Norway’s Pension Fund Discloses Divestment Practices
Norway’s Government Pension Fund Global revealed those companies it divested from in 2014, judging “there to be high levels of uncertainty about the sustainability” of these companies’ business models.
Yngve Slyngstad, CEO of Norges Bank Investment Management, the Norwegian bank which manages the country’s Government Pension Fund Global, commented on its decisions in a press release announcing a report investigating responsible investment in 2014:
“Our aim with this report is to provide a full overview of the many different areas we are working on and so increase transparency on the management of the fund. We recognise that there is still much to be done, and that we will encounter a number of challenges in the years ahead. Our role is to think long-term and protect value for future generations.”
Norway’s Ministry of Finance announced in early-December, 2014, that the country’s Pension Fund, the world’s wealthiest sovereign wealth fund, would begin excluding the most harmful climate offending companies from the Fund on a “case-by-case basis.”
“We believe active ownership and engagement are appropriate primary tools for the [fund] to use to address climate-related issues,” the Ministry of Finance wrote in a press release Wednesday. Furthermore, the Ministry of Finance propose that the fund will continue to support relevant climate change research.
As a result, Norges Bank Investment Management announced 49 companies had been divested from the Pension Fund’s investments.
“We have gradually increased the scope of risk-based divestments, both geographically and thematically,” says Slyngstad. “In total, we have divested from 114 companies in the past three years.”
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This was no small matter for those involved. Norges Bank Investment Management held 2,641 meetings throughout 2014, meeting with companies in an attempt to increase their understanding of those companies they invest in, and to present their expectations and views on ownership.
And while companies reliant upon fossil fuels and those actively harming the environment are morally opposite to Norway’s investment goals, these companies also represent an investment risk, as many will find themselves stranded in the next couple of decades in a world that does not want what they offer.
Nevertheless, “environmental, social, and governance issues are integrated into the investment process,” according to Norges Bank Investment Management.
As a result of this moral factor, Norges Bank Investment Management conducted risk assessments at company, sector, and country level throughout 2014, attempting to gain a better understanding of those companies within their portfolio’s greenhouse gas emission intensity. They found that the “emission intensity was lower for the companies the fund was invested in than for the benchmark index for equities set by the [Norwegian] Ministry of Finance.”
In November of 2014, Norway’s KLP — the mutual insurance company responsible for the pension funds of the country’s public sector employees — announced that they intended to divest entirely from coal energy. And just this past week, the Government of Norway announced their decision to divest from coal.
And while Norway is not a member of the European Union, these decisions will without a doubt play a huge part in impacting future European investment and fossil fuel-related decisions for decades to come.
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