Responsible investment

Responsible investment

One of the bank’s fundamental values is accountability. This term implies that the bank has an extended responsibility for how its actions affect the environment, people, jobs and management of assets now and in the future. Capital is an important input factor both in ethical and unethical activity. The bank intentionally channels capital to ethical activity and away from unethical activity in order to contribute to creating a better society and to reduce risk in its own asset management. In dialogue with our stakeholders, the bank has identified active ownership, negative screening and requirements on financial suppliers as material themes, which we must have under our control in order to ensure responsible asset management.

It is particularly important for us as a regional bank to assume a responsibility for sustainability in investments. We are duty bound to do what we can to support the UN’s sustainability goals, and we are concerned that companies in which we invest or to whom we loan money should take account of themes such as responsible management of water resources, forests, mineral extraction, responsible oil extraction and refinement of petroleum products, and fishery resources.

The bank’s geographical catchment area is Central Norway. Given this geographical demarcation, investments and lending are largely restricted to companies subject to Norwegian law. However, globalisation and digitalisation have changed the context in which the bank operates. The bank has accordingly in 2017 and 2018 undergone a comprehensive programme to structure its work on responsible investments.

All of SpareBank 1 SMN’s direct investments, subsidiaries and companies in which it exerts majority control are now subject to a new policy from 2017 “Our requirements on sustainability in our lending and our owner positions” and “Our principles regarding ethics, corporate social responsibility, corporate governance and sustainability in asset management”. The policies describe the criteria underlying positive and negative screening over and above statutory requirements (GRI FS11) and the bank’s requirements on its external asset managers.

The bank acts on its responsibility for customers’ and the bank’s owner interests through separate guidelines in order:

  • Not to take owner positions or provide loans to companies that fail to abide by our principles, and to include caveats regarding follow-up and consequences in the event of any deviation (covenants) in funding where the companies concerned operate in industries, countries and regions posing a particularly high risk
  • To exert pressure on customers and companies in which we invest to ensure that they maintain sound procedures and processes for making appropriate ethical, environmental and sustainable choices, and for influencing companies in which they hold owner positions through active owner management
  • To require documentation that customers have taken action on circumstances that violate our principles
  • To take the consequence of deviations that are not acted on by not renewing or prolonging loans, or by winding down owner positions.

Each year the bank will review developments in the documentation of compliance with anti-money laundering rules, requirements on transparency, ethics, corporate social responsibility, sustainability and corporate governance at small companies in which the bank holds owner positions. The bank will also check necessary measures to improve procedures and processes for following up on its owner positions. All the bank’s employees are required to annually review the bank’s policy for sustainable and ethical investments and to be aware that the bank expects all credit cases and investment decisions regarding international companies and risk industries to be accompanied by an assessment of compliance with the bank’s principles, and an account of control measures and opportunities for sanctions that are established in the event of breaches.

The Group’s investments in money market paper and bonds for liquidity purposes total about NOK 20.3bn at the end of 2018. Investments in derivatives, shares and owner interests total NOK 12.0bn at the same point in time. (GRI FS11)

Investments at SpareBank 1 SMN can be divided into three categories:

  • The bank’s own direct investments
  • Investments carried out by asset management services intermediated through the bank
  • Investments carried out by the gift fund and SpareBank 1 SMN Utvikling.

The bank endorses the United Nations-supported Principles for Responsible Investment (PRI) in all its own investments, and works to ensure that the principles are also complied with by SpareBank 1 Gruppen’s companies.

Own direct investments

Subsidiaries (and companies under majority control)

SpareBank 1 SMN controls EiendomsMegler 1 Midt-Norge, SpareBank 1 Finans Midt-Norge, SpareBank 1 Regnskapshuset SMN, SpareBank 1 SMN Invest and SpareBank 1 Markets. SpareBank 1 Markets manages own funds with total assets of about NOK 2.3bn. The subsidiary SpareBank 1 Kapitalforvaltning manages capital on behalf of its customers totalling about NOK 16bn. (GRI FS11). SpareBank 1 SMN Invest is the bank’s wholly-owned subsidiary, and manages own capital worth about NOK 400m (GRI FS11).

SpareBank 1 SMN Invest operates in Norway’s technology capital, Trondheim, and through SpareBank 1 SMN Invest the bank meets a further need in the local community – for local capital for technology. SpareBank 1 SMN Invest invests exclusively in unquoted shares and mutual funds in the bank’s geographical area.

Additionally, the company takes over shares in connection with bankruptcies and loan defaults in order to retain local business activity. Where required, its owner position is used to influence the company concerned to comply with the bank’s principles as regards sustainability, ethics, governance and corporate social responsibility. The bank requires evidence of a positive development in the willingness of the company concerned to comply with the bank’s principles in order to maintain its owner position. Owner positions in companies that breach the bank’s principles are followed up in the form of a half-yearly report to the board of directors until the position has been wound down. (FS10)

Although new holdings are screened in accordance with the bank’s requirements, existing portfolios have yet to undergo a structured screening process. (GRI FS11) Where the subsidiaries are concerned, the bank has a continuous owner dialogue in which the bank also incorporates social or environmental themes. (GRI FS10)

The SpareBank 1 Alliance’s companies (not under majority control)

SpareBank 1 SMN holds stakes through the SpareBank 1 SMN Alliance in Odin Forvaltning, SpareBank 1 Forsikring, SpareBank 1 Boligkreditt, SpareBank 1 Næringskreditt, BN Bank and SpareBank 1 Gruppen.

