Engagement Cases and Results

We use our position within sustainability to encourage companies to improve. We exert influence when both we consider excluding companies from our investment ecosystem and in a proactive way to raise industry ESG standards and practices. 


We advocate clear principles and maintain high standards

Each year, Storebrand's sustainable investments department engages in dialogue with a large number of companies, with the aim of influencing them to move in a more sustainable direction.

By questioning companies about sustainability practices and developments, we encourage them to adopt a more proactive approach.

Through our efforts in the UN Principles for Responsible Investments (UN PRI), we have collaborated with other investors on several issues to exert a positive influence on companies, and have seen some good results from this work.

Highlights

Companies contacted by topic 2018:

Category

Individually

%

Jointly

%

Total

Total in %

Environmental 4 3 % 171 97 % 175 41 %
Social 7 100 % 0 0% 7 3 %
Governance 89 100 % 0 0 % 89 28 %
Overlapping 11 26 % 32 74 % 43 14 %

Total

111

 

203

 

314

 

Total in %

36 %

 

64 %

 

 

 



Companies contacted per response level in 2018:

Response Level

Description

%

Level 1 Contacted, no reply 14 %
Level 2 Contacted, unsatisfactory reply 51 %
Level 3 Contacted, satisfactory reply 26 %
Level 4 Contacted, improved business operations 9 %



Main engagement activities

Topic or ESG Issue: Environmental, Climate, GHG emissions
 

Engagement type: Collaborative, proactive

Objectives: Reduction of water use and GHG emissions within intensive livestock producers.

Scope and process: FAIRR is a collaborative investor network that raises awareness of the material ESG risks and opportunities caused by intensive livestock production. The network engages with over 80 companies via several initiatives. Storebrand is particularly active in the meat sourcing initiative directed towards the fast food industry. 

Livestock production consumes nearly a third of global freshwater use and contributes 14.5% of global GHG emission. We directly ask companies to de-risk their meat and dairy supply chains by requiring them to undertake climate risk scenario analysis, develop strong supplier policies on climate and water, set science-based targets, and publicly report on progress against these targets.

Results: The initiative started in 2019. Dialogue with companies is ongoing.


Topic or ESG Issue: Environmental, Climate, GHG emissions
 

Engagement type: Collaborative, proactive

Objectives: Climate Action 100+ is a five-year PRI investor initiative to engage with the world’s largest corporate greenhouse gas emitters to curb emissions, strengthen climate-related financial disclosures and improve governance on climate change.

Scope and process: Investors will request companies to: (1) take action to reduce greenhouse gas emissions; (2) provide enhanced corporate disclosure in line with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations; (3) implement a strong governance framework that clearly articulates the company board’s accountability and oversight of climate change.
Through a proprietary methodology investors evaluate 160 companies in six sectors: oil and gas, metals and mining electric utilities, automobiles, banks and insurance, and food and retail distribution). Companies are evaluated in terms of five criteria:

  • Statement on Climate Change: Formally recognizes climate and energy impacts
  • Transparency: Transparent disclosure of key indicators to investors
  • Board Governance: Diverse and robust board that is equipped to drive innovation and market changes
  • Business Strategy: Robust strategy that embraces current and future climate related challenges for the company. Investments into new technology/products
  • Public Policy: Disconnect between public statement and collective advocacy

Outcomes: Investors can support dialogues or lead them. Storebrand is active within the oil and gas sector and has been leading the dialogue with a Norwegian company with a strong focus on how to address climate risks and opportunities. Storebrand issued a joint statement with the company on future agreed goals regarding climate change.


Topic or ESG issue: Environmental, Climate. Methane emissions

Engagement type: Collaborative, proactive

Objectives: Request companies in the oil and gas sector to measure, manage and reduce methane emissions as well as more transparency and better reporting data.

Scope and Process: In 2017, Storebrand joined a group of PRI investors to engage with 42 companies in the oil and gas sector. Methane gas warms the earth 20 times faster than C02 and therefore it is important that methane emissions are managed and reduced. The oil and gas sector is particularly exposed to methane emissions. However, there are very few companies that measure their emissions and even fewer that report this data. It is essential for investors to have access to this type of data in order to better assess climate risk in portfolios.

Outcomes: Dialogue continues during 2019 and progress will be assed by the end of the year.


Topic or ESG issue: Environmental and Social. Palm Oil (Deforestation, Working Conditions and Indigenous People)

Engagement type: Individual and collaborative (end of 2018), proactive

Objectives: To create awareness of environmental and social issues in the palm oil industry and raise its environmental and social standards.

Scope and Process: In 2013, Storebrand/SPP carried out its first thematic approach to the entire palm oil plantation industry. As a result, Storebrand/SPP realized that the poorest environmental and social performance was to be found in palm oil plantations. Therefore, we mapped and assessed all plantation owners in its investment universe regarding policies, management systems, RSPO membership and other standards. We noticed that there was a big gap between what companies were telling us their practices were and what was actually happening at the plantations. Since the practices were so poor and the incidents so severe, we decided to exclude all plantation owners but one (Golden Agri Resources) that could show a bit better practice and could be used as an example for the rest of the industry. In 2016, Storebrand/SPP decided to reinvest in Wilmar since the company had improved its practice and its policy of "No Deforestation, No Peat, and No Exploitation across its supply chains" policy has inspired the rest of the industry. In 2017 and 2018, Storebrand divested from three new plantation companies whereas it continued engagement with GAR and Wilmar regarding implementation of best practice and incidents. By the end of 2018, Storebrand joined the investor collaborative PRI initiative on sustainable palm oil and continues to have direct dialogue as lead investor within the initiative.

