Effective Q4 2024, we changed the way we process data inputs to, and make decisions on, Storebrand’s Extended criteria: MOS (Market oriented screening).
Context for changes
In certain markets, such as in Sweden, industry standards and expectations for exclusions based on international norms and conventions may be different than those enshrined in Storebrand's Exclusion Policy. Therefore, for many years, we have carved out an extended set of exclusion criteria, which we defined as MOS (Market Oriented Screening), criteria, and which applied to a subset of our funds.
Our MOS criteria resulted in exclusion, from those funds, of companies that are in breach of the UN Global Compact, as flagged by external data providers; namely ISS ESG (Norms Screen) and Sustainalytics (Global Standards Screen). The MOS screening has been applied to all our Swedish domiciled funds, as well as our Art. 9 funds [1], thereby automatically excluding companies that have been red flagged by one of these data providers for human rights, environmental damage or corruption.
But in recent years, we have seen industry practice in Sweden changing, with more of a focus on engagement and active ownership, and a more nuanced understanding of information and recommendations coming from data providers. This has led us to reevaluate our decision to automatically exclude all companies red-flagged by these data providers.
New process
We will continue to screen red-flagged companies, but these companies will be brought into our own evaluation and analysis for potential exclusion following a thorough assessment conducted by our in-house expert team as we have been doing over the years in accordance with our Exclusion policy.
Thus, eventual exclusions will no longer be automatically effected as a result of red flags by data providers. Rather, they will now be taken as part of Storebrand’s Exclusion Policy — and thereby apply to all funds and markets. An exclusion will be made if the merits of the case flagged by the data providers warrants it in accordance with our Exclusion Policy, if we are unable to come into a constructive engagement with the company to influence a change in practices, and/or if escalation measures (such as voting and co-filing shareholder resolutions) do not prove successful. The screening and automatic exclusion of red-flagged companies by the data providers will however continue to apply to our Art. 9 funds as specified in our SFDR methodology. This change will only be applicable to our Art. 8 funds. [2]
Immediate impacts
As part of this change in Q4 2024, we have carried out a thorough evaluation and assessment of all companies that have been excluded under this criterion that have otherwise not already been excluded under the Storebrand Exclusion Policy, which applies to all funds and markets. This has resulted in certain companies be- coming eligible for investment while others have been completely excluded from our investment universe.
It is important to underline that this does not mean that companies that are now eligible for investment are “cleared”, but rather that we either disagree with the data providers assessment or methodology for concluding the company is in non-compliance with UN Global Compact, or that we have a strategy for active ownership and escalation which we are applying toward the company to secure that they meet our sustainability requirements.
Following the Storebrand Exclusion Policy means that we do not invest in companies in breach of international norms and standards, based on UN Global Compact or OECD guidelines, and this will continue to be the case. We conduct an active and continuous dialogue with several of these companies. Our ambition is to make independent judgments based on our own analysis, in-house expertise and experience, rather than relying solely on the recommendations provided by our various third-party data providers. This approach allows us to have a more direct impact and take greater responsibility for our investment decisions.
References
[1] Art. 9:
Funds that are marketed as meeting the criteria for Article 9 of the EU Sustainable Finance Disclosure Regulation (SFDR): financial products with a primary sustainable investment objective.
[2] Art. 8:
Funds that are marketed as meeting the criteria for Article 8 of the EU Sustainable Finance Disclosure Regulation (SFDR): financial products that promote environmental or social characteristics alongside financial objectives.