The owner dialogue regarding responsible investments is simplified here since the other SpareBank 1 Alliance owners are savings banks with requirements and expectations similar to those of SpareBank 1 SMN. The banks coordinate their positions on social and environmental themes with these companies (GRI FS10), but the Alliance companies are not subject to the bank’s own policy.

The savings and investment committee at SpareBank 1 Gruppen carry out a quality assessment of all savings and investment products distributed by SpareBank 1 Gruppen. The committee conducts an annual audit of the product portfolio. In 2018, the committee incorporated ESG criteria in the audit.

Odin Forvaltning

Odin Forvaltning is obliged to comply with the UN’s principles for responsible investment. Odin combines ESG analyses with respect to investments with exclusion of companies that produce goods and services not in accordance with generally accepted ethical values. Odin has ongoing screening with the acknowledged research and ratings company, Sustainalytics. At Odin, the managers themselves are responsible for integrating corporate social responsibility and corporate governance into investment analyses and investment decisions. Odin’s products are included in the audit done by SpareBank 1 Gruppen’s savings and investment committee. 

SpareBank 1 Forsikring

All but two of SpareBank 1 Forsikring’s asset managers have signed the UN’s principles for responsible investment. The company employs a broad range of instruments to ensure responsible investment of its portfolio. SpareBank 1 Forsikring describes its policy here (pdf).

Investments done by management services mediated through the bank

Odin Forvaltning delivers the bulk of the bank’s mutual fund products. This also means that the majority of mutual funds that the bank offers its own customers adhere to Odin Forvaltning’s policy for responsible investment, described in the previous chapter. As a distributor, the bank can exert influence on potential mutual fund providers through its negotiating power and through good, close dialogue with its customers. The bank cannot itself steer investment, but has at its disposal several instruments for influencing providers to follow up on their own positions so that the businesses make good choices.

Retail Banking at SpareBank 1 SMN is responsible for following up on mutual fund providers. As from 2018, the bank has overseen mutual fund providers’ compliance with the bank’s guidelines regarding negative screening on social and environmental criteria. This work will be followed up by continuous random checks on asset managers’ products to verify compliance. (GRI FS11) Read more: Our principles regarding ethics, corporate social responsibility, corporate governance and sustainability in asset management (pdf).

The bank is concerned to manage savings in mutual funds in a sustainable manner. This means that environmental, social and governance (ESG) factors are an important aspect of the bank’s asset management. The bank aims to offer a range of sustainable mutual funds. The diagram below describes the supplier chain of mutual fund products. ODIN and other fund managers put together mutual fund products with investments in selected companies. The mutual fund products are then intermediated to customers through the bank.

In September 2017, the bank launched a share saving account functionality (Aksjesparekonto). By the end of 2018, we had established 18,169 share saving accounts. Individual pension saving (IPS) was launched in November 2018. By the end of 2018 we had 3,267 IPS customers. (GRI 102-10)

Investments carried out by SpareBank 1 SMN Utvikling and the gift fund

The foundation SpareBank 1 SMN Utvikling is engaged exclusively in operating appropriate investments in projects designed to support a positive development of society. Initiatives that benefit the common good. SpareBank 1 SMN Utvikling has owner positions worth NOK 51.5m. (GRI FS11)

The gift fund is financed by the bank’s net profit. The fund prioritises projects in the field of innovation, business development, culture, sports, the environment and humanitarian causes. The fund’s resources are held in an account with the bank, and it annually donates about NOK 60m distributed fairly equally between grassroot sports, culture and business development. (GRI 201-1)

SpareBank 1 SMN Utvikling and the gift fund aim to develop a societal account with indicators in the course of 2019.

Local business development

SpareBank 1 SMN has traditionally had a strong local footing, and an important part of SpareBank 1 SMN’s social mission is to facilitate growth and development as a basis for the community’s welfare.

Through its core business, SpareBank 1 SMN covers many important needs in society: saving, credit, payment services, insurance, damage prevention, management of assets and investment. The fact that the bank operates this core business on a long-term and sustainable basis is possibly the bank’s most important contribution to local business development. Beyond its ordinary banking operations, SpareBank 1 SMN has many extraordinary initiatives with a view to developing the region in which the bank operates. SpareBank 1 SMN Invest develops local businesses by offering capital directly at the development stage. SpareBank 1 SMN Invest therefore invests exclusively in unquoted shares and mutual funds in the bank’s geographical catchment area.

The foundation Sparebankstiftelsen SMN is a substantial owner of SpareBank 1 SMN. Its object is to preserve the social aspect of SpareBank 1 SMN’s ownership. Read more about Sparebankstiftelsen SMN.

SpareBank 1 SMN Utvikling

Stiftelsen SpareBank 1 SMN Utvikling invests in projects intended to support a positive development of society. Just over NOK 50m is invested in infrastructure projects and seedcorn and venture funds. (GRI 203-1)

In addition, SpareBank 1 SMN has a social commitment that is out of the ordinary, each year supporting more than 1,000 large and small causes through the gift fund. The gift fund distributes resources to grassroot sports, culture and business development.

Stiftelsen SpareBank 1 SMN Utvikling and the gift fund aim to establish a societal account in the course of 2019. 

Investor and media contacts

Kjell Fordal
Executive Director, Finance
+47 905 41 672
Hans Tronstad
Head of Corporate Communications
+47 941 78 322