The Strategy Council for the Government Pension Fund Global, Norway's sovereign wealth fund, has recommended changes to ensure greater focus on responsible investing by the fund's manager Norges Bank, as well as greater transparency in its decision making.
The recommendation is contained in the latest report of the Strategy Council, which has reported today, 11 November.
The Council notes the difficulty of managing some 7,000 holdings in equity and debt of companies, but that it is important to ensure any investment decisions are in line with the consensus of the Norwegian people - who ultimately will judge whether the fund carries legitimacy.
On the point of responsible investing (RI), the Council noted that there is a serious lack of knowledge about how adopting more RI would impact the type of portfolio that the fund represents. Therefore it has recommended that the fund encourage more independent research into this area.
It said that the fund could become more efficient by merging its exclusion decisions with ownership strategies. Therefore it has recommended that "the resources currently devoted to responsible investment in the Council on Ethics and in Norges Bank should be integrated. Further, the responsibility for ensuring that the Fund's responsible investment principles are followed should be delegated to the Board of Norges Bank. The Report proposes mechanisms that could enhance accountability and provide incentives to counter the inherent conflicts between the financial and non-financial objectives of the mandate."
And, significantly, the Council has recommended the fund be more open about its investment objectives, principles, policies, strategies and priorities. This is to foster "public trust and legitimacy in the Fund and will help create the dialogue and involvement that will lead to continuous learning and improvement."
Siv Jensen, Norwegian minister of Finance, said: "I note that it is the Strategy Council's view that gathering all the tools/instruments in one place and considering exclusions as an integral part of these ownership strategies will make the Fund more influential and improve the overall efficiency of our responsible investment efforts,. We will have a thorough and open process to follow up the report from the Strategy Council."
Today on Investment Europe
Selectors are increasingly being asked to consider the merits of ‘smart beta’ on behalf of their clients, but opinion on its role in providing superior risk adjusted returns is not clear cut.
A selection of key moments caught on camera from InvestmentEurope's recent Fund Selector Bond Focus Italy, which took place in Milan on 4 March.
Helene Williamson, head of Emerging Market Debt at First State Investments, is set to contribute to the discussion at the upcoming Fund Selector Forum Sweden in Stockholm on 7 May.