Methodology
Storebrand has developed a three pronged strategy for sustainable investments.
1) Risk management: Avoid the worst performers.
This is done through restrictive analysis, also known as negative screening. Storebrand's investment universe consists of over 4000 companies that are monitored continually. We use a customised internet search engine, that searches through 120 000 sources, for a combination of company names and thematic search words. It is this process that allows us to identify news articles on possible company breaches of our criteria.
If the article indicates an unacceptable company culture, we conduct an analysis and contact the company directly. Two important aspects of the analysis are to investigate both the measures taken to correct the damage and what is being done to reduce the risk of recurrence. In many cases, we also contact external consultants to obtain further information, fundamental assessments, legal considerations or general statements on the case.
Finally, the analysis, including accusations, company response and expert statements are presented to Storebrand's sustainable investment committee. The committee assesses whether the accusations should result in the company being excluded. The case information is presented anonymously, so that the decision is not coloured by the committees knowledge of the company. The investment committee meets quarterly and consists of six senior group directors. The committee also considers cases concerning the inclusion of companies that demonstrate systematic improvement.
Regarding weapons analyses, we use, in addition to our own analyses, external expertise. We have a constructive partnership with Norwegian Peoples Aid who have a number of leading experts on landmines and cluster munitions.
Storebrand's environmental and social criteria are based on a range of international conventions, among others:
- The UN Universal Declaration of Human Rights
- International Labour Organisation (ILO) conventions
- OECD Guidelines for Multinational Enterprise
- The Ottawa convention on anti-personnel mines
- The Climate convention and Kyoto protocol.
Since Q3 2008, Storebrand's Group Standard has also applied to externally managed funds. Storebrand has allocated significant resources to following up our external fund managers through dialogue and engagement. We also cooperate with other financial actors to raise standards within our own industry.
For Sovreign Debt we have developed a standard that covers corruption risk, UN sanctions and political and civil rights.
2) Business Opportunities: Best in Class
Storebrand conducts Best in Class analyses, in order to identify the best companies within a given industry. The best companies are awarded Best in Class status and qualify for inclusion in our Best in Class funds; Storebrand Global SRI and Storebrand Pionèr.
Our Best in Class analyses cover environmental management systems, initiatives to control corruption, corporate governance principles, employee conditions and guidelines for labor and human rights. The analyses are built on the Global Reporting Initiative (GRI), though the choice of indicators is adjusted to account for industry differences. The main source of information for our analyses comes from companies own reporting in addition to company information provided by an external supplier. Companies also have the opportunity to supply extra information.
Through investment in the best performing companies on Environmental, Social and Governance (ESG) factors, Storebrand can make a positive contribution to sustainable development.
3) Increase portfolio quality through engagement and dialogue.
We are in daily contact with companies via email and telephone and sometimes through meetings and company visits. Each year, Storebrand contacts several hundred companies worldwide. Representing an asset manager is an obvious strength, as the company knows that a breach of our standards could result in divestment of shares and bonds in the company concerned.
An important goal for Storebrand is to exert its influence to contribute to sustainable development. Exclusion of companies is not a goal in itself, but a last resort when all other means have failed. We contact excluded companies periodically to influence them to improve. The long term goal is a business community that actively contributes to sustainable development.
Through our participation in the UN Principles for Responsible Investments (UNPRI), we have cooperated on a number of occasions with other investors to influence companies. Our experience is that such collaborative efforts are an effective method of engagement.
Whether it is through exclusions or through identifying Best in Class companies, we are interested in encouraging companies to work systematically to reduce environmental and social risk. We would like to see companies increase the level of transparency around these issues and actively communicate their goals and results to stakeholders.
