Storebrand ESG Plus fund range

The Storebrand ESG Plus equity fund range strategy offers systematically managed equity portfolios that seeks alignment with the goals of the Paris Agreement and a transition to a low carbon future, while avoiding unnecessary sources of expected tracking error relative to the MSCI benchmark. The ESG Plus fund range offers a low cost, core equity exposure for sustainability aware investors and is applied to global as well as regional portfolios. Please see our fund list for more information.

Investment strategy

Climate change is a systemic risk that threatens all areas of the economy and financial markets. Storebrand ESG Plus was created to act as an alternative to pure market capitalization weighted index products for climate aware asset owners.

The strategy is managed by climate specialists who actively apply the latest scientific knowledge and data to create a portfolio that is ideal for those seeking a low carbon alternative to traditional passive equity products.
 

Investment process

The investment team combines a specialist understanding of climate science, policy and data with deep experience of portfolio management and optimisation. The portfolios are constructed using a risk model and optimization framework to ensure that it has the required climate characteristics while avoiding unnecessary sources of tracking error relative to the market capitalization weighted benchmark.

The investment process comprises six components::

  1. Divestment: In addition to Storebrand's extended exclusion list, which omits companies involved in alcohol, gambling, weapons or pornography, we exclude fossil fuel companies (companies generating more than 5% of revenues from the production or distribution of fossil fuels) and those providing environmentally harmful products and services, such as plastics, meat or airports. Exclusions are based on analysis of climate risk across supply chains.  

  2. Climate solutions: 12%-15% of the portfolio is allocated to over 100 pure-play climate solutions companies, such as renewable energy, green transport, recycling and water; the remainder is optimised for FTSE green revenues (climate solutions defined as companies with over 50% of revenues or market cap from climate solution products or services, green revenues based on FTSE green revenues).

  3. Carbon intensity: The portfolio is further optimised to reduce production phase emissions (Scope 1 and 2), resulting in a fund with significantly lower carbon intensity than the index (based on Trucost data (tons / mUSD sales). Insights from lifecycle emissions and avoided emissions (scope 3 and 4) are also incorporated into the model design by the portfolio manager. 

  4. Target setting: We incorporate forward-looking analysis alongside backward-looking emissions data. The strategy overweights companies with climate goals aligned to the Paris Agreement and externally verified by the Science Based Targets initiative.

  5. Climate lobbying: We engage with companies to get clarity on, and to influence, their climate lobbying. We also avoid investing in companies which have a track-record for lobbying against climate mitigation policy.

  6. ESG rating: We incorporate an external ESG risk rating into the optimisation process, with additional weight given to climate factors. The best-scoring companies are overweighted in the portfolio.

This approach results in a portfolio with relatively low tracking error versus the index with reduced carbon emission exposure, higher green revenues and a superior ESG rating to the benchmark (carbon emission exposure based on scope 1 & 2 carbon intensities from Trucost, green revenues based on FTSE Green Revenues, ESG rating based on Sustainalytics).

Why invest in Storebrand Global ESG Plus?

  • Broad equity market exposure
  • Avoid exposure to fossil fuel value chain and reduce other climate-related risks
  • Portfolio optimised for green revenue exposure with increased allocation to companies providing products and services that help solve the climate problem
  • Specialist portfolio management to avoid benchmark-relative risk from other sources – expected tracking error approx. 1.0-1.5% (12% allocation to climate solutions companies and 1.0% tracking error for Global ESG Plus / 15% allocation to climate solutions companies and 1.5% tracking error for Emerging Markets ESG Plus)
  • Future-proof investment strategy that evolves with climate science and market developments

 

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Historical returns are no guarantee of future returns. Future returns will depend, among other things, on market developments, the manager's skills, the fund's risk profile and management fees. The returns can be negative as a result of price losses. There is risk associated with investments in the fund due to market movements, developments in currency, interest rates, economic conditions, industry- and company-specific conditions. Before investing, customers are advised to familiarize themselves with the fund's key information and prospectus, which contains further information about the fund's characteristics and costs.