May 03, 2002
Mutual Fund Reports on Environmental and Social Returns
by William Baue
Norway-based Storebrand reports on the environmental and social performance of companies in its
international mutual fund.
All investors expect companies to report on their financial performance in a transparent way; so
too do they expect transparent financial reporting from their mutual funds. Social investors are
increasingly calling on companies they invest in to report on their social and environmental
performance as well. Now, Norway-based Storebrand Investments is
offering a mutual fund that reports on the social and environmental performance of the companies in
Storebrand Principle Global Fund’s Triple Return Report
discloses the “Social Returns” and “Environmental Returns” in addition to
the financial returns of their portfolio’s holdings. The report compares the average
environmental, social, and financial performance of companies on the fund’s benchmark, the
Morgan Stanley Capital International-World Index (MSCI-WI), to the average performance of the
portfolio’s companies in aggregate. Storebrand’s Triple Return Report sets an
important precedent in transparency on the non-financial side.
“I am not aware of
any other (SRI) Fund that goes to the lengths Storebrand does to measure, quantify and report the
superiority of sector leaders over their peer group in terms of environmental performance or social
responsibility,” said Storebrand Investments UK Director Stephen Williams. “We are
transparent in reporting the results.”
The Environmental Returns report details the
portfolio companies’ performance in several categories: global warming, ozone depletion,
toxic releases, and material-, energy-, and water intensity. The report also includes two umbrella
categories: overall product characteristics and impacts, evaluated by sector-specific indicators
such as recyclability, and quality of environmental management, which represents a comprehensive
assessment of the companies’ environmental policies and practices.
On average, the
Storebrand Principle Global Fund outperformed its benchmark’s average on Environmental
Returns in 2001.
Source: Storebrand Principle
Storebrand bases its Social Returns criteria on
generally accepted international standards, such as adherence to the United Nations Universal
Declaration of Human Rights, International Labour Organisation conventions, and Amnesty
International guidelines. The report addresses four dimensions: what companies say they will do
(policies and strategies), what they actually do (practices), how their social commitments extends
beyond their own companies (business partners and suppliers), and how they have integrated these
measures into their organizations (scope, and occupational health and safety).
companies in the fund’s portfolio tend to score slightly above average on the Social Returns
report, while a few leading companies in several sectors tend to score very high, buoying the
overall results even higher. The fund’s social performance in 2001 exceeded the average
performance of its benchmark by about a third on all five social criteria.
Source: Storebrand Principle Funds
Mr. Williams cautions
that reporting on the social and environmental performance of mutual funds requires dedication.
“Generating the report is the straightforward part of the process,” said Mr.
Williams. “The more difficult part is contributing the intellectual horsepower to develop
the methodology, recruit and train the professionals to undertake the research, building the
database that underlies the research and the system which processes all the inputs. This is a huge
commitment, especially for those SRI providers who are not prepared to make the type of commitment
necessary to develop a world class SRI capability.”