The Explorer

Movers & Shakers: Jan Erik Saugestad on divesting from coal

Energy
PUBLISHED MAY 20, 2019
5 MINUTE READ
BY THE EXPLORER

Dominik Vanyi on Unsplash

Energy
PUBLISHED MAY 20, 2019
5 MINUTE READ
BY THE EXPLORER

Norway’s largest private asset manager, Storebrand, is divesting from coal. And for this the company has been nominated for one of the world’s most prestigious sustainability prizes.

On 23–25 May, movers and shakers in green technology and sustainability will come together at the GreenTech Festival in Berlin – one of the world’s largest events for sustainable innovation, whose motto is #celebrate change.

Storebrand – Norway’s largest life insurance and asset management company – has been nominated for a prestigious Green Award for its proactive, responsible and sustainable asset management and coal exit strategy.

“It’s always nice to receive external recognition for what we’re doing. It’s inspiring for us who work with sustainability. It’s just as motivating for us as it is for an athlete to win a medal,” says Jan Erik Saugestad, Executive Vice President Asset Management at Storebrand.

Jan Erik Saugestad, Executive Vice President Asset Management, Storebrand.

He makes it crystal clear that coal has no place in responsible, future-oriented asset management.

“We are convinced that there’s no future for coal in the energy mix if we are to achieve the 1.5 °C target set out in the Paris Agreement. It’s better that we invest capital in solution providers that will be bringing us closer to that goal,” says Saugestad.

Storebrand manages more than NOK 720 billion – most of which is retirement savings. As early as 2013, Storebrand decided to exclude all coal mining and power companies with coal activity from its portfolios. The original plan was to divest from coal completely by 2030, but now that has been pushed forward to 2026.

“There’s no doubt that the world is way behind schedule in meeting the climate targets. That is why we are speeding up the measures we are taking rather than continuing along the same path,” says Saugestad, when asked why the company has set a more ambitious goal.

Wants to influence companies and investors

It is not uncomplicated for an asset manager to divest from coal overnight. Nor is it particularly desirable, according to Saugestad. He says it is not just about responsibly managing money, but rather about how to influence companies to become more sustainable.

“Normally we like to go into dialogue with the companies to get them to make changes to their business or investment activity in order to move in the right direction. Divestment is in a way a last resort – if we get companies to change, we will have a greater effect. But if the company shows little willingness to change, we pull out, of course.”

Instead of pulling out of all companies involved in coal at once, Storebrand is doing it gradually. In 2013, the asset manager began to sell its shares in companies with more than 30 per cent of revenue from coal. In 2018, it began divesting from companies with 25 per cent of revenue from coal. By reducing this percentage by 5 per cent every other year, the company will no longer have any investments in coal by 2026.

Storebrand’s coal exit strategy.

According to Saugestad, this is the best way to help to make the world more sustainable while remaining a responsible asset manager.

“The reason we have a gradual divestment plan is because we want to give the companies time to have a dialogue about sustainability and give them time to respond. We are also divesting gradually because we want to get more investors on board and other investors need time to process things,” he says.

“It’s better that we are a responsible owner than that we pull out completely and let others, who are perhaps not as committed to sustainability as we are, come in,” he points out.​

Positive ripple effects

According to Saugestad, Storebrand’s customers and investors like that the company focuses on sustainability to generate high yields and manage risk. He finds that it is becoming more and more important for asset managers to demonstrate that money is being invested in a sustainable manner.

“Up to two-thirds of the new generation of savings customers say that it is important for them to know what the capital is being invested in and whether the capital is being invested in a manner that reflects their values,” he says.

Saugestad believes that Storebrand’s coal exit strategy can have a major impact beyond the companies Storebrand invests in.

“The fact is that when a leading sustainability player like us pulls out of a company, people notice and some follow our lead. When the few become many, the probability that a company will change increases,” he says.

And the faster coal is phased out, the better. He does not buy the argument that coal has to be a large part of the energy mix for many years to come.

“I recognise that fossil energy sources will still be in use for a number of years, but I’m primarily thinking of natural gas. There is no reason why coal has to be or should be part of the energy strategy for the future. We have cleaner alternatives and the cost of producing electricity from these alternatives is falling dramatically,” he points out.

Saugestad says the time has come to invest more heavily in the sustainable solutions that already exist – not just continue on as before or count on technological development to solve climate change.

“It could very well be that technologies emerge which can solve climate problems at some point in the future, but those technologies are not available today. We have to be realistic and not live in naive hope that things will sort themselves out.”

“We have to invest heavily in the solutions that are available today within solar, wind and other renewables. We can’t take the chance that we will be able to solve things with something we don’t even know exists. That’s far too risky,” he concludes.