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Our approach to ESG

Our principles

Fondsfinans Kapitalforvaltning is convinced that the financial industry has an important role to play in the transition to a more sustainable economy and society, and we will do our part to contribute.

We are committed to sound corporate governance principles and sustainable value creation. We believe that companies with a good handling of material ESG (environment, social, and corporate governance) topics will have an important competitive advantage and be tomorrow’s winners.

Our goal is to work with ESG in a sophisticated and constructive way, thereby creating value as part of our asset management and for our unitholders.

 

Melanie Brooks is Head of ESG and Portfolio Manager of Fondsfinans Fornybar Energi

Keeping our own house in order

In addition to being a responsible investor and active owner, we aim to be a driving force for sustainability and ESG in our own operations. We are committed to gender equality, and we actively seek to increase the proportion of women in different parts of the organization. We focus on developing our employees and offer opportunities for further education and development through our education fund. We also aim for our office activities to be climate-neutral, and we buy emission allowances to over-compensate for our emissions.

As a company, Fondsfinans Kapitalforvaltning is aware of its corporate social responsibility, and we are committed to making a positive contribution beyond what we can do as an employer and investor. We support the Norwegian Cancer Society and the Church City Mission and contribute to making hiking and other experiences in nature available for all. The mountain cabin Fondsbu in Jotunheimen is owned by Fondsfinans and is rented out to DNT Oslo for a symbolic amount of 1 NOK per year.

Collaboration and participation in external initiatives

Fondsfinans Kapitalforvaltning has signed the UN-backed PRI initiative (Principles for Responsible Investments) and we are therefore obliged to report our activities in accordance with the initiative`s six Principles. Our response to PRI`s yearly assessment can be found here.

We also participate actively in relevant forums for ESG in our domestic market. Fondsfinans Kapitalforvaltning is a member of NORSIF (Norwegian forum for responsible and sustainable investments) and is represented in VFF`s (Verdipapirfondenes association) ESG committee.

ESG in our investment process

ESG is an integrated part of our investment process. This means that we incorporate ESG factors in company analysis, portfolio composition and active ownership.

Our portfolio managers seek to identify companies that we believe have significant potential for sustainable value creation. We are concerned about long-term trends related to technological developments, demographic changes (i.e. ageing population) and the transition to a low-carbon and green economy. We always assess how companies’ products and services are aligned with these trends and whether they contribute to promoting goals in recognized framework such as the Paris Agreement or the UN Sustainable Development Goals.

Before an investment is made, the portfolio manager is obliged to check whether the potential investee company has products or activities that may be in violation of our guidelines. If we discover that companies in which any of our funds are invested is in violation of the guidelines described herein, the shares will be disposed of in a way that best safeguards the interests of the shareholders.

What do we exclude?

At a minimum, we follow the recommendations given by the Council on Ethics for the Norwegian Government Pension Fund Global (GPFG), but in some areas we go further in excluding companies or industries in Norway and abroad that are not socially beneficial.

Fondsfinans Kapitalforvaltning strives to avoid investing in companies that contribute to violations of human rights or workers’ rights (including child labor or other exploitation of children), corruption, serious environmental damage, and gross violations of fundamental ethical norms.

In line with the ethical guidelines for the GPFG, we do not invest in companies that produce weapons that, under normal use, violate fundamental humanitarian principles. In practice, this applies to companies that produce key components for nuclear weapons, cluster munitions and anti-personnel landmines. Nor will we invest in companies that sell military equipment to sanctioned regimes.

We have chosen to exclude companies that produce pornographic material, companies that have gambling as their core business or companies that produce liquor or tobacco. We are cautious about investing in companies that have a substantial share of their values related to the production and sale of wine and beer.

Active ownership

We seek to develop good communication and a constructive relationship with the management of the companies in which we invest. This implies meeting the management, knowing the ownership structure, and understanding the core business, and its drivers, including ESG topics and strategic choices tied to sustainability. We want the companies we invest in to have a reflected shareholder policy, equal treatment of shareholders, to be open and demonstrate corporate social responsibility.

We will use active ownership to guide investee companies in the right direction when we believe it will create value for the company and our unitholders. Through dialogue with the management, participation at general meetings and in the exercise of voting, Fondsfinans Kapitalforvaltning will seek to ensure that good principles of corporate governance are upheld.

Regulations and reporting

We observe a growing interest in ESG in the market and see that this is an area that is rapidly developing. Lawmakers and other stakeholders have increasingly stringent demands to the fund management industry. As a Norwegian fund manager, there are a number of EU regulations in particular that apply to Fondsfinans Kapitalforvaltning.

EUs Platform on Sustainable Finance

The EU has introduced a Platform for Sustainable Finance with various measures to promote sustainable economic activities. Key elements of the EU action plan include a classification system for sustainable activities (the EU taxonomy) and new reporting requirements related to ESG and sustainability for financial market participants such as regulated asset managers and investment advisers (Sustainable Finance Disclosure Regulation or-SFDR).

The EU Taxonomy shall form the basis for a common understanding of which economic activities can be defined as sustainable. Unlike the Taxonomy, SFDR is not a classification system. Rather, it is focused on increasing transparency and mandates increased reporting. For asset managers, there are requirements for reporting on ESG-risks and sustainability at both product (portfolio) and entity (asset manager level).

Some parts of the EU Platform came into force as early as 2021 in Europe. Additional requirements apply from January 2022 and other parts will be rolled out later. In Norway, a new law on the publication of sustainability information in the financial sector and a framework for sustainable investment (covering SFDR and the Taxonomy) was adopted by the parliament in December 2021. The Norwegian law is expected to come into force in the first half of 2022.

Based on this, Fondsfinans Kapitalforvaltning is in the process of implementing the parts of the regulations that apply to us as an asset manager. For example, information on sustainability risks and sustainability objectives been incorporated into the prospectuses of all our funds. Further information will be reported in line with the new requirements.

Our funds ‘objectives and reporting in accordance with SFDR

We work actively with ESG in all our funds. However, we have made a conscious choice to be conservative in terms of how our funds will report according to the Articles (6, 8 and 9) in SFDR. A lack of adequate data and reporting on certain ESG KPIs – especially from smaller and unlisted companies – may make it difficult for us to report target figures aggregated at fund level in some of the funds. We will continuously assess how we report according to SFDR based on developments in access to data.

Our funds that report according to:

Article 6: Integrates ESG/sustainability risk, without promoting environmental or social characteristics.

  • Fondsfinans High Yield
  • Fondsfinans Kreditt
  • Fondsfinans Aktiv 60/40

Article 8: Both integrates ESG/sustainability risk and promotes environmental and social characteristics through selection and active ownership.

  • Fondsfinans Global Helse
  • Fondsfinans Norden
  • Fondsfinans Norge
  • Fondsfinans Utbytte
  • Fondsfinans Obligasjon

Article 9: Has sustainable investments as a purpose.

  • Fondsfinans Fornybar Energi

Would you like to know more about how we work with ESG? Contact Melanie Brooks by email: melanie.brooks@fondsfinans.no  or by phone: +47 23 11 30 66