ESG Investor Gets Funds With $4.6 Trillion to Back Brazil Plan

Norway’s biggest private investor, Storebrand Asset Management ASA, says its pressure campaign on Brazil to protect the Amazon forest is having a “real impact.”

The money manager has now brought together 34 funds with over $4.6 trillion in assets to try to get Brazil to end policies that destroy the Amazon forest. Storebrand, which has devoted its entire $90 billion portfolio to environmental, social and governance investing, says it now has a “clear commitment” from the Brazilian government that it will respond to its demands.

“We have already seen a real impact,” Jan Erik Saugestad, chief executive of Storebrand, told Bloomberg. “Following a meeting with the investor coalition, the Brazilian government introduced a 120-day ban on wildfires in the Amazon as a short-term measure to reduce the fire danger we now face during the drought season.”

Beyond the ecological benefits, ethical investing is also starting to reap bigger financial rewards, as some climate sinners take on pariah status. The iShares exchange-traded fund investing in companies it thinks have “positive environmental, social and governance characteristics” -- one of the largest of its kind -- produced a total return this year that is more than three times the performance of S&P 500 index.

ESG Investor Gets Funds With $4.6 Trillion to Back Brazil Plan

The funds led by Storebrand had singled out a proposal in Brazil to legalize the private occupation of public lands, mostly concentrated in the Amazon.

Saugestad says Storebrand was able to get “a clear commitment on the government’s side to reduce deforestation and to stand by its obligations to respect United Nations conventions in terms of protecting indigenous people and human rights.”

This latest move by the fund industry coincides with pressure from the corporate sector, after 61 companies wrote to Brazil’s government earlier this month demanding more action to tackle Amazon deforestation. As a result Lower House speaker Rodrigo Maia has this week promised to set up a working group to speed up projects with an environmental agenda.

Blacklisted

Entities that don’t live up to Storebrand’s demands for ethical conduct end up being excluded from its portfolio. Companies to have ended up on its blacklist include Glencore Plc, Volkswagen AG, Airbus SE, BAE Systems Plc and Boeing Corp. The latest exclusion list numbers 193 in total.

Saugestad says he expects his industry to start changing the way it measures returns as ESG dominates investing strategies.

Asset managers “will increasingly measure impact and start talking about impact adjusted returns in the same way as risk adjusted returns,” he said, though he also acknowledges it “will probably take more than 10 years to get there.”

“In my opinion everybody in the asset management industry has to understand sustainable investments because sustainability already has an impact on most investments today,” Saugestad said. “Sustainability is already in the curriculum on most business schools, and if it is not mandatory yet, it ought to be.”

©2020 Bloomberg L.P.

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