Norges Bank ESG priorities in 2017
Updated: Sep 4, 2019
Norges Bank Investment Management’s Environmental, Social and Governance Integration /
Key Insights for Investor Relations in 2017
With over USD 544bn invested across 9,000 companies globally, the largest Responsible Investor (RI) in the equity market has recently published its annual RI review.
We consider this summary a must-read for ALL IROs as Norges Bank Investment Management’s (NBIM) evolving ESG policies will impact most Investor Relations (IR) teams and corporate communication strategy during 2017 and beyond.
For the busy bees that need the key facts to support internal presentations, Leaders Arena provides here the main highlights of what NBIM’s ESG policies recent update means for IR.
While this series only highlights NBIM as leaders in this space, we are seeing improved efforts and transparency by asset owners and investment managers globally. NBIM’s priorities can be seen as a proxy for future topics of focus by investors.
Feel free to get in touch with us if you want to know what these drivers mean specifically to your company or sector. Also please feel free to reach out to us to request your complimentary copy of these insights in PowerPoint: esg@leadersarena.global
Leaders Arena summary of NBIM’s latest ESG policies and their impact on Investor Relations:
Key facts:
Engagement with companies
In 2016, NBIM held 3,790 meetings with 1,589 companies, raising ESG issues in half of those meetings.
ESG topics raised included matters related to board expertise, shareholder rights and sustainability practices that did not meet NBIM’s expectations.
Source: Norges Bank Investment Management / Government Pension Fund Responsible Investment report 2016
Voting decisions reflect governance priorities
During 2016, NBIM voted at 98% of shareholder meetings through 11,294 shareholder meetings globally in which it opposed 6,700 board-supported resolutions.
It voted against company-backed resolutions at half of its top 50 holdings in 2016
More than half of the fund’s votes against companies’ recommendations were related to board issues, such as a lack of independence or over-committed directors.
In addition, NBIM focused on other topics including the protection of minority shareholders and companies’ choice of auditors.
NBIM voted against a number of US companies for having a combined chief executive and chairman role including ExxonMobil, Johnson & Johnson, JPMorgan, General Electric and Procter & Gamble.
NBIM’s governance policies contributed to an increase in the number of US companies adopting proxy access as well as other governance changes in Brazil, Japan and Sweden.
NBIM is currently talking to circa 40 companies about pay, representing 7% of its equity portfolio. Last year it voted against SAP and Sanofi on pay.
NBIM continued its initiative to publish vote intentions and rationales ahead of certain shareholder meetings.
NBIM took other actions outside of voting and engagement which included joining a class action lawsuit against Volkswagen.
Source: Norges Bank Investment Management / Government Pension Fund Responsible Investment report 2016
Divestment policy
In 2016 NBIM divested from 23 companies following an assessment of environmental, social and governance-related risk factors.
In the last five years, NBIM has divested from a total of 210 companies.
Coal divestment continues: In March 2017 NBIM announced it divested from an additional 10 companies which derive more than 30% of its revenues or energy generation from coal. These include Great River Energy and Otter Tail Corp in the US, PGE in Poland and CEZ in the Czech Republic.
Near-term ESG priorities
‘E’. On the environmental front, climate change will still be the key focus, with further implications on engagement and portfolio divestment, especially as it measures and tracks carbon in its portfolios. NBIM is also increasing its focus on water risk management.
‘S’. Regarding social impact, in 2016 NBIM issued new guidelines on human rights and expects all companies to meet its expectations related to their own operations and supply chains. It considers respecting human rights as ‘an inherent art of good business practice and risk management’. NBIM will continue to pursue better company disclosure on children’s rights.
‘G’. On governance, executive pay and company taxation will be key topics. NBIM is preparing to lay out its principles on executive pay and company taxation in months to come.
Leaders Arena recommendations for IROs
The knowledge of NBIM’s investment teams underpins its voting decisions. Therefore, it pays for IROs to INTEGRATE ESG in their regular communication with investors and ENGAGE with key responsible investors such as Norges Bank Investment Management. That will in turn better position IROs to LEAD those conversations.
