RIO DE JANEIRO, BRAZIL – Storebrand Asset Management, Norway’s largest private investor, sees a “real impact” of its pressure campaign on Brazil to protect the Amazon Forest.
The asset manager has now combined 34 funds, with more than US$4.6 trillion (R$23 trillion) in assets, in an attempt to persuade the Brazilian government to reverse policies that destroy the Amazon. Storebrand, which has dedicated its entire US$90 billion portfolio to environmental, social and governance investments (ESG), says it now has a “clear commitment” from the Brazilian government that it will meet its demands.
“We have now seen a real impact,” said Jan Erik Saugestad, Storebrand’s CEO, in an interview with Bloomberg. “After a meeting with the investors’ coalition, the Brazilian government banned burning in the Amazon for 120 days as a short-term measure to reduce the danger of fires we currently face during the dry season.”
In addition to the ecological benefits, ethical investment is also beginning to yield greater financial rewards. The iShares index fund invests in companies that have “positive environmental, social and governance characteristics” in their evaluation. The fund, one of the largest of its kind, has recorded a total return this year that is more than triple the performance of the S&P 500 index.
The funds led by Storebrand had their sights set on the Brazilian government’s proposal to legalize private occupation of public lands, mainly concentrated in the Amazon.
Saugestad says Storebrand has achieved “a clear commitment from the government to reduce deforestation and to comply with its obligations to respect the United Nations conventions in terms of the protection of indigenous peoples and human rights.”
The latest initiative by the fund industry is concurrent with pressure from the corporate sector after 61 companies wrote to the Brazilian government earlier this month demanding further action to fight deforestation in the Amazon. As a result, the president of the Chamber of Deputies, Rodrigo Maia, vowed this week to set up a working group to expedite projects with an environmental agenda.
Blacklist
Companies failing to meet Storebrand’s demands for ethical conduct are excluded from the manager’s portfolio. Companies that have made the blacklist include Glencore, Volkswagen, Airbus, BAE Systems, and Boeing. The most recent list totals 193 excluded companies.
Saugestad says he expects his industry to start changing the way it measures returns as ESG progresses in investment strategies.
Asset managers “increasingly measure impact and start talking about impact-adjusted returns in the same way as risk-adjusted returns,” the executive said, though he also acknowledged that “it’s likely to take over ten years to get there.”
“In my opinion, everyone in the asset management industry needs to understand sustainable investments, because sustainability is impacting most investments today,” Saugestad said. “Sustainability is already in the curriculum of most business schools and, if it’s not yet mandatory, it should be.”
Source: Bloomberg