Norges Bank Investment Management (NBIM), the arm of the Norwegian central bank which manages the assets of the NOK5trn (€595bn) Government Pension Fund, has set up frameworks to analyse companies’ reporting on climate change risk management, water management and children’s rights.
The issues are three of the giant fund’s six key focus areas for its ownership strategies. The others are equal treatment of shareholders, shareholder influence/board accountability, and efficient markets.
As part of the process, NBIM has also developed a composite index in each focus area for comparing companies against each other across the indicators. This enables comparison of results across companies and over time – although it acknowledges that obtaining a complete picture of risk exposure, management and performance requires a deeper analysis.
While the fund has published separate expectations documents for climate change risk management, water management and children’s rights, it says that most corporate environmental and social reporting is “not done accordance with standards that allow us to compare data easily across companies”.So, to address this, NBIM has created three distinct analytical frameworks to help it assess the level of corporate reporting and translate that information into “standardised, quantitative, and comparable data”.
“Standardised, quantitative, and comparable data”
Each company assessed is given an overall score, reflecting the quality and scope of its reporting. For example, 30% of a firm’s overall climate change risk reporting score will reflect whether its greenhouse gas emission intensity has increased or declined.
NBIM explains that it uses the frameworks to review corporate risk management, reporting and performance annually across the largest companies in its equity portfolio. The assessments supplement other data in the investment process.
“By assessing a large number of companies’ reporting against a common set of indicators, NBIM has built an in-house data set that can be used for company screening, sector analysis and market analysis, amongst other things,” NBIM says.