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Norway’s Sovereign Wealth Fund Issues Stance on Executive Pay

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The world’s largest sovereign wealth fund is taking a principled stance on corporate CEO pay, arguing the current model adopted by most companies is flawed. Norges Bank Investment Management (NBIM), the manager of Norway’s Government Pension Fund Global (GPFG) crafted a policy paper on CEO remuneration.

Yngve Slyngstad

Yngve Slyngstad

Like the corporate activist pension California Public Employees’ Retirement System (CalPERS), NBIM has voiced its concerns on a wide variety of issues such as environmental matters across corporate boards globally. NBIM is also a shareholder in most major companies. For example, at the end of 2016, Norway’s GPFG owned 5.2% of equity in BlackRock Inc. At the end of 2016, the Norwegian sovereign investor was invested in 8,895 companies, having an ownership stake of more than 2% in 1,158 companies, according to its annual report.

War Against Long-Term Incentive Plans

With regard to listed companies, CEO remuneration is a touchy topic. NBIM wants to realign the interests of the CEO and its shareholders, by altering the current pay model for a more simple and transparent compensation scheme. The wealth fund argues that a good number of long-term incentive schemes are ineffective, flawed and opaque. In addition, in a shift in thinking, NBIM desires listed companies to force their CEOs to own a substantial ownership stake in the company. Ideally, the wealth fund wants the CEO to own stock in the company for 10 years, or 5 years at a minimum. NBIM is generally more concerned about pay structure versus pay levels. The wealth fund hopes that companies enact and reveal pay ceilings for the following year.

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Japan’s GPIF Awards Nissay Asset Management with ESG Disclosure Mandate

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Increasingly asset owners across the Asia-Pacific region are studying the impacts of environmental, social, and governance factors on listed companies. As more Japanese pensions augment asset allocation to listed equities, the importance of corporate non-financial disclosures and practices becomes clear. These disclosures can have a material impression on company stock prices. In addition, Japanʼs Stewardship Code and Corporate Governance Code in 2014 and 2015 were launched, respectively. These codes helped the (environmental, social, and governance) ESG concept gain momentum in Japan.

Japan’s Government Pension Investment Fund (GPIF), the largest public pension fund in the world, awarded a research mandate to Nissay Asset Management Corporation. The mandate entails studying ESG disclosures. The study will conduct a comparable analysis on ESG standards and practices, while taking into account input from both investors and companies. With around US$ 110.5 billion in assets under management, Nissay Asset Management is owned by Japanese life insurance giant Nippon Life Insurance Company.

As GPIF boosted its allocation to domestic equities, the asset owner took a deeper look into the impact of ESG on equity investing. GPIF is keen on improving efficiencies in Japan’s capital markets. GPIF is a universal owner of stocks, similar in some aspects to what Norway’s Government Pension Fund Global (GPFG) does.

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Norges Bank Real Estate Management Buys Central Paris Property

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Norges Bank Real Estate Management, the real estate unit of Norges Bank Investment Management (oversees Norway Global Pension Fund Global), has signed an agreement to acquire a 100 percent interest in an office property located on 54-56 rue la Boétie in central Paris.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Schlumberger Gets Closer to Eurasia Drilling Company

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Russia’s sovereign wealth fund, the Russian Direct Investment Fund, and American oilfield services giant Schlumberger (SLB) have planned a deal to invest in Russia’s Eurasia Drilling Company Limited. RDIF CEO Kirill Dmitriev made the announcement. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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