
The launch of the SPP fossil 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. In 2019 Storebrand tripled the amount of fossil free investments by making all funds if the the Swedish subsidiary SPP Funds fossil free, the total AUM in fossil free investment solutions now amounts to EUR 26 bn, or a third of total AUM.
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. Deforestation is an example of theme that directly affect investment decisions in several sectors.
In the light of the Paris Agreement on Climate Change Storebrand has had a focus throughout 2019 on climate risk and adjustment. Storebrand has strengthened its exclusion criteria on coal, tripled the amount of fossil free investments, launched a deforestation policy and engaged with companies with in activities related to the production of soy, palm oil, cattle and timber. Our portfolios have also been stress tested against a 2 degrees scenario. The reccomendations of the taskforce on Climate Related Financial Disclosures have been followed up in 2019, with special focus on an engagement process with large Norwegian companies on TCFD disclosure.