NordSIP (Stockholm) – Norges Bank Investment Management (NBIM), the world’s largest sovereign and pension wealth fund, from Norway, confirmed it had ended externally managed environment-related mandates and that it would close down Norges Bank Real Estate Management (NBREM).
Under the environment-related mandates, NBIM has NOK 56.7 billion invested in shares (76.4%) and green bonds (23.6%), as required by the Norwegian Ministry of Finance. The decision to bring all environment-related mandates in-house coincided with the poor performance of this sector and was initially reported in October 2018. During 2018, returns on the environment-related equity mandates were down 8.3%, underperforming the already weak performance of the benchmark MSCI Global Environment Index, which fell by 7.2%, according to NBIM. Moreover, NBIM has also admitted that “external management is more expensive than internal management”. At the end of 2017, NBIM reported it had five external mandates for environment-related investments.
“To reduce cost in the management of the fund, the externally managed, environment-related mandates were terminated in 2018. Today, the environment-related mandates are in their entirety internally managed,” stated the report.
On the same day, the Executive Board of NBIM also adopted a new real estate strategy aiming at establishing a real estate portfolio “on the order of 3-5%”, including listed and unlisted real estate investments. As a result, the Executive Board decided to discontinue the NBREM as a separate organisational unit and integrate it into NBIM.
“With a limited portfolio of unlisted real estate and a desire to integrate listed and unlisted real estate, the Executive Board finds that it is no longer appropriate to organise the management of unlisted real estate separately,” says the report.
In a separate note, NBIM discussed its engagement with its companies on sustainability. It raised ESG issues at 1,493 meetings during 2018, engaging companies on the bank’s climate disclosure, lending and deforestation, tax among others.
“Some new issues are emerging from the transition to a low-carbon economy. In 2018 we engaged in dialogue with companies in the automotive sector that use cobalt as a component of lithium batteries. We contacted companies to understand their low-emission plans and how they are managing the risk of human rights violations in their supply chains”, says Chief Corporate Governance Officer Carine Smith Ihenacho.
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