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Norwegian Government Pension Fund Global (Norwegian Ministry of Finance and