Stockholm (NordSIP) – As the Government Pension Fund Global of Norway received top marks from global voters in the IRRI Survey 2019, NordSIP took a closer look at the fund’s sustainability goal, and asked Marthe Skaar, Manager, Communications and External relations at Norges Bank Investment Management (NBIM) to share some thoughts about her organisation’s key achievement.
We consider both governance and sustainability issues, and publish clear expectations of companies in the portfolio.
“Our motivation for responsible investment is to achieve the highest possible return with moderate risk,” starts Skaar. “Companies’ activities have a considerable impact on society and the environment around them. Over time, this could affect their profitability and so the fund’s return. We, therefore, consider both governance and sustainability issues, and publish clear expectations of companies in the portfolio.”
With almost NOK 9.3 trillion (approx. €960 billion) in AUM as of the end of Q1 2019, NBIM, the asset manager for the Norwegian sovereign wealth fund has investments in around 9,000 companies in 70 markets. NBIM’s responsible investment approach is based on three pillars: establishing principles, exercising ownership and investing sustainably. As part of its endeavours to develop principles for sustainable investing and support the development of international standards, NBIM participated in 13 public consultations in 2018, focusing on shares with unequal voting rights in Singapore and Hong Kong, national corporate governance codes in Europe, Japan and Australia, sound voting systems in the USA and in the EU and standards for corporate disclosure.
We participate in the development of international standards and expect the companies we invest in to comply with them.
“As a long-term investor we focus a lot on good standards,” Skaar emphasises. “Standards establish common ground across markets and raise the bar for all companies. We participate in the development of international standards and expect the companies we invest in to comply with them.”
According to the 2018 Responsible Investment report, NBIM voted at 11,287 shareholder meetings on 113,546 resolutions while also engaging in 3,256 meetings with 1,420 companies during 2018, covering ESG topics such as climate change, water management, human rights, children’s rights, anti-corruption, executive remuneration and shareholder’s rights. The asset manager also assessed the sustainable disclosures of 2,256 companies and compared them with the results observed in 2017.
We encourage companies to move from words to numbers, so that we can evaluate their efforts and better understand financial risks and opportunities.
“During the last years we have put a lot of efforts into building databases with ESG numbers,” adds Skaar. “We encourage companies to move from words to numbers so that we can evaluate their efforts and better understand financial risks and opportunities. To perform analyses of this kind, we need governance and sustainability data. This is an area where other asset managers and we have a shared interest.”
NBIM conducts a three-stage sustainable investing approach, based on risk assessments, investments and divestments. The manager performs a risk and sustainability assessment at the country, sector and company levels. In 2018, the organisation analysed sustainability risks in 515 companies in emerging markets, carried out sector analysis of 905 companies and produced five reports on material holdings and 34 briefs on incidents.
Comparing the emissions intensity of NBIM’s equity portfolio with the reference index across all sectors, the asset manager produced an extra 85,000 tones of CO2. However, it outperformed its reference index in terms of tonnes of CO2 equivalents per million dollars invested. In 2018, and over the last five years, the return on NBIM’s environmental mandates has consistently underperformed the FTSE Global All Cap.
The Norwegian sovereign wealth fund is often referenced as a benchmark by asset owners or asset managers when it comes to exclusions. At the end of 2018, NBIM had blacklisted 152 companies and divested from another 30 companies on a risk basis. The main driver for these exclusions were the risks associated with climate change, which motivated the half of the risk-based divestment by the Norwegian asset manager. Another nine companies were excluded due to corruption concerns, as well as another four due to human rights considerations, while the last two divestments were tobacco-related.
Featured Picture © Shutterstock
Portrait of Marthe Skaar, courtesy of NBIM