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Norges Bank Investment Management takes €2bn green mandates in-house, terminates external managers

Move comes as environmental equities return -8.3%

Norges Bank Investment Management (NBIM), the arm of the Norwegian central bank which runs the assets of the huge Government Pension Fund Global sovereign fund, has terminated its external environmental mandates and moved the c.NOK20bn (€2bn) assets in-house.

It comes as the influential fund said its environmental equity investments returned -8.3% in 2018. This compares to -7.3% for the FTSE Global All Cap Index and -7.2% for the MSCI Global Environment Index.

NBIM is required by the government to invest between NOK30-60bn in dedicated environment-related mandates.

“At the end of 2018, we had NOK43.3bn invested in shares in 77 companies and NOK13.4bn invested in green bonds under these mandates,” NBIM says in its new Responsible Investment report.

“The annualised return [for environmental equities] since inception in 2010 has been 4.5%.” Over the same period, the FTSE and MSCI indices referenced above have returned 9.2% and 7.3% respectively.

The environment-related mandates had been run both internally and externally, but that is now no longer the case.

“To reduce cost in the management of the fund, the externally managed, environment-related mandates were terminated in 2018,” the fund said. “Today, the environment related mandates are in their entirety internally.”A spokesperson declined to name the managers but said around NOK20bn was managed externally.

As at the end of 2017, the most recent period for which there is information, NBIM had 81 external managers running a total of NOK451bn.

The fund said in the report that it has built up “extensive internal expertise” in environmental technology and that much of its work involves defining the universe for environmental investments. “We screen our environmental investments against information supplied by specialist external data providers and integrated into our sustainability databases.”

Over the year, NBIM had dialogue with 24 global banks on climate-related disclosure, following up its dialogue with banks in 2017 on adopting the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). “We found that many banks back the recommendations,” it said, adding that of the 55 banks originally contacted in 2017, 37 intended to report in accordance with the TCFD.

Overall, NBIM held almost 1,500 company meetings on ESG issues last year, with topics including not just banks’ climate disclosure, but, more widely, lending and deforestation, tax and transparency at UK companies and the marketing of breast-milk substitutes. It engaged with the automotive sector over cobalt as a component of lithium batteries.