This is a version of a feature interview authored by Felipe Albuquerque and previously published by Nordsip in August 2025 (link).
At a time when the EU’s Omnibus legislation is in danger of sacrificing sustainability for the sake of efficiency and the current US government is pursuing an anti-ESG agenda, it is easy to lose faith and fear the worst. For Dagfin Norum, CIO and Head of Fixed Income at Storebrand Asset Management, however, the ongoing pushback is only the latest iteration of what he sees as a pendulum that swings back and forth towards and away from sustainability.
Despite the turmoil, the risks and opportunities related to environmental, social and governance (ESG) issues remain valuable investment considerations, and fixed income continues to play a critical role in the evolution of sustainable investment. However, companies need to understand how sustainable investors approach green bonds and the issues that need to be addressed in order to be acknowledged as credible sustainable investments.
ESG Never Dies
“Is ESG an empty and shallow promise? Definitely not,” says Norum. “ESG keeps on being declared dead, but it never really dies. Our focus lies on our fiduciary duty and delivering the best possible risk-adjusted returns for our clients. Integration of ESG factors into the investment process contributes to our ability to fulfil that duty, so I find it difficult to argue against ESG from that point of view. ESG provides us with more information, which allows us to gain a better understanding of our investments”, Norum continues.
Norum concede that there has been some regulatory overreach. However, it is crucial that the EU’s sustainable investment efforts not be watered down either. “It is possible that EU regulations and reporting requirements may have gone too far. It is very demanding and resource-intensive, both for investee companies as well as for us investors. Decision makers must find a path towards a better balance,” he adds.
Green Bond Fund: From niche to mainstream
Storebrand has been a fixture of fixed income markets for a decade. It recently marked the tenth anniversary of the launch of its commercial green bond fund, the world’s first, inspired by the World Bank’s 2008 inaugural issuance in this market. Since its inception in 2015, the fund has grown to SEK 11 billion (US$ 1.1 billion) in AUM, Sweden’s largest, and outperformed its benchmark with more than 5% over five years as of May. The fund backs projects like energy-efficient housing, bike lanes, and train links. It has also expanded to areas such as aluminium recycling, electric trucks, and supply chain decarbonization. Real estate remains central, with green bonds supporting the sector’s vital role in the energy transition.
“Global sustainable bond issuance has surged past US$1 trillion annually, with cumulative green bond volumes reaching US$ 3.5 trillion by end-2024. The market now spans many sectors, supported by frameworks like the ICMA’s Green Bond Principles and the European Green Bond Standard, enhancing transparency and reducing the risk for greenwashing,” Norum notes.
“As sustainability becomes embedded in mainstream investing, dedicated green bond funds may fade, but their legacy of driving transparency and climate-conscious finance will remain. Green bond funds have contributed to the transition and also laid the groundwork for a more environmentally conscious fixed income market. We remain steadfast on both our approach and commitment to sustainable investments”, Norum continues.
Sustainable Fixed Income in Storebrand
Storebrand AM manages NOK 1442 billion in assets as of the first quarter of 2025, of which 31 percent corresponds to fixed income investments. The main channel through which Storebrand AM invests in sustainable fixed income instruments is through green bonds across all portfolios. However, the Norwegian asset manager also runs the dedicated Storebrand Green Bond Fund, which is classified as an Article 9 fund under the EU’s Sustainable Finance Disclosures Regulation (SFDR). The fund was valued at SEK 11.1 billion at the end of May 2025.
Given Storebrand AM’s interest in sustainable fixed income, Norum argues that borrowers will benefit from understanding Storebrand’s preferences. “We have looked into sustainability bonds, social bonds and sustainability-linked bonds, but most of our focus remains on green bonds, where there are more clearly defined and established standards from the ICMA as well as the EU Green Bond Standard. We find it better to invest in sustainable assets that have more standardisation than in those that do not,”
Potential bond issuers should also bear in mind Storebrand’s approach and the tools it uses when considering potential investments. “It's crucial that our fixed income investments have credible decarbonisation targets. This includes a 2050 net-zero goal but also intermediate goals and transition plans that allow us to assess the credibility of those commitments. These cannot be mere window dressing. We need to see that the company has taken the time to think about these issues,” Norum says.
