The Norwegian Finance Ministry has responded to criticism from leading academics that the NOK2.8trn (€353.3bn) Government Global Pension Fund puts ethics over investment efficiency – describing how it is moving away from a pure ethical stance towards a more balanced, comprehensive view on responsible investment.
Oxford researchers Gordon Clark and Ashby Monk had written that the fund’s ethical stance may be hindering its effectiveness as an investor, as reported by RI in October 2009. They argued that the fund’s high profile and controversial corporate exclusion strategy could be “self-defeating”. They were also critical of the fund’s decision-making process.
Now Trude Myklebust, Special Advisor in the Ministry’s Asset Management Department, has responded to the academics’ observations.
Writing in the Rotman International Journal of Pension Management, Ms. Myklebust says the fund has introduced several new initiatives as result of a review of the ethical guidelines by the Ministry. These include “better interaction” between the fund and the Ethical Council and the introduction of a watch list for companies in the exclusion “grey zone”.
“We are in the process of implementing the changes described above, and expect that the greater part of the amendments and new initiatives will be in place by summer 2010,” Myklebust states. “In short the Norwegian government is moving towards a more comprehensive approach to responsible investment.“The deontological [science of ethics] ‘do no harm’ aspect is still present, but it is now being balanced by a more proactive strategy incorporating and strengthening measures with a clear ambition to affect business practices and markets in a direction that are deemed beneficial to the goal of securing long-term financial results.”
The work on developing responsible investment practices “has not yet been concluded” so couldn’t be described in detail.
Myklebust added that there are also “several developments” in the governing framework of the NBIM although “we cannot go into exact detail as this is a work in progress”.
She concludes: “Certain decisions of importance have to follow processes and procedures that others may find long-winded and bureaucratic. However it is these processes and procedures that lead to the stability and trust required to reach our goal of sound long-term returns.”
Meanwhile, the Finance Ministry has said that it wouldn’t exclude Israeli companies after the country’s raid on ships carrying aid to Gaza in which nine people died. It was responding to a union group LO which had called on the fund to exclude Israel from its portfolio.
And in other news, Norges Bank Investment Management said deputy chief executive Stephen Hirsch has resigned. Hirsch, who joined as a portfolio manager in 1998, plans to move back to the US with his family.