Going direct: Norway’s €326bn investor ESG data project

Government supported investor initiative goes direct for company SRI key performance indicators.

In August this year, a group of Norway’s largest institutional investors launched a collaborative project called Sustainable Value Creation. Its aim is to influence companies listed on the Norwegian stock exchange to develop responsibly and create long-term value for their owners. Together the investors in the group have NOK 2700 billion (€326bn) under management, of which NOK 1000 billion is invested in the Norwegian market. The calibre of the investors involved underlines the project’s intent. The group consists of Alfred Berg, DnB NOR, Folketrygdfondet, Gjensidige, KLP, Nordea, the Norwegian Ministry for Trade and Industry, Odin, Oslo Pensjonsforsikring, StatoilHydro Kapitalforvaltning, Storebrand and Vital. The project also received highly valuable support from the Norwegian government. At the launch of Sustainable Value Creation, Kristin Halvorsen, Minister of Finance, said: “Never before has such a broad group of investors collected and compared the companies’ performance within these areas. This makes the project unique and very exciting. What we are doing in Norway is noticed internationally. It is thereforea pleasure to see that we can collaborate on developing these issues further. The project also has an international ambition and this is very promising.” So what are we doing? On August 12th, the investors sent all Norwegian companies listed on the Oslo Børs Benchmark Index a survey regarding their policies for sustainable value creation. It included questions on environmental, corruption, human and labour rights policies. Importantly, the survey was sent directly to the chief executive officer with a copy to the chairman of the board and the head of investor relations. The questions in the survey cover four main areas: overall policies and commitments, implementation and adherence, communication and reporting, and the board’s accountability. The results will be publicly available in a report to be issued in November 2008.
Why are we doing this? As Nils Bastiansen, director of equities at the €14bn Folketrygdfondet, the Norwegian national insurance scheme, and fund spokesperson for the steering committee of Sustainable Value Creation, puts it: “As owners in Norwegian companies, we, as

responsible investors wish to challenge them to develop sustainably because we believe this is an important requirement for achieving the highest possible financial returns over the long-term.” By naming the group Sustainable Value Creation, we are outlining our belief that the goal for companies is to create economic, environmental and social value. Companies must act responsibly in relation to both their own interests and those of their stakeholders. Good corporate governance is crucial to this. Since the launch, the project, has received a lot of positive interest. We are now working hard to collect as many company responses as possible before starting the analysis of the results. In addition, we are talking informally with like-minded investors in different countries about potential international expansion of the project.
One catalyst for what we are doing was the United Nations Principles for Responsible Investments. KLP knew that several new signatories would need to work towards compliance with the principles. As such KLP invited them to become project partners and work towards meeting several, if not all of them. Another was our belief in the synergies of collaboration. We are all trying to move towards the same goal: sustainable economies, societies and companies.
Therefore we need to join forces to do that effectively.
A few investors and companies have also expressed scepticism about the project; mostly towards thepracticalities of using a survey to assess companies, as well as on the formulation of some of the questions. No system is perfect. We believe that using a survey creates broad awareness of the project, brings some discipline into the reporting process and creates a basis for continuous improvement through comparison of the results. In addition, improving the survey and the questions in line with market developments will make both investors and companies progress. Importantly, the project operates on the principle of full transparency in the questions asked, the methodology and the results. We will make the information available to the public if the company agrees. The idea is that companies can refer to this information when receiving similar inquiries or to publicly demonstrate good governance based on ESG-factors. With increased pressure on asset owners and managers to act responsibly we need to actively engage in the information collection process and more specifically in the kind and quality of information we sollicit from companies. The rationale is simple: this information forms the basis of our investment decisions and that is what we do.
Jeanett Bergan is head of responsible investment at KLP, the Norwegian insurance company.

Jeanett Bergan will be talking about Sustainable Value Creation at the RI conference: Integrating ESG into mainstream investing in Amsterdam on November 12. For the programme conference click here