“Our preferred tool for assessing the effectiveness of our engagements is to track the progress on the use of proceeds reported by the borrowers. This is also why we prefer to have bonds issued with a narrower scope. It makes it easier to assess the success of the bond. Our focus is on the company reports and following all the sources of information, not least of which, the third-party opinions. Given the breadth of bonds in our portfolios and their distribution over various jurisdictions, we simply do not have the capacity to have the on-the-ground presence necessary to actively check every single company and project ourselves,” Norum continues.
Fixed income investors, due to the nature of the bond market, are in the privileged position of encountering companies frequently, as they come to the market to seek funding. “These regular interactions allow us to have real discussions with companies and inform them of what we are looking for. For instance, our investee companies will know that we prefer green bonds with a narrow scope of use of proceeds. This makes it easier for us to follow up on and see what the funds are going towards,” Norum explains. He notes that Storebrand recently had active dialogues with two different companies in Sweden helping them develop their green bond framework ahead of them coming to the market.
Storebrand’s Sustainability Analysis
These regular interactions give Storebrand AM the opportunity to engage more deeply with investee companies, but these dialogues must be supported by strong analytical tools. To conduct its engagement efforts, Storebrand has had to develop its own approach to ESG integration and how it incorporates these factors into its investment analysis.
“We believe that integrating ESG factors into the actual analysis and the portfolio management will, over time, ultimately contribute to enhancing risk-adjusted returns. To this end, we have a risk and ownership team that works quite closely with the investment side of our business,” Norum says.
Underlying it all, there is one tool that stands out above all others, according to Norum. “On the sustainability side, we have our own overall ESG score. We apply this ESG score to our investment universe, and it is included in our credit analysis. It influences the fundamental risk assessment, but it is also pertinent to the relative value consideration. The Score is also useful to avoid sustainability controversies,” he explains.
“The ESG Score sits at the centre of a range of other tools that allow us to build an assessment of our investments. Beyond this ESG score, we do qualitative assessment of the data points we have on the issuers, and for green bonds we assess the credibility of the green bond frameworks underlying our investments and seek to ensure their alignment with ICMA bond principles,” Norum adds.
How to Spot Sustainability Risks and Opportunities
Underneath its ESG score, Storebrand has specific metrics that it focuses on to understand the risks and opportunities present in different companies. “When we are building our internal sustainability rating, we divide it into two parts: the sustainability risk and the sustainability opportunity. This allows us to consider whether companies are most at risk, but also which are best positioned to deal with environmental and transition issues,” Norum explains.
“Our assessment of the risk is fundamentally informed by our in-house tools combined with the best information available. Data scarcity is always a problem, but we try to mitigate these limitations by purchasing it from several third-party data providers, which we combine to create the best possible view of the ESG risk underlying the portfolio,” Norum explains. “Beyond that, we can also interact with individual companies and request more information or clarifications and conduct our own analysis both quantitative and qualitative,” he adds.
Despite the extra hurdles facing investors, Norum argues that private credit markets, to some extent, can be more transparent than their public counterparts. “Private credit investors, by virtue of the market, tend to engage with smaller companies. We run most of our private credit investments through external managers. When we select those managers, we focus on their awareness, their experience, their existing portfolios and whether this matches what they have been saying,” Norum argues. “Requiring ESG disclosures can be useful in private markets in general as they can push us to seek out more information directly from the company on a board-to-board basis, which will be harder, but possible to obtain. In that sense, and despite the more pervasive absence of data in private markets, one can make the argument that private markets can be even more transparent, given the right of engagement,” he notes.
Returning to the construction of Storebrand’s internal sustainability rating, Norum notes that the sustainability opportunities provided by any given company focus on the business’s revenue sources and whether the business is positioned to navigate the transition. “We want to find companies that have the best long-term prospects to navigate the upcoming changes. This tends to be easier for us to assess since we tend to be able to access this information from the companies,” Norum continues.
“We make these assessments available to portfolio managers. If there is a very low ESG score, a portfolio manager would have to have a conversation with the Risk and Ownership Team, which could lead to the issuer being punished in the quantitative screening of issuers. If all the financial parameters are the same, low ESG-rated issuers will fall in our ranking. We’ll then go for the highest ESG score,” Norum concludes.
