Unlisted real assets investments

Issued 1 November 2010
Last updated 12 June 2024

Policy

Investments in unlisted real assets shall be governed by investment mandates, boards and committees and follow a structured investment and approval process. The Fund is a financial investor and can invest directly with high quality partners regarded as proven experts. Within real estate the Fund can invest by itself in less resource-demanding assets. The Fund invests and manages the portfolio in a focused, responsible and environmentally sustainable manner. High quality asset management is important to maximize the return on the investments and to control associated risks.

Investment mandates

• The investment mandates for unlisted real assets shall define investment universe, investment restrictions, investment approval limits and other specific investment rules as applicable.
• The investment mandates shall be approved through the reporting line and shall be subjected to annual review.
• All investment mandates shall be subject to review and monitoring for adherence to risk limits and mandate-specific investment rules and restrictions.

Investment process

• All investments shall be subject to due diligence. The due diligence process shall include relevant risk assessments, such as market risk, liquidity risk, credit risk, counterparty risk, operational risk, legal risk, tax risk and technical risks. The process shall also include assessments of environmental, social and governance risk factors, including risks relating to management of various stakeholders affected by the investment. The process shall include an assessment of whether necessary systems and procedures are in place to manage the investment properly. The process and risk assessments must be documented. All investments shall be subject to formal approval.
• Real assets investments shall be made through subsidiaries to ensure sound risk management and to protect Norges Bank and the Fund's assets.
• When considering a real estate investment opportunity, the Fund shall assess and make assumptions about rents, capitalisation rates, vacancy periods, lease terms, refurbishment costs and other costs.
• When considering an infrastructure investment opportunity, the Fund shall assess and make assumptions about power prices, relevant regulation, power production, remaining asset lifetime, operational expenses and other costs.

Investment decisions

• The decision process for real assets investments shall be governed by job descriptions, investment mandates, boards, the NBIM investment meeting and the Executive Board.
• All material investments and transaction costs shall be considered by the advisory boards, consisting of internal and external advisors, the NBIM investment meeting, and the Executive Board in accordance with thresholds or considerations in the investment mandates.

Asset management solutions

• The Fund shall manage partially owned assets in the unlisted real assets portfolio through two different asset management solutions:
  1. Joint venture assets managed by the joint venture partner.
  2. Joint venture assets managed by an external third-party asset manager.
• The Fund shall manage wholly owned real estate assets through two different asset management solutions:
  1. Wholly-owned properties managed internally.
  2. Wholly-owned properties managed by an external third-party asset manager, or where the Fund has an asset management advisory agreement with a third party.

• Indirect investments can also be made in investment funds that comply with the restrictions set in the Management Mandate.
• For joint venture assets, the Fund shall review and approve business plans, budgets, the signing or renewal of major leases, or major off-take agreements, significant works and capital expenditure including sustainability initiatives, and other material matters for each asset. This shall ensure appropriate influence over major decisions reflecting our ownership interest and alignment of strategy and expectations in the management and operation of the investments.
• For wholly-owned real estate assets, the Fund shall develop and implement business plans, manage leasing to ensure stable cash flows and the right tenant structure, identify and implement accretive asset management initiatives, and supervise works or redevelopment projects.
• Investment funds regularly have a number of investors, and NBIM’s relative ownership stake is less significant than for joint ventures. As such, the governance rights for investors will be more limited. Transparency requirements as set out in the Management Mandate shall be met.
• The Fund shall communicate sustainability expectations to partners, fund managers and asset managers, and maintain a dialogue with them to discuss major sustainability plans and initiatives affecting the investments.

Asset management performed by joint venture partner

• The Fund shall seek to partner with well-known, and respected investors, with long-term capital to deploy and a long-term investment horizon, whose interests are aligned with those of the Fund. In real estate, the Fund shall seek to partner with investors with a local presence.
• The Fund shall select partners with good knowledge of the markets in which we invest, whose experience makes them well suited to manage the assets on behalf of the partnership.

External asset management

• External asset management may be utilised for joint venture partnerships, fund investments and for wholly-owned real estate assets.
• When choosing external asset managers, the Fund shall seek to find professional and reputable asset managers with good knowledge of specific markets and, for real estate, local presence, and with a good track record of managing assets in relevant markets.
• The Fund shall seek to minimise asset management costs and include flexible contract termination provisions.

Internal asset management for real estate

• The Fund shall as a main principle manage its wholly-owned real estate assets internally. Complex or intensive asset management shall be outsourced to an external third-party asset manager, or an asset management advisory agreement shall be set-up with a third party.

Responsible investment

• The Fund shall base its responsible investment practices for unlisted real asset investments on the Executive Board principles and the NBIM Policy for responsible investment management in Norges Bank, and on internationally recognised environmental, social and governance (ESG) standards relevant to the investment. The Fund will apply the key principles of NBIM's expectation documents where these are relevant to unlisted real assets.
• The Fund shall seek to collect data on energy and water consumption, waste generation, and carbon emissions for all investments and consider it in the management of its investments.
• The Fund shall communicate sustainability expectations to real estate partners and asset managers, and maintain a dialogue with them to discuss major sustainability plans and initiatives affecting the investments.
• The Fund shall agree and be aligned with its investment partners and asset managers on ESG standards and requirements prior to investment.
• For infrastructure investments, the Fund will seek to include investments in an ESG benchmark survey annually. In addition, the Fund shall seek to collect ESG data on its investments in accordance with best industry practice. This may include data on ESG issues which have been identified during the due diligence phase for specific monitoring or follow-up.