Fondsfinans Kapitalforvaltning is convinced that the financial industry has an important role in the transition to a more sustainable economy and society, and we will do our part to contribute within the framework set by our management mandates.
We are committed to sound corporate governance principles and long-term value creation. We believe that companies that handle material ESG (environment, social, and corporate governance) topics in a sound way will reduce risks, have an important competitive advantage and be the winners of tomorrow.
Our goal is to work with ESG in a systematic and constructive way, thereby creating value as part of our asset management and for our unitholders.
Keeping our own house in order
In addition to being committed to sustainability in our role as investor and owner, we aim to be a driving force for good ESG practice 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 invest in our employees and offer opportunities for further education and development through our education fund. We also have an ambition for our office operations to be climate neutral and buy allowances to offset our emissions.
As a company, Fondsfinans Kapitalforvaltning is conscious of its social responsibility, and we aim to contribute positively 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, obligated to report on our activities in accordance with the initiative`s six principles. Our response to PRI`s yearly assessment can be found here.
In addition, we actively participate in relevant ESG forums 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 integral part of our investment process. Our managers seek to identify companies that we believe have great potential for long-term value creation. We are concerned with long-term trends such as the technological, demographic and green shift and assess how companies are exposed to these trends. We are also interested in companies’ positioning in relation to goals in recognised frameworks such as the Paris Agreement or the UN Sustainable Development Goals.
We integrate sustainability risks (ESG-related risks and opportunities) into our investment analyses and decisions. This means that we analyse environmental, social or governance aspects and/or events that may have a material negative impact on the value of the investment. For example, based on information from the ESG analyses, we adjust our estimates for future earnings, future impairment of asset values and/or change the risk premium that we use in our investment calculations. In addition, we can enter into dialogue with companies that we believe should reduce their sustainability risk, both to help companies and to reduce the risk in our investments.
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 globally and in Norway that are not socially beneficial. Link to the GPFG guidelines can be found here.
Fondsfinans Kapitalforvaltning avoids investing in companies that contribute to gross or systematic violations of labour and human rights (including child labour or other exploitation of children), severe environmental damage, gross corruption or other serious violations of fundamental ethical norms.
In line with the ethical guidelines for the GPFG, we exclude investments in companies that produce tobacco or tobacco products, cannabis, and companies that base their operations on the extraction of or power production from thermal coal. We also exclude companies that produce weapons that violate fundamental humanitarian principles through their normal use. In practice, this applies to companies that produce key components for nuclear weapons, cluster munitions and antipersonnel landmines. Nor will we invest in companies that sell military equipment to sanctioned regimes.
We have also chosen to exclude companies that produce pornographic material, companies that have gambling as their core business and companies that are producers of alcohol.
Before an investment is made, the manager is obliged to check whether the investment object’s activities may be in breach of our exclusion policy. Furthermore, all mutual funds are screened on a monthly basis against data from Morningstar/Sustainalytics to uncover any violations of our policies. If we discover that companies in which the funds hold shares violate those guidelines, the shareholding will be disposed of in a way that best safeguards the interests of unitholders.
We seek to develop good communication and a constructive relationship with the management of the companies in which we invest in. 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 principles of sound corporate governance are upheld.
Regulations and reporting
We observe a growing interest in ESG in the market and see that this is a rapidly evolving area in terms of both practice and reporting. There are also increasing demands placed on us as managers on this front from the authorities and other stakeholders. 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 2023.
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 reporting in accordance with SFDR
We aim to assess relevant information about ESG in the management of all our funds, in line with the funds’ investment mandates. This includes ESG risk assessments in our company analyses, as discussed under ESG in our investment process. In addition to these risk assessments, however, we have different strategies and objectives related to sustainability and ESG in the individual funds. How our funds are regulated by the various SFDR articles will depend on the individual fund’s approach and any objectives related to sustainability and ESG.
Regulation of our funds in accordance with the articles of the SFDR:
Article 6: Funds that integrates sustainability risk, without promoting environmental or social characteristics.
- Fondsfinans High Yield
- Fondsfinans Kreditt
- Fondsfinans Aktiv 60/40
Article 8: Funds that both integrate sustainability risk and promote environmental and social characteristics through selection and active ownership.
- Fondsfinans Global Helse
- Fondsfinans Norden
- Fondsfinans Norge
- Fondsfinans Utbytte
- Fondsfinans Obligasjon
Article 9: Funds that both integrate sustainability risk and have sustainable investments as their purpose.
- Fondsfinans Fornybar Energi
For more detailed information on the ESG approach and targets in our funds, please read the prospectuses of the individual funds.
At the enterprise level, Fondsfinans Kapitalforvaltning AS has chosen not to take into account or report negative effects of investment decisions on sustainability factors (which the EU has defined as Principle Adverse Impact (PAI) indicators). Data availability is a major challenge as many companies in the investment universe of our equity and fixed income funds do not report sufficient data that we can use as a basis for PAI assessments across our funds. If we have sufficient PAI data for the companies in some of our funds, this information may be included in investment decisions, and we will consider reporting PAI indicators at fund level. We will reassess annually (by 31 June) whether it is practicable to take into account and report enterprise-level PAI indicators.
Remuneration schemes in Fondsfinans Kapitalforvaltning AS
The Board of Directors of Fondsfinans Kapitalforvaltning AS (“Fondsfinans”) has adopted a remuneration scheme for the company’s employees and employee representatives. The remuneration scheme is in accordance with Regulation No. 1467 of 21 December 2011 to the Securities Trading Act and will be reviewed by the Board of Directors at least once a year. The remuneration system is designed to take sustainability risk into account and that risk-taking that is incompatible with the risk profile, articles of association or other memorandum of association for funds under management is not encouraged. Integrating sustainability risk is part of the overall risk assessment for our investment products and is therefore included in all risk references in our remuneration policy.
Would you like to know more about how we work with ESG? Contact Melanie Brooks by email: email@example.com or by phone: +47 23 11 30 66