When the financial system seemed on the verge of collapse last fall, Kristin Halvorsen, Norway’s finance minister "did more than crow" writes Landon Thomas Jr. in the New York Times. "As investors the world over sold in a panic, she bucked the tide, authorizing Norway’s $300 billion sovereign wealth fund to ramp up its stock buying program by $60 billion — or about 23 percent of Norway ’s economic output.”
"“The timing was not that bad,” Ms. Halvorsen said, smiling with satisfaction over the broad worldwide market rally that began in early March.” New York Times.
“The financial crisis has meant that the return on the Government Pension Fund’s investments in 2008 was very poor,” said Kristin Halvorsen when she informed the Norwegian parliament in early April 2009 that the Government Pension Fund had a negative return in 2008 of -23.3 per cent in 2008.
“However, we have a robust and long-term investment strategy that we have chosen because it will serve us well over time,” says the Norwegian Minister of Finance Ms Kristin Halvorsen, and she may have been proven right already.
The Norwegian Government pension fund is not only one of the world’s largest sovereign wealth funds, but also known for its strong ethical investment guidelines. The Norwegian Government wants the Fund to act as a responsible investor, which means that the Fund shall be managed in a way that promotes better functioning, legitimate and efficient markets and sustainable development in the broadest sense. Firstly, the Fund should be managed with a view to achieving high return that will enable coming generations to benefit from the country’s petroleum wealth. Secondly, the fundamental rights of those affected by companies in which the Fund invests should be respected. This ethical basis is promoted through two instruments: exercise of ownership rights and exclusion of companies from the Fund’s investment universe.
In early April this year, after a broad evaluation of the ethical guidelines for the Government Pension Fund, the Government presented a more active and more cohesive perspective on the ethical management: consideration of environmental and social aspects and good corporate governance are going to be integrated to a greater extent as relevant factors in all aspects of the management of the Fund.
"we have tried to... further clarify the fund's role as a responsible investor. We are planning to introduce more tools and new measures, at the same time as we are maintaining the existing instruments," explained Finance Minister Kristin Halvorsen to Forbes after she had presented a white paper to the parliament. “The government intends to introduce measures that include excluding tobacco industry investments, putting a greater focus on the environment, more closely watching companies in an ethical gray-zone, and studying ways of making climate change a factor in investment decisions,” wrote Forbes in an article detailing the new measures.
Central new measures that the Government is intending to introduce include:
• Exclusion of tobacco-producing companies from the portfolio.
• Introduction of a watch list as a new measure vis-à-vis companies that are in the grey zone in terms of exclusion.
• Strengthening of the active ownership effort, among others by asking Norges Bank to formulate more documents outlining their expectations of companies the Fund invests in. One will pertain to environmental issues, for instance concerning the companies’ strategies on climate change. Another will be related to corporate governance, concerning transparency and reporting on payment flows in companies. Clear expectations in this area may help counteract the use of closed jurisdictions (so-called tax havens) to conceal unlawful acts.
• New requirements concerning transparency and reporting linked to the exercise of ownership.
• Establishment of a procedure for how an excluded company can be reincluded in the portfolio.
Climate change has been raised by many of the commenting bodies. As a broadly diversified and long-term investor, the Fund has an interest in avoiding negative economic repercussions of climate change. In addition to seeking an expectations document within the environmental area, other new measures in this area include:
• Initiation of a broad study to assess how the challenges of climate change can affect the financial markets and how investors ought to act in light of this.
• Establishment of an environmental programme aimed at investments that can be expected to yield indisputable environmental benefits, such as climate-friendly energy, improving energy efficiency, carbon capture and storage, water technology and management of waste and pollution
Learn more.