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Finance Blog

Laura Natumi McTavish

Laura is an Analyst within the Team of Responsible Investments (RI), where topic of interest includes researching and analyzing companies and portfolios to identify material Environmental, Social and Governance (ESG) risks and opportunities. Companies ESG practices are then followed up through engaging with companies, both directly and through investor initiatives. The RI team works closely with the Portfolio Managers across the funds.

Laura McTavish joined us in 2018. Previously, Laura spent just short of 2 years with Trucost (part of S&P Global) as a research analyst, conducting portfolio carbon footprinting and bespoke project work for financial institutions.

Laura holds an MSc in Carbon Finance from the University of Edinburgh and a BA (Hons) in Business with Economics from Glasgow Caledonian University.


Over the past year, DNB Asset Management’s (DNB AM) ESG team has worked closely with the fixed income team to further improve processes and work towards integrating Environmental, Social and Governance (ESG) factors into credit analysis and investment decision making in a more systematic way.

We have created a framework for assessing material ESG risks and opportunities per sector. Based on this framework, we have developed and sent out sector-specific questionnaires that account for distinct conditions within the Norwegian market. We have scored bond issuers on the quality and transparency of their ESG work within the bank, utilities and real estate sectors based on the responses we have received. We have now had follow-up dialogues with some issuers where we have outlined our findings and encouraged increased transparency. Our goal is to influence the companies in a positive direction.

Sustainability will be prioritised in 2020

Top-level results show a normal distribution of scores amongst Norwegian banks. Only two banks did not respond to our request.

Figure 1

Figure 1.

Head of Fixed Income at DNB AM, Svein Aage Aanes, highlights that:

- We seek to understand both how companies work with sustainability today, and which plans they have moving forward. Over 50% of banks have indicated that sustainability will be prioritised in 2020 and will be integrated into their company strategy. We look forward to seeing how this will be reflected in the development of their ESG scores during next year’s assessment. Over time we will set increased expectations towards companies, in line with developments in the market.

Poorest performance on climate and the environment

Figure 2

Figure 2.

A clear weakness amongst banks is their reporting of and work with climate change and the environment. This is reflected in the negative distribution of the “environment” scores in the graph above.

A report by Finanstilsynet on the mapping of Norwegian listed companies’ sustainability work draws the same conclusion – “climate-related risk reporting is limited and is rarely quantified”.

We encourage increased transparency around climate change and the environment. Climate-related reporting based on the Task Force on Climate-related Financial Disclosures’ (TCFD) recommendations are considered best-practice reporting. The TCFD framework is split into four key areas (governance, strategy, risk management, and metrics and targets) and provides both sector-specific and general recommendations. We also encourage reporting in line with the TCFD recommendations in our expectations document on climate change.

Moreover, we seek to understand how banks are working with the recommendations from Finance Norway’s Roadmap for Green Competitiveness:

  • Measure carbon-related credit exposure in line with the recommendations from the TCFD
  • Make climate part of the credit process
  • Include climate criteria in residential and commercial mortgages
  • Make the bond market greener, both by including climate factors in prospectuses and issuances of ordinary bonds, and by increasing issuances of green bonds

Good performance on social and governance factors

As reflected in figure 2, the results of the banks’ work with social factors is positively distributed. This means that banks generally have good processes and policies in regards to human capital, product quality and safety, and data security and privacy. We see, amongst other measures, that these topics often have Board-level oversight, and that there are comprehensive training and competency building programmes in place.

The results in regards to governance are “flatter”. The banks score well on sector-specific questions covering Board independence and having an independent Risk Committee, and bonus-programmes include long-term incentives. On the other hand, robust and publicly available ESG policies, strategies and Board-level oversight over this work are generally lacking. We anticipate an improvement in this area during next year’s assessment, as most banks have indicated that this will be prioritised during 2020.

Room for improvement on gender equality and diversity

Another key finding from this assessment is that there is a lack of transparency around banks’ strategy for gender equality and diversity. Most banks limit their reporting to the gender mix of their employees.

The banks that lead in this area report, amongst other measure, how gender equality and diversity are integrated into recruitment processes and professional development programmes and opportunities. They also set targets for this work and report on progress towards targets.

Large cap bias

The largest banks have more resources available for work with and reporting of sustainability. This is reflected in our scoring. The graph below demonstrates that no large banks score lower than BBB, and most of the A-AAA scores are awarded to large banks. The spread in scores is greater for small and medium-sized banks. Most of the banks we have scored as defined as medium-sized. Note that our definition of bank size comes from Finance Norway[1] and the EU’s[2] definitions.

Figure 3

Figure 3.

In attempt to address this large-cap bias, we have scored and ranked the banks in three ways:

  • Compared to all banks we have scored (Figure 1)
  • Compared to banks of comparable size (Figure 4)
  • Compared to banks within their alliance (relevant to banks which are part of an alliance)

Figure 4

Figure 4.

The scores in Figure 4 are adjusted such that we now can compare similar-sized banks. This means that small banks can receive an AAA score compared to the performance of other small banks. However, we still observe a negative distribution amongst the small banks, thereby indicating weaker performance amongst these compared to the medium and large banks.



We are working towards a common goal

Svein Aage Aanes, Head of Fixed Income

Sustainability work puts us in the unusual position where both loan provider and bond issuer have aligned incentives – both wish to improve. This can result in productive company dialogue and positive developments in bond issuers’ work with sustainability over time. We believe we can contribute with knowledge of best-practice processes, policies and reporting, which can help to drive sustainable development, whilst also uncovering risks that can be integrated into credit analysis and investment decision making.

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