NBIM to take closer look at ultimate owners and due diligence

Tender comes as Norwegian sovereign wealth fund says risk-based divestments have contributed €654m so far

Norges Bank Investment Management (NBIM) – manager of Norway’s $1trn Government Pension Fund Global (GPFG) – plans to take a closer look at who really owns its investee companies.

Within a broader tender for a 4-year contract with an estimated value of up to Kr15m (€1.4m), is a “mini-tender” focused on what NBIM labels “global integrity due diligence”. 

That would entail analysing corporate structures and ultimate beneficial ownerships, as well as “investigations on investments, companies, and individuals as requested in connection with NBIM business activities”, according to the RFP.

The investment giant does not specify why it has turned its attention to such matters, but the move comes at a time when legislators in the EU plan to introduce ESG-related due diligence obligations, requiring company boards to up their game when overseeing supply chains. See RI coverage on the European Parliament here and European Commission here

In addition, the EU's 5th Anti-Money Laundering Directive requires member states to set up beneficial owner registers of companies – although a study by NGO Global Witness earlier this year found sluggish progress. 

Speaking yesterday, Jon Nicolaisen, Deputy Governor of Norges Bank – Norway’s central bank and the parent of NBIM – said “value creation in the long term depends on how well companies are managed, on business models that are sustainable, as well as on markets that are well functioning, legitimate and efficient”.

In the same speech, he discussed the impact of the 282 “risk-based divestments” NBIM has made since 2012. “The first divestments were of palm oil companies, whose activities entail destruction of rainforests. Since then, the fund has divested of a number of other companies, where the common denominator has been that we have observed inadequate management of risks such as those related to the environment and climate change, corruption and human rights,” he explained. 

“Risk-based divestments have contributed to increasing the return by an amount equivalent to around 0.27 percentage point of the value of the fund's equity portfolio, measured against the benchmark index. This is the equivalent of around NOK7bn.”

In September, NBIM disclosed it had underperformed benchmarks as a result of its ethical exclusions, but said the decisions were necessary to maintain its legitimacy as Norway’s sovereign wealth fund.