Responsible investment management

Issued 19 May 2011
Last updated: 12 June 2024

Policy

NBIM works to safeguard the Fund's long-term value and build financial wealth for future generations. Responsible investment management supports the objective of the Fund in two ways: First, NBIM seeks to further the long-term economic performance of our investments. Secondly, NBIM seeks to reduce financial risks associated with the environmental, social and governance (ESG) practices of companies in its portfolio. NBIM will take into account how this could have impact on the Fund at market, portfolio and company level.

Responsible investment management will be based on internationally recognised principles, including the UN Global Compact, the OECD Guidelines for Multinational Enterprises, the United Nations Guiding Principles on Business and Human Rights, and the OECD Principles for Corporate Governance. NBIM will respect human rights in line with applicable international standards. NBIM will carry out ongoing environmental and social due diligence of the investment portfolio and use its leverage to promote responsible business conduct. NBIM expects its investee companies to exhibit responsible business conduct, to respect human rights and, as appropriate, to address human rights issues in their direct operations, supply chains and other business relationships.

Responsible investment management further reflects the special characteristics of the Fund. The Fund is a long-term, financial investor and diversifies its investments across a large number of markets and securities. NBIM will integrate responsible investment management into its investment strategy and establish a chain of measures for responsible investment, including through standard setting, investment management and ownership activities.

NBIM has a strong interest in well-functioning, legitimate and efficient financial markets that facilitate long-term growth and are less prone to shocks.  Sustainable economic growth is a determining factor for the Fund's long-term rate of return. NBIM recognises the potential for climate change and other global sustainability developments to have a significant impact on economies and markets over time. A long-term goal for responsible investment is that the companies in the portfolio have operations that are aligned with global net zero GHG emissions targets according to the Paris agreement.

NBIM will work with companies, investors and other stakeholders to advance relevant standards, increase the information available to investors, and promote value creation, good corporate governance and responsible business conduct. NBIM will join initiatives consistent with the fund’s mandate and in support our management objective, that do not require disproportionate resources. NBIM will not collaborate on investment decisions or voting at shareholder meetings. Nor will NBIM participate in initiatives aimed primarily at policy-makers. New initiatives and relationships shall be subject to assessments of costs, complexities and benefits prior to joining. They are also governed by NBIM’s compliance requirements for external participation. 

In addition, NBIM will engage with external stakeholders, e.g., through periodic working-level meetings with non-governmental organisations (NGOs). NBIM may also seek external advice to support on its responsible investment management, including through the establishment of advisory committees and the contracting of experts.

Standard setting

• NBIM will contribute to the development of market practices that serve the long-term interests of the Fund. The starting point for these efforts will be the priorities set by the Executive Board and the Ministry of Finance, developments in regulation and international standards, market developments, and internal NBIM considerations.
• NBIM will thus engage in the development of regulatory frameworks and industry-wide standards to promote well-functioning, legitimate and efficient markets, good corporate governance, sustainable business practices and responsible business conduct.
• NBIM will use a combination of tools to ensure wider market impact for its standard setting activities, including publishing policies for responsible investment and active ownership, and actively engaging with regulators and other standard setters.
• NBIM will publish its policies as expectations towards companies, positions on specific issues, voting guidelines, and in other suitable formats. NBIM will work to ensure that its policies are well known across the organisation.
• NBIM will engage with regulators and other standard setters, companies, industry partners, and other stakeholders by making submissions and participating in relevant fora and discussions on responsible investment.
• NBIM will support academic research to improve the empirical and theoretical foundations for its responsible investment management. NBIM will promote the findings of such research to inform market standards, data development and its own investment and ownership decisions.

Investment management

• At the portfolio level, NBIM considers investment dimensions of ESG issues as both risks and opportunities. ESG data integrated in relevant analyses and processes including assessments and actions at the portfolio, industry and company level.
• NBIM will incorporate high quality data on ESG issues in its databases. This includes country indices, company ESG ratings and metrics, information on ESG-related incidents and controversies, and other public sources.
• Investment decision makers shall consider material ESG information in their investment process.
• NBIM will target investment opportunities in the climate transition in its listed investments.
• Investments in unlisted real estate and renewable energy infrastructure assets shall be managed in a responsible and environmentally sustainable manner.
• For the management of unlisted real estate investments, the focus areas within environmental matters shall include, amongst others, carbon emissions, energy efficiency, water consumption and waste management.
• Norges Bank will communicate its expectations on ESG integration to investment partners and asset managers for unlisted real estate and renewable energy infrastructure assets.
• NBIM will integrate ESG considerations in the selection and monitoring of external managers.
• NBIM will monitor and analyse risks from ESG issues as part of the overall risk management of the Fund.
• NBIM will systematically screen companies in our portfolio, the fund’s equity benchmark, and companies confirmed to enter the equity benchmark. When relevant risks are identified, they will be assessed and considered for further responsible investment activities such as ownership measures, standard setting, continued risk monitoring or additional risk management measures.
• Risk assessments may also lead to adjustments to the portfolio or to restrictions affecting specific markets, sectors or companies. Accordingly, NBIM may divest from companies that are closely associated with unsustainable business models or practices.

