

The €267bn ($420bn) Norwegian Government Pension Fund has issued one of the most comprehensive consultation exercises ever into its policy on responsible investment, broaching subjects such as exclusion limits, the effectiveness of investor engagement and the targeting of corporate tax evasion. The review, launched by the Ministry of Finance last week, will likely drive broader discussion amongst the world’s pension and sovereign wealth funds over their adoption of responsible investment policies. Many pension funds use the Norwegian fund’s corporate boycott list, for example, as a benchmark for their own exclusions because of the resources put into its research. The review follows the findings of a report on the fund’s ethical investment policy presented to the Norwegian government last month by the consultancy group created by former US Secretary of State, Madeleine Albright, working with Simon Chesterman, global professor and director at the New York University School of Law Singapore programme.
The report made 27 recommendations to the government on issues including its high-profile exclusions strategy and engagement procedures with the 7000 companies it invests in.One major debate raised by the government review is whether excluding companies closes the door on influencing corporate behaviour or if, conversely, engaging with companies could render the fund complicit in unethical behaviour. Another is how far the fund can go in excluding investments in countries where the Norwegian government does not have explicit boycotts. Last year, the fund excluded investment in Burmese government bonds, mirroring Norwegian sanctions against the country.Significantly, the consultation raises the prospect that the fund could take positions on questions of corporate tax evasion. The review states that it is in the “self-interest of a long-term and universal investor” to ensure that laws and regulations promote ”healthy growth”, and not growth based on “obtaining advantages through tax evasion or by failing to disclose their financial situation to the general public.” On investor engagement with companies, the document points out that Norges Bank, which runs the pension fund money, has no clear system for concluding when engagements have failed, or for determining the consequences of that. It recommends that a “timetable” be prepared for each engagement to evaluate progress. The review also suggests that
the fund collaborate more with other investors on engagements where it has tended to work alone to date.
The review also raises the potential of conflict regarding companies where the Government pension fund has decided on exclusion or engagement, but where Norges Bank itself has no policy – a problem raised by the Albright review. However, in a letter to the government, Norges Bank said no such conflicts had yet arisen and downplayed any potential problems.Interested parties can submit their views on the issues raised in the consultation paper by 15 September to postmottak@fin.dep.no
The result of the evaluation will be presented to the Norwegian Parliament in a white paper on the management of the Government Pension Fund during spring 2009.