Norway sovereign fund raises standards on sustainability

6 years ago - Published in Alternative investments

Norway’s $1 trillion sovereign wealth fund wants companies in which it invests to follow stricter guidelines on global sustainability and strengthen efforts to combat plastic pollution of the oceans, it said.

The fund, the world’s largest, invests the revenues of Norway’s oil and gas production and is a global investor with stakes in some 9,000 companies across 72 countries.

The fund’s ambitions as an investor significantly overlap with the United Nations’ goals of achieving sustainable economic, social and environmental development by 2030.

But as a global investor the fund wants to avoid investments in one sector to negatively impact another, so-called externalities, which would hurt the overall value of its portfolio.

“We are a universal investor compared with some investors that narrowly focus on one sector. Externalities will affect (us),” Carine Smith Ihenacho, the fund’s Chief Corporate Governance Officer, said. “That is why we are looking at long-term sustainability … We find the UN Sustainable Development Goals are a good framework to look at because they go across many indicators,” she told Reuters.

Among other things, it urged them to integrate environmental ideas into their business strategies, suggesting for example that plastics producers plan a transition to a “circular economy” frugal in raw materials, and that fisheries companies incorporate forecasts on future stocks in their planning.

The recommendations apply to companies active at sea — shipping, fisheries, fish farms — as well as others on land whose activities may affect the oceans, such as distribution and plastics industries and agriculture, the fund said.The fund has in the past laid out its expectations on other issues, including better efforts in water management, anti-corruption, human rights and tax transparency, judging that bad practices in these fields can ultimately hurt companies’ profitability.

In addition to its expectations based purely on financial considerations, the fund also follows ethical guidelines that bar it from investing in, among other things, companies that commit serious human rights violations, manufacture nuclear or “particularly inhumane” weapons, or those in the coal and tobacco industries.