The physicist turned fund manager generating positive financial and environmental results

Since joining Storebrand a decade ago, Henrik Wold Nilsen has played a vital role in developing the company's highly successful ESG Plus funds. The range of investment strategies aim to broadly mirror the financial returns of global stock markets but with increased sustainability; a challenge that Henrik's academic background and environmental passion mean he's well-placed to tackle.

Published 08.02.2021 by Sindre Schjevik

His route into quantitative investment was far from conventional. On graduating from the University of Freiburg in Germany with a PhD in high energy physics, Henrik believed his career path lay in academia. However, he became uncertain if such a narrow field was enough to fill a life-time career, if it would still be enjoyable after 20 years. Instead, he decided to use his analytical and mathematical skills to pursue a career in finance.

The science of finance

This new path took Henrik to Storebrand, where he applied for and successfully landed a role in the investment team. Although the recruitment was unconventional for both Henrik and Storebrand, making the leap from physics to finance was not as big as it perhaps seems, as Nilsen explains: "When you manage funds, you can do it in a number of ways. The quantitative and statistical analysis techniques that we use mean that my scientific background comes in handy."

Henrik is now a Senior Portfolio Manager in Storebrand's five-strong global equity team. He believes it is the leading one in the Nordics for quantitative asset management and although it has been a steep learning curve, Henrik has benefitted from his colleagues' expertise: "I've had to absorb and apply a lot of information but have had a great team alongside me and been lucky to be able to learn from the best".

Henrik Wold Nilsen, Senior Portfolio Manager at Storebrand Asset Management

One of Henrik's main achievements at Storebrand has been his role in creating and managing its popular ESG Plus range of funds, which have attracted a total of EUR 4.7 / GBP 4.1 / SEK 47 / NOK 49 billion in assets. Each tracks a different equity index, depending on where clients are looking to gain exposure, but they are all fossil-free and share a strong focus on sustainability.

The fastest growing is Storebrand Global ESG Plus, which has EUR 1.3 / GBP 1.2 / SEK 13.3 / NOK 13.6 billion under management, including SEK 4.6 / NOK 4.7 billion recently invested by Storebrand's first UK institutional client. The fund aims to replicate the return profile of the MSCI World Index, but with greater sustainability and lower climate risk. This is achieved using quantitative portfolio optimisation techniques to replace fossil fuel and other polluting stocks with those offering climate solutions and improved sustainability criteria.

The result is a fund which has a much smaller carbon footprint than the mainstream index and has delivered superior financial returns. Launched in 2016, the strategy continued Storebrand's long history of sustainable asset management, which can be traced back to 1995 when Norway's largest private asset manager formed the region's first ESG team.

A bright future

With an established track-record, a growing international client base and few constraints on future capacity, the outlook for Storebrand Global ESG Plus looks bright, as Nilsen explains: "The fund combines two big trends in asset management; growing capital flows to index funds and increased investor focus on mitigating climate risk. We've recently had significant inflows from Sweden and the UK, and increasing appetite for these type of investment strategies should enable our fund to grow."

The idea to apply sustainability criteria to index investing was pioneered by Storebrand over 15 years ago when it launched Storebrand Global Index. The fund, which tracks the MSCI World Index but omits companies on the Storebrand Standard exclusion list, has similarly outperformed its benchmark since launch in 2005 and provides further evidence that investing sustainably doesn't require the sacrificing of financial returns.

For Henrik, Storebrand Global ESG Plus allows him to play an active role in the debate over climate change, something he is deeply passionate about. "I`m a keen follower of environmental news and political developments around climate risk, as well as studying the science behind global warming and what is required to reverse it. This also helps me to not miss physics too much!", he says.

More importantly, the fund enables him to make a tangible financial difference. As well as preventing capital flowing to polluting sectors – Henrik has made continuous strategy enhancements to exclude industries such as meat and plastic production alongside fossil fuels – he is able to divert it to those providing solutions to the climate crisis. The fund invests up to 10% in smaller companies specialising in areas such as renewable energy, energy efficiency, green transport and infrastructure. In addition to environmental benefits, these companies offer attractive financial returns, and their inclusion is a key differentiator of Storebrand Global ESG Plus from similar funds.

The growing universe of exciting and investable climate solution companies is another positive for the fund's outlook. Henrik's main hope for the future, however, is that all funds will be ESG focused in a world that has achieved the Paris Agreement: "Paradoxically, my biggest aspiration is that specialist funds like mine will no longer exist!"