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 2017:

Category

Individually

%

Jointly

%

Total

Total in %

Environmental 4 6 % 58 71 % 62 41 %
Social 11 16 % 11 14 % 22 15 %
Governance 51 72 % 7 8 % 58 38 %
Overlapping 4 6 % 6 7 % 10 7 %

Total

70

82

152

Total in %

46 %

54 %


Companies contacted per response level in 2017:

Response Level

Description

%

Level 1 Contacted, no reply 18 %
Level 2 Contacted, unsatisfactory reply 32 %
Level 3 Contacted, satisfactory reply 36 %
Level 4 Contacted, improved business operations 14 %



Main engagement activities

Topic or ESG Issue: Environmental, Climate, GHG emissions

Engagement type: Collaborative, proactive

Objectives: 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. Over 100 companies within the Energy, Transport, Materials & Building, Agriculture, Food and Forest industries have been selected. First investor engagement groups start in January.


Results: Investors can support dialogues or lead them. Storebrand has been leading the dialogue with a Norwegian company with a strong focus on TCFD requirements. Apart from engaging with companies alone and together with other investors. Lead investors have been asked to speak at AGM during 2018. Storebrand has read a statement during AGM of closest focus company in Norway.

Topic or ESG Issue: Environmental, Climate, TCFD reporting

Engagement type: Collaborative, proactive

Objectives: Storebrand together with other PRI investors sent a letter to 24 banks requesting them to report in alignment with the Taskforce on Climate-related Financial Disclosures (TCFD).


Scope and process: In September 2017, the investor statement was sent to the banks requesting them to report in alignment with the Taskforce on Climate-related Financial Disclosures (TCFD).

Results: Response follow-up is being carried out during December 2017-January 2018. The response has been mixed during 2018 as most banks are still trying to understand how TCFD requirements apply to them, even though some mean they will report regarding TCFD requirements.

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: Companies have been contacted with materials on climate change and TCFD recommendations. Dialogue has continued during the fall of 2018 and progress is being assessed by the end of the year.

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

Engagement type: Individual, 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.

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 have continued to engage with these companies in 2017 and in 2018. Storebrand visited Wilmar and GAR's plantation in Indonesia in September 2018. In addition, at the beginning of 2018 Storebrand gave feedback to the RSPO on its evaluation of new standards. We hope this feedback will also help improve industry practice.

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.

Topic or ESG issue: Environmental and Social

Engagement type: Individual, reactive

Objectives: Bring the company's attention to the implementation of its zero-deforestation policy and its implementation as well as the negative social impact its operations may cause.

Scope and Process: Bunge has been accused by several organizations of driving deforestation via its soybean suppliers in Chan Chaco, in Bolivia, despite its zero-deforestation commitment. In addition, the company has been fined by the Brazilian Institute of Environment for activities involving illegal deforestation in the Cerrado. What is more, organizations claim that indigenous peoples are negatively impacted when new soy plantations are established due to force displacements as well as by the use of toxic pesticides that have led to birth defects, cancers and respiratory diseases. Storebrand started dialogue with Bunge during the Spring of 2018 with questions regarding its zero-deforestation policy and its implementation as well as how the company assess and prevents negative social impact.

Outcomes: Storebrand has received several detailed answers from Bunge explaining the Zero deforestation policy and its implementation and denying NGOs' accusations. Although the policy looks good in paper, we continue our dialogue regarding its implementation. The company has not been able to provide any answers regarding alleged human rights violations of indigenous peoples and local communities. At this point, Storebrand is considering joining a new collaborative PRI investor initiative on soy that will start after the summer for more leverage.

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 has joined the group as lead investor. Some companies have already received letters from the investor group, and in addtion some of them have had meetings with lead investors.

Other initiatives

In 2017, Storebrand decided to dedicate extra efforts to advocate for climate issues. Below are some of the initiatives that have been prioritized.

