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    New Engagement Priority for NBIM: Human Capital

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    Stockholm (NordSIP) – Companies can hardly afford to disregard a nudge from Norges Bank Investment Management (NBIM), the world’s biggest sovereign wealth fund. They should therefore be aware that the asset manager has just revealed a new engagement priority going forward: human capital management. On 17 August, NBIM published a comprehensive document detailing the expectations they have regarding the way their portfolio companies should manage human resources.

    “Companies that invest in their employees will become the winners of tomorrow since people have become companies’ greatest resource,” comments Nicolai Tangen, NBIM’s CEO. His statement reflects a belief that the way companies invest in people is becoming increasingly important for value creation and profitability.

    - Partner Message -

    There is plenty of scientific evidence supporting NBIM’s conviction. Research shows that safe working conditions and a good corporate culture provide a basis for innovation, motivation, increased productivity, and growth. In today’s pressured labour market, in which competition for knowledge and expertise is fierce, this could prove decisive for whether companies succeed or not. Human capital management that supports adaptation and resilience also offers clear risk-management benefits.

    As in other sustainability areas, things are not simple. There are many different aspects to consider, such as health and safety, remuneration, development and training, diversity, equity and inclusion (DE&I), labour relations and company culture. Naturally, not all of these aspects are equally important for all companies, sectors and regions. For NBIM, therefore, assessing materiality is critical. “As an investor, we seek to understand a company’s business model and operating context and how these inform their efforts to attract, retain, develop, motivate and engage their workers,” states the report.

    High up on the agenda is also corporate disclosure. According to NBIM, corporate balance sheets today generally fail to provide investors with a clear picture of companies’ investments in their human capital. As accounting and reporting practices in this area continue to evolve, NBIM vows to support the ongoing development of good practices and standards that better enable investors to assess the steps companies are taking to maximise value and reduce risks related to their human capital.

    “We are clear on what our expectations are. We will influence the companies through dialogue and voting, and we will hold the boards accountable,” concludes Carine Smith Ihenacho, Chief Governance and Compliance Officer at NBIM.

    - Partner Message -

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