Outcomes:  Although the companies continue to work to implement their policies, we can see that serious incidents in breach of their policies continue to occur. We see some progress regarding how they handle the incidents but these incidents would not occur with better policy implementation. Therefore, we continued to engage with these companies in 2017 and in 2018. Storebrand visited Wilmar and GAR's plantation in Indonesia in September 2018 with a focus on deforestation at suppliers and working conditions including child labor and child welfare in general. In addition, at the beginning of 2018 Storebrand gave feedback to the RSPO on its evaluation of new standards. By the end of 2018, Wilmar launched a new way of tracing deforestation from suppliers by real-time satellite monitoring to provide independent verification of land use change on its own as well as its third-party suppliers’ plantations. Wilmar also increased efforts on social issues by partnering with Verité and moving from a mere zero tolerance for child labor to a more holistic approach to children's' rights with a new Child Protection Policy that goes beyond child labor.


Topic or ESG issue: Social. Workers Rights

Engagement type: Individual, reactive

Objectives: Bring the company's attention to freedom of association issues and labor rights so that it can improve its policies and performance regarding its relationship with employees and avoid recurrent strikes.

Scope and Process: Hyundai was excluded from our investments in Q3 2017 due to its recurrent and systematic conflicts with employees in several countries due to the lack of company's recognition of freedom of association rights and anti-union activities. In addition, employees often complained of long days without being paid over time. Temporary workers complained of being unfairly treated. These situations have led to violent conflict and 23 strikes in the last 26 years. After the exclusion, Storebrand has continued its dialogue with the company.

Outcomes: In May 2018, Storebrand Asset Management's CEO, SKAGEN Investment directors and Storebrand sustainability analysts visited Hyundai in South Korea to discuss these issues with high level executives at the company. The company was asked regarding a formal freedom of association policy and its implementation as well as working conditions for its employees. The company has been working with these issues since it was excluded from our investments. Storebrand will continue its dialogue to assess progress. In April 2019, SKAGEN visited the company again in South Korea. The company has policies now and communicated that it is working on their implementation.

 

Topic or ESG issue: Environmental and Social. Soy and Cattle
 

Engagement type: Collaborative, proactive

Objectives: To Improve transparency and quality of disclosure related to the source and materiality of deforestation-risk with focus on soy, including supply chains; To achieve full commitment by companies to eliminate deforestation and human rights violations throughout the entire supply chain; To improve traceability and supplier verification approaches for the deforestation-risk focus commodities throughout the entire supply chain; and, to encourage participation in collaborative forums to develop standards, policies, certifications, and/or tools to facilitate deforestation-free supply chains for the deforestation-risk focus commodities.

Scope and Process: At least two-thirds of tropical deforestation is driven by commercial agriculture, predominantly from four commodities: cattle, soy, palm oil, and timber & pulp. Deforestation has significant environmental impacts contributing to approximately 15% of CO2 emissions globally, in addition to the loss of biodiversity, ecosystem services, soil degradation and the disruption of hydrological cycles. This PRI engagement focuses on 98 companies across the soybean value chain. These companies were highlighted as being a focus for engagement because they either source or are highly likely to source soybeans or soy products from South America. Storebrand joined this group after the summer of 2018 as part of Storebrand's anti-deforestation strategy.

Outcomes: Storebrand is a lead investor for two companies: a cattle producer and a soy producer. Dialogue is on-going with both companies. 


Other collaborative investor statements and initiatives

Storebrand is signatory to investor statement on the Bangladesh Accord on Fire and Building Safety where investors urge Bangladesh Government not to abandon the accord in order to ensure safety in the garment sector after the Rana Plaza collapse. Global brands are also urged to actively participate in the Ready-made Garment Sustainability Council and drive sustainable change to eliminate the risk to workers and ensure their safety.

Storebrand is also part of the Call for new independent mine safety systems for tailings dams with focus on the establishment of an independent public classification system for tailings dams, with safety standards being commensurate to consequences of dam failure. This PRI group was established following the deadly collapse of Vale's tailings dam in Minas Gerais, in Brazil in January 2019. The collapse had devastating consequences for workers and communities leaving more than 200 people dead, almost 100 missing and nearly 1000 displaced. Storebrand together with 95 institutional investors (representing more than $10.3 trillion assets under management) has written to 683 extractive companies seeking greater disclosure on the management of tailings storage facilities (“TSF”).

Storebrand is also a signatory of the Investor Commitment to Support a Just Transition on Climate Change launched in May 2019. There is an increasing recognition that the social dimension of the transition to a resilient and low-carbon economy has been given insufficient attention, notably in terms of the implications in the workplace and wider community. Investors commit to incorporate these social issues in their climate practices by, for example, including them in climate-related engagement on corporate practices, scenarios and disclosures.

Storebrand recently signed an investor letter to Amazon requesting a call to discuss the situation of labour rights in Amazon’s operations and supply chain. Amazon’s growth over the past five years has been astounding but its lack of attention to social risks poses legitimate questions. The company has also been reluctant to investor engagement.

Storebrand supported once more the investor statement to G20 governments on phasing out subsidies to fossil fuels. This has been an initiative since 2017 where, every year, investors send a common letter calling on G20 governments to phase out subsidies and public finance for fossil fuels, and to accelerate green investment and reduce climate risk.


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