Dialogue with public policy makers/standard setters

Letter to G7 and G20 governments regarding climate change

Together with other PRI investors, Storebrand signed a statement urging all governments to stand by their commitments to the Paris Agreement and to put in place policy measures to achieve their nationally determined contributions (NDCs) with the utmost urgency. The letter calls for governments to continue supporting and fully implement the Agreement, despite the announcement from the US Administration not to do so. The statement also asks governments to develop focused and targeted long-term climate and energy plans by which their NDCs become aligned with the Paris Agreement’s goal of “holding the increase in the global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5 °C above pre-industrial levels.” By May, around 200 investors with over US$15trn in AUM had signed the letter. The letter was sent to the governments and released to the press in advance of the G7 summit on 25-26 May 2017.

Engaging on climate change challenges in Japan, Luxembourg and USA

  • Japan: Storebrand visited Japan in February to discuss climate change with Japanese authorities and companies. Storebrand met top officials at the Japanese Trade and Industry Ministry to discuss why coal is a high-risk investment. This issue was also raised with top Japanese politicians. Storebrand discussed sustainable and fossil free investments with a Japanese pension fund and met 10 companies from the Japan Climate Leadership group. Discussions with the companies included investor ESG expectations and positioning to face sustainability challenges such as climate change. Storebrand also participated as a speaker at a conference organized by Bloomberg and Oxford University on stranded assets.
  • USA: In March, in New York, Storebrand had a discussion on low-risk fossil free investments with the Office of the New York City Comptroller, who is in charge of New York City's five pension funds.
  • Luxembourg: In May, Storebrand visited Luxembourg where it discussed fossil free investments with Luxembourg's Minister of the Environment.  

Dialogue with External Fund Managers

Requiring our external fund managers to disclose carbon data

At the end of 2016, Storebrand sent a letter to all its external fund managers requesting them to calculate the carbon footprint of their funds and to sign the Montreal Pledge. By signing the Montreal Pledge, investors commit to measure and publicly disclose the carbon footprint of their investment portfolios on an annual basis.  As of June 2017, almost all fund managers have replied to us and a large majority have sent their CO2 footprint calculations. Some managers have replied that they are in the process of calculating their CO2 footprint and will send the results as soon as they finish. Regarding the Montreal Pledge, very few have replied they are signatories. One of the fund managers stated that they will not sign the pledge but that they disclose their carbon footprint.

Active ownership yields good results

Total and Veolia are good examples of how our efforts to make a positive influence can be successful in achieving more sustainable outcomes.

Topic or ESG issue: Social, Indigenous Peoples Living in Voluntary Isolation (IPVI).

Company having operations within reserve for isolated indigenous peoples in Peru.


Type of engagement: Collaborative


Objectives: Require Repsol to implement its indigenous peoples policies and protocols with business partners. Focus: If negative impact cannot be mitigated then withdrawal from the block should be considered.


Scope and Process: Collaborative engagement with Boston Common Asset Management and Batirente since 2010. Storebrand is lead investor. Repsol is part of the Camisea consortium in Peru, whose main operator is Pluspetrol. The Camisea oil project has been expanded to overlap with a reserve for IPVIs. Isolated indigenous peoples are particularly vulnerable. Contact with people from the surrounding environment can be fatal since their immune system is not developed to fight common diseases such as colds, flues, measles and diarrhea. There is evidence that those diseases have killed indigenous peoples in great numbers upon first contact. It is not clear to what extent Peruvian authorities and Pluspetrol guarantee that IPVIs' rights are respected. Since the investor group is not able to find investors in Pluspetrol to engage directly with Pluspetrol, the group is engaging with Repsol so that the company will raise these issues in the consortium. The group has been successful in the past in engaging with Repsol to adopt indigenous policies and protocols and requiring their implementation in block 39 in Peru via several conference calls. The company withdrew from this block in 2013. Recent focus has been on Repsol's implementation regarding business partners and the Camisea consortium.


Outcomes: In September 2016, the company unofficially announced it would be withdrawing from the expanded Camisea block and most likely the whole consortium would follow suit. In May 2017, the consortium unofficially announced its withdrawal from 41% of the expanded block, therefore mitigating its impact on the indigenous peoples reserve.