The manager of Norway’s sovereign wealth fund says new wording from the Principles for Responsible Investment (PRI) about investment impact was so substantial that it amounted to a new PRI principle that should have gone to a signatory vote.
The move, Norges Bank Investment Management (NBIM) says, is a “departure” from the PRI’s six founding principles and may be interpreted as an “expectation that financial investors should have dual or multiple objectives”.
The letter, signed by Chief Corporate Governance Officer Carine Smith Ihenacho and Head of Sustainability Wilhelm Mohn, was in response to the PRI’s 2019 signatory survey.
NBIM, which runs the assets of Norway’s NOK8.9trn (€919bn) Government Pension Fund Global, said PRI signatories should have been granted a vote on the inclusion of a chapter on “real-world impact aligned with the SDGs” as part of the network’s 10-year Blueprint document that was adopted in 2017.
It argued that the impact component represented “a substantial strategic development”, and as such was a “de facto new principle”.
NBIM points out that, according to the PRI’s articles of association, signatories are entitled to vote on amendments to the PRI’s six founding principles.
NBIM is reiterating its opposition to an outcomes-focused approach for the PRI’s annual assessment framework. The giant investor already warned the PRI in a previous consultation that “including outcome-based reporting in the PRI Reporting Framework is drifting away from the PRI’s founding principles”.
Currently, the assessment evaluates ESG integration on the basis of a signatory’s investment processes rather than investment outcomes.NBIM also called for more transparency within signatory surveys, saying that the majority of signatory responses for a proposal should be supportive, otherwise a proposal should be amended to reflect the feedback. ‘Don’t know’ responses should also be taken into consideration, the manager said.
An NBIM spokesperson said that as “a founding signatory and supporter of the principles” it welcomes “the opportunity to share our feedback with the PRI Association, and look forward to our continuing dialogue”.
On the topic of governance, NBIM said that the PRI’s most recent 2019 Signatory Survey did not cover “certain key points” as it contained only one question on the quality of board-level disclosure.
NBIM also cautioned the PRI to “represent broadly held view among the signatories, and outcomes permissible by their respective mandates” in its engagement with policy-makers.
With such a diverse signatory base, the PRI may need to introduce “more rigorous processes” to gather views from its signatories and ensure its policy work remains “balanced”. It provided no further details to explain its comments.
Unlike many peers, Norges has not signed up to environmental engagement group Climate Action 100+, and has a policy of not signing voluntary guiding codes such as the UK’s Stewardship Code.
A spokesperson for the PRI said to RI: “PRI welcomes feedback from signatories including Norges Bank in relation to all parts of its operations. As a signatory-led organisation, maintaining an open dialogue with investors is important to PRI.”
PRI Chair Martin Skancke is a former senior Norwegian finance ministry official who was closely involved in the creation of the fund in the mid-1990s.