Norway’s SWF Strategy Council Suggest Streamlining ESG Process

The Strategy Council 2013, a group of 5 independent reviewers tasked with evaluating Norway’s Government Pension Fund Global (GPFG), released their list of recommendations yesterday. Among the most notable were suggestions to streamline the evaluation and decision making process of the GPFG’s Environment, Social and Governance (ESG) mandates and finding the sweet spot between transparency and discrete operational management. The idea behind the latter being that too little transparency makes it difficult for companies to operate within the responsible investing framework established by the GPFG, and too much transparency, specifically with regards to mega funds like the GPFG, can cause unintended market movements.

On the evaluation front, the Council believes that there is currently too much overlap between the Council of Ethics and Norges Bank.

Indeed, considering a sovereign wealth fund that has in its equity portfolio over 7,000 companies and of those, 34 are more than 5 percent owned, significant market swings are a concern with arbitrarily defined investment criteria. To that end, the Strategy Council suggests that Norges Bank, the wealth fund’s manager, seek – through independent analysis – to fill in the “knowledge gap” it perceives concerning the effects of responsible investing on portfolio value.

This independent analysis would also lend a sense of legitimacy to the process of their SRI aims. The Council believes that this would strengthen the view of the GPFG’s governance in the eyes of the Norwegian people, an aim they view as “crucial” to the fund’s success.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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