"Changing perception of sustainability creates new champions on Nordic stock exchanges," portfolio manager Sindre Sørbye argues in article with Danish AMwatch. Read the article in full, on how new companies emerge as ESG rise on the agenda for Nordic and Global investors, and how new investment opportunities arise.
Written by: REETA PAAKKINEN
Published 29.04.19 at 13:38
There are companies that the investment community did not previously consider to be champions of sustainability but are presently in the midst of implementing circular economics, says Sindre Sørbye, partner at Arctic Fund Management.
A thorough assessment of larger, diversified companies’ forward-looking positions is central to evaluating their approaches to ESG criteria," says Sindre Sørbye, portfolio manager and partner at Oslo-based Arctic Fund Management.
"Doing one's homework properly plays a vital role here. Responsible investment and responsible ownership go hand in hand, meaning that you really have to know and engage with the companies you are investing in," Sørbye underlines.
Relying exclusively on third-party data is simply insufficient when evaluating a possible investment, he says. "This is also the case for matters related to ESG issues. We try to uncover risks and upside potential, also in this field."
Artic Fund Management currently manages seven funds with an asset volume exceeding NOK 17bn, most of which belongs to institutional investors. Sørbye is one of the three portfolio managers for Arctic Nordic Equities and Norwegian Value Creation funds.
"Changing perception of a company may provide an investment opportunity"
Following possible changes in companies' ESG factors and investor perception of a company over the longer term is also important. Improvement within the company's operations from an ESG perspective or the general perception of a company may provide attractive investment opportunities, Sørbye adds.
"For instance, the broader investment community did not consider companies such as Stora Enso or Borregaard sustainability champions a few years ago. Today, the logic 'what can be made from oil can be made from wood' places those companies in the midst of the very concept of circular economy," Sørbye adds.
Another issue of similar importance is the focus on the sustainability of a company's business model, Sørbye notes. One example of a firm with a financially sustainable business model is the Norwegian collection and sorting solutions firm Tomra, in which two of Artic's funds have now been investing for more than four years.
"Although there are signs that labels such as 'green' or 'sustainable' alone attract investor attention, it is also key that we deem the business model itself to be sustainable in financial terms. This obviously has been the case with Tomra, where the growing demand for recycling and sorting solutions has grown the company's business volume for several years. We have also witnessed strong returns in 'green' companies such as Scatec Solar, wind energy company Bonheur and hydrogen company NEL," Sørbye adds.
A key remaining challenge in developing commercial ESG standards is the lack of uniform reporting standards, Sørbye notes. "Large companies tend to allocate significant resources to ESG reporting, but extensive reporting does not necessarily mean good performance. Moreover, the ESG arena is still a field in which personal opinions of what is good and what is bad are broadcast by both, corporates as well as the investor community," he concludes.
- Link to article https://amwatch.dk/secure/article11345992.ece
Arctic Nordic Equities is a research driven and truly index‐independent UCITS fund. The investment process focus on identifying companies which are considered to be value‐creating over time at a reasonable price. The portfolio is constructed by bottom up stock picking. There are no constraints regarding country or industry in the Nordic region, and the goal is to create the best portfolio possible at any time. The funds benchmark is VINX Index calculated in Norwegian kroner.
Past performance in the fund is no guarantee for future returns. Future returns depend on the market, fund manager skill, fund risk level, costs, among others. Performance in the fund may at times be negative and may vary within periods.