ESG integration in fixed income: Norwegian banks
Norwegian banks perform poorest in regards to environmental factors. However, most banks plan to prioritise sustainability by integrating it into their strategy moving forward.
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
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.
