Stockholm (NordSIP) – At the beginning of October, Norges Bank Investment Management (NBIM), criticised the PRI for effectively sneaking in a seventh principle through the backdoor in 2017’s Blueprint.
The world’s largest sovereign wealth fund, responsible for managing the approximately US$1 trillion assets of Norway’s Government Pension Fund Global (GPFG) also announced its intentions to upgrade its voting disclosures.
Criticism of PRI Blueprint
Carine Smith Ihenacho, NBIM’s Chief Corporate Governance Officer
In response to the PRI 2019 signatory survey, NBIM highlighted its concern about the organisation’s decision-making process, its lack of transparency and potential over-reach.
In the letter, Carine Smith Ihenacho, NBIM’s Chief Corporate Governance Officer, and Wilhelm Mohn, NBIMs’ Head of Sustainability, make their displeasure clear regarding the PRI’s 2017 Blueprint goal of “enabling real-world impact aligned with the SDGs”.
According to the two NBIM executives, this is “a departure from the Six Principles and PRIs mission, which do not provide direction for the PRI to work on how investors should advance global development and support international political commitments.”
NBIM is not criticising the UN SDGs. The complaint is, however, a criticism of the process through which the PRI came to endorse them. “As a long-term and global asset owner, we have a general interest in understanding how issues related to sustainability, as well as the achievement of the SDGs, may impact the economy and the companies we invest in, and thus long-term risk and return,” Ihenacho and Mohn clarify. “From that perspective, we see the benefits of PRI supporting research and knowledge on such issues and how they could impact financial markets and investors in general.”
At its core, the criticism is one of transparency. “In April 2017, the PRI adopted its Blueprint, which contains a chapter on ‘real-world impact aligned with the SDGs’,” the response adds. “We note that this new chapter is not linked to (…) [one of the PRI’s] existing Principles, contrarily to other chapters of the Blueprint. In our view, it represents a substantial strategic development, which can be seen as de facto a new principle.”
Fundamentally, the argument that NBIM is making is that the PRI has broken its own rules. In order to adopt a seventh principle, the PRI would have required the approval of its signatories. “We believe it is important that any substantial strategic development which may represent de facto a new principle is treated as such, and therefore subject to a signatory vote,” Ihenacho and Mohn add.
It is not the first time that the PRI has faced criticism of lack of transparency. PensionDanmark, Industriens Pension, PKA, PFA Pension, ATP and Sampension all left the PRI in 2013 due to governance concerns. PensionDanmark and Industriens Pension have subsequently rejoined the PRI. NBIM’s criticisms echo those of Denmark’s ATP, which reportedly commented that “the reason for the lack of transparency and democracy is that the management of the organisation in 2010-11 on its own initiative changed the organisation’s original constitution radically without involving its members at the time – including ATP – or obtaining their consent.”
Pre-Disclosure of Voting
In less scandalous news, NBIM’s 2020-2022 Strategy Plan discretely announced it would adopt a policy of pre-disclosing all its votes at its companies AGM.
“We are open about how we vote and aim to promote greater transparency throughout the voting process,” notes the strategy report. “Since 2013, we have published our voting instructions one day after the shareholder meeting, and we have in some cases announced ahead of the meeting how we intend to vote. By the end of the strategy period, we aim to publish all our voting instructions ahead of shareholder meetings where this is practicable.”
This is a substantial commitment on the part of NBIM. As the owner of 1.4% of all listed companies worldwide, totalling 9,158 companies in total, across 73 countries, NBIM has a lot of influence and can set an example for others to follow.