Ownership activities

• At the company level, NBIM will make its priorities clear from positions and expectations on governance and sustainability topics.
• NBIM will work to ensure that company boards are accountable to shareholders and that its members represent shareholder interests. As a minority shareholder, NBIM will work to ensure the equal treatment of shareholders to protect shareholder value.
• NBIM will engage with companies, their boards and management, taking into account its ownership policies, as well as a broader set of company and sector specific issues.
• NBIM will prioritise its ownership activities according to the type of activity, materiality of issue, significance of its holding, and likely impact.
• NBIM will track company engagement at a company and issue level, and according to milestones and indicators of progress as relevant to specific engagements.
• Ownership activity will be integrated with company interactions informing investment processes. Certain securities may be restricted from lending to facilitate NBIM’s ownership priorities.
• Shareholder meetings are the main formal opportunity for NBIM to hold boards accountable and influence the companies in which it is invested. NBIM will vote at every shareholder meeting where there is no significant obstacle to do doing so.
• NBIM will vote in a principled and consistent manner to maximise the long-term performance of the Fund. NBIM will base its voting decisions on publicly available information, but seek dialogue with companies when required.
• NBIM will integrate advice from portfolio managers into voting decisions and accommodate company specific circumstances where necessary. NBIM may take market specific practices and regulation into consideration where appropriate.
• Where companies fail to meet our expectations and positions, NBIM will consider voting against the board’s recommendation at shareholder meetings, or filing its own shareholder proposals.
• NBIM will publish voting guidelines, which set out its approach to voting and the overarching policies that guide voting decisions.
• NBIM will publicly disclose its voting instructions five days ahead of all shareholder meetings where it is practicable.  Any voting instructions that are not pre-published shall be published at the latest one day after the shareholder meeting.
• Where ownership activities fail to meet the desired objectives, NBIM will consider risk and return implications, including divestment according to the strategy and parameters for such decisions.

Decisions by the Executive Board under the Guidelines for Observation and Exclusion

• The Guidelines for Observation and Exclusion from the Government Pension Fund Global (the Guidelines), issued by the Ministry of Finance, are part of the formal framework for Norges Bank's management of the Fund.
• Norges Bank makes decisions on observation and exclusion under the Guidelines, based on advice from the Council on Ethics. Such decisions can be based either on the product or on the conduct of companies. Norges Bank can decide to exclude companies under the coal product criterion and greenhouse gas conduct criterion, independently of any recommendation from the Council.
• Before making any such decision, Norges Bank ensures that sufficient information is available to inform a given case, considers the grounds for a recommendation against the criteria and stipulations of the Guidelines, and assesses the appropriateness of alternative measures, such as the exercise of ownership rights, to reduce the risk of future norm violations.
• Norges Bank and the Council on Ethics regularly share information about its activities toward portfolio companies and coordinate company contact. Norges Bank also submits matters to the Council for consideration.
• NBIM will contribute to the coherent and consistent operationalisation of the Guidelines, and will provide such advice as required by the Executive Board.

Reporting

• NBIM will provide an annual public summary of its responsible investment activities, priorities, and results, in line with mandate requirements. The reporting should build on applicable, internationally recognised reporting frameworks and standards, such as the Task Force on Climate-Related Financial Disclosures (TCFD) and Partnership for Carbon Accounting Financial (PCAF).
• The reporting will include results of stress tests of the Fund’s resilience against different climate scenarios, including a scenario aligned with 1.5C rise in median global temperature.
• It will also cover assessments of future emission pathways, the extent to which portfolio companies have net zero targets aligned with the Paris agreement and other metrics covering the fund’s exposure to climate and environment-related business activities and information on NBIM’s environmental and social due diligence.
• Further information on voting decisions, submissions, as well as engagement priorities, trends and results, including, where appropriate, company specific information, will be made available on the website.
• Norges Bank will report on decisions on exclusion and observation, as well as revocations, on an ongoing basis together with the associated recommendations from the Council on Ethics. Where the Bank acts on its own initiative, it will similarly provide the basis for its decision.
• The Bank will also provide an account of decisions under the Guidelines as part of its semi-annual and annual reporting. Progress in cases where the exercise of ownership rights was chosen to affect risk reduction shall be reported annually.
• Reporting on responsible investment will otherwise be integrated into NBIM financial and management reporting.