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Storebrand Global ESG Plus: Fossil-free market return

Imagine an equity fund that provides around the same return as the market and has around the same risk, but that replaces unsustainable companies with the most sustainable ones. Storebrand Global ESG Plus is expected to deliver on its ambitions. 

Published 11.02.2019 by Frode Aasen

The goal of active mutual funds is to create the highest possible return within given risk frameworks, while the goal of passive funds is to reflect the return and risk of a specific market. It is normally difficult to have several goals at the same time because they may in part be conflicting. But for us at Storebrand it is nonetheless necessary to be able to have several thoughts in our minds at the same time because we have more than just one goal.

Model-based management 

With the help of model-based management techniques, Storebrand has developed a fund that can achieve several goals at the same time. Storebrand Global ESG Plus is the fund that takes us furthest with this mindset since it has a number of goals – at the same time. 

Storebrand's sustainable investment standard, also called the Storebrand Standard, forms the basis for all our activities, including for this fund. The Storebrand Standard quite simply means that some companies in the investment universe have such great weaknesses linked to sustainability that they have been removed from Storebrand's investment universe. 

"We exclude companies that contribute to serious breaches of international law and human rights, or that in some other way are involved in unacceptable activities. Around 200 companies are currently excluded from our investment universe. The return is not the only factor that means anything, it is also important how the return is created," explains Bård Bringedal, chief investment officer at Storebrand Asset Management.

In addition to the Storebrand Standard, Storebrand Global ESG Plus is managed in accordance with a number of other sustainability criteria that Storebrand has developed during its 20 years of working on sustainable investments. 

More of the best companies - optimisation

Storebrand Global ESG Plus seeks to invest in companies with a high sustainability rating instead of those with a low rating. In addition, the fund deliberately chooses companies with lower CO2 emissions over others. 

"As a result of these optimisations, the fund has a large percentage of companies that we believe are well positioned to deal with the global challenges," says Bringedal.

Solution shares

Up to 10 per cent of the fund's assets are invested in so-called solution shares. These are companies that try to deliver solutions to future climate challenges, such as companies in the renewable energy sector. An important characteristic of such companies is that they extensively operate in accordance with the UN Sustainable Development Goals (SDG). 

Fossil-free investments

One of the most significant dimensions of Storebrand's sustainability work – which differentiates Storebrand Global ESG Plus from most other global equity funds – is the absence of fossil investments.

"We are still dependent on fossil energy, but a useful and necessary change-over is taking place so that we are less dependent on fossil energy sources. Investments play a key role here, so the fund does not invest in companies that obtain more than five per cent of their income from the production or distribution of fossil fuel," says Bringedal. 

Extended ethical criteria

Another dimension to our sustainability work is aimed at areas that deserve greater ethical awareness. Storebrand has established exclusion criteria related to alcohol, pornography, weapons and gaming, and for Storebrand Global ESG Plus this means that additional companies are excluded from its investment universe.

Long-term market return

On top of ambitious sustainability requirements which result in a more limited investment universe for the fund, Storebrand Global ESG Plus tries to minimise deviations from its benchmark.

"The fund is expected to give the same return as the global market, but investors in Storebrand Global ESG Plus must also be able to expect a much higher sustainability level, and above all the fund must be managed fossil-free," concludes Bringedal. 

Historisk avkastning er ingen garanti for fremtidig avkastning. Fremtidig avkastning vil blant annet avhenge av markedsutviklingen, forvalters dyktighet, investeringsrisiko og kostnader ved forvaltning. Avkastningen kan bli negativ som følge av kursfall.

Bård Bringedal, CIO  Equities, Storebrand Asset Management