Norway SWF Sets Ocean, Sustainability Expectations

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Stockholm (NordSIP) Norway’s Sovereign Wealth Fund wants the companies it invests in to follow increasingly rigorous regulation on sustainability and particularly ocean plastic pollution, according to two “expectation documents” it released yesterday (September 5).

Norges Bank Investment Management (NBIM), which manages the $1 trillion fund, will henceforth require of the 9,000 companies it invests in to “integrate ocean sustainability into strategy; integrate material ocean-related risks into risk management, and act responsibly and transparently on ocean-related governance,” according to a report on CNBC. They should also “disclose how ocean sustainability forms part of their strategies, policies and commitments.”

“The ocean is a vital part of the biosphere and an important part of the global economy,” NBIM CEO Yngve Slyngstad said in Wednesday’s statement. “We expect companies to manage the challenges and opportunities related to sustainable use of the ocean.”

The move could affect companies with a combined value of $56.5 billion, representing about 8 per cent of its global equities portfolio, with companies ranging from retailers, plastics producers, fisheries and aquaculture. Plastics producers alone account for $25.01 billion, close to half of the investments affected.

The fund is also requiring companies to work towards the UN Sustainable Development Goals, including “environmentally responsible ways to alleviate poverty, promoting social equality and growing the economy by 2030,” adding that there would be consequences for companies that fail to develop adequate strategies to these ends.

“The fund’s investments in more than 9,000 companies in 72 countries contribute directly and indirectly to a number of SDGs,” Slyngstad said. “Our most important contribution is to strengthen governance, improve performance and promote sustainable business practices.” He added that the fund was invested in “developing markets and businesses that were coming up with solutions for a more friendly economy,” and had divested from companies with “unsustainable business models.”

The fund thereby also seeks to avoid externalities that would hurt the overall value of its portfolio. “We are a universal investor compared with some investors that narrowly focus on one sector. Externalities will affect [us], Sovereign Wealth Fund Chief Corporate Governance Office Carine Smith Ihenaco explained to Reuters. “That is why we are looking at long-term sustainability… We find the UN Sustainable Development Goals are a good framework to look at because they go across many indicators.”

“If we believe there isn’t a long term sustainable model for various reasons, we will divest from them, like we have done with palm oil and deforestation.”

The Sovereign Wealth Fund has recently been under scrutiny, among other things for its use of the FTSE All Cap Global Index as a benchmark, which, according to Re-Define, a think tank, undermines the government-imposed sustainability mandate, and for failing to extend mandates imposed on third party managers to itself. It was also recently accused of investing in banks tied to war crimes.

Image: Pexels

 

 

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