Norges Bank ESG Priorities in 2019
Leaders Arena’s ESG Market Insights for companies presents:
Spotlight on Norges Bank ESG priorities in 2019
Norges Bank Investment Management’s Environmental, Social and Governance Integration -Key Priorities for Companies in 2019.
In our dialogue with companies, we raise governance and sustainability topics relevant to our long-term return. We prioritise our largest investments, where we know the companies best. We have a regular dialogue with these nearly 1,000 companies, which make up around two-thirds of the total value of the equity portfolio.
page 17, NBIM Responsible Investments 2018 report
Leaders Arena is happy to provide its third annual summary of the Environmental, Social and Governance (ESG) investment priorities for Norges Bank Investment Management’s (NBIM) from its February 2019 Responsible Investment report1. We hope Investor Relations, Communication and Sustainability officers will find these insights useful as a quick investor policy update in order to help prioritise ESG communication & sustainability goals and to support internal presentations.
Following the market downturn of 2018, and despite a 13% decrease in equity assets under management from a year earlier, NBIM’s strong focus on ESG within the investment process and the USD 599bn in equity assets it managed at the end of 20182 across 9,000 companies globally, NBIM continues to be the largest and one of the most influential Responsible Investors (RI) on the market.
From an ownership standpoint, NBIM which owns an average of 1.44% of shares in listed companies globally, exerts a notable influence on the companies’ sustainability strategies through its published ESG expectations and its dialogue with companies.
Don’t hesitate to get in touch with us if you want to know what these drivers mean specifically to your company or sector. We will also be more than happy to provide you with a PowerPoint summary. Feel free to contact us at: email@example.com
Engagement with companies:
During 2018 NBIM held almost the same number of total company meetings vs. 2017 (3,256 vs 3,252). This total comprised of 1,420 companies vs. 1,380 companies a year earlier. This represented 16% of the number of companies in its portfolio and 2/3 of its equity portfolio value). Meetings with large cap companies continue to be prioritised. 1,737 of those meetings focused on ESG issues (53% of all company meetings).
NBIM continues to prioritise dialogue with companies vs. divestment. However, during 2018 it did divest from 30 new companies vs. 6 in 2017 and 23 in 2016. The causes of these 30 divestments relate to the risk-based themes it closely tracks: climate change (incl. coal and CO2 intensity), corruption, human rights and tobacco. NBIM’s exclusions on the other hand, are either product or conduct-based and include weapons, tobacco, coal, human rights, environmental damage and gross corruption. 13 additional companies were added to the 138 companies in NBIM’s exclusion list in 2018.
The most commonly raised ESG topics by NBIM during company meetings were related to climate change (12%), board accountability & effectiveness (10%) and executive compensation (8%).
Active ownership & voting:
Since NBIM announced in 2014 that it would publish its voting intentions ahead of company shareholder meetings, it has only done so in very few instances: only for 5 companies in each of 2018 and 2017 supporting requests for better reporting on greenhouse gas emissions and water among other topics.
In line with 2017, during 2018 NBIM continued to vote at 98% of the shareholder meetings it could take part in globally. It supported board recommendations in 94.7% of cases, voting against one or more resolutions at 27.5% of meetings.
The most frequent topic where NBIM voted against management recommendations was the election of directors, which accounted for nearly ½ of resolutions it voted on. NBIM voted against 595 candidates for board election, citing the combination of the roles of chairperson and CEO as the most common reason.
Companies ESG assessment and near-term ESG priorities:
During 2018, NBIM assessed climate change disclosure for 1,700 companies in which it invests, followed by human and children’s rights disclosure on 600 companies, and water management and ocean sustainability on 598 companies. This provides an indication of its ESG focus in 2019 and beyond. A summary of ESG focal points for NBIM in the near-term include:
‘E’. On the environmental front, NBIM updated its existing expectations guidelines on climate change and water management. It also published a new expectations paper on ocean sustainability and continued to report extensively on its carbon footprinting efforts. On the topic of NBIM’s environmentally-focused investments, it is worth noticing that its environmental-related equity mandates underperformed the global benchmark used by NBIM by 1 percentage point (pp) in 2018 and 1.1 pp during the last 5 years (-8.3% and 5.9% return respectively).
‘S’. Regarding social impact, in 2018 NBIM published its new expectations on anti-corruption. NBIM praised the outcome of its engagement with Eni and Saipem as both companies continue to strengthen their focus in preventing and detecting corruption risks. NBIM continues to engage with other companies on this topic.
‘G’. During 2018, NBIM reinforced its focus on governance by publishing 3 governance-related position papers. In 2019 NBIM will continue to look for:
Board members that have relevant industry experience
Board members that can dedicate sufficient time to a company board which for NBIM means not serving on more than five boards at one time, or being the chair of two companies at once.
NBIM continues to hold that, in general, the roles of chairperson and CEO should be separate
Recommendations for companies:
We encourage companies to move from words to numbers, so that we can evaluate their efforts and better understand financial risks and opportunities. To perform analyses of this kind, we need governance and sustainability data.
page 19, NBIM Responsible Investments 2018 report
Integrate: Investor Relations, Corporate Communication and Sustainability officers can use these insights to prioritise ESG investor communication and reporting in 2019.
Engage: Proactively engage with key Responsible Investors such as Norges Bank Investment Management to tell your company story.
Lead: Benefit from dialogue with ESG analysts to bring the investor perspective into internal company discussions on strategy, sustainability and investor communication.
Leaders Arena’s unique ESG market intel helps companies to better integrate, engage and lead their dialogue with Responsible Investors.
1. Norges Bank Investment Management 2018 Responsible Investment Report: https://www.nbim.no/en/publications/reports/2018/responsible-investment-2018/
2. Leaders Arena and FactSet public filings data as of 31-Dec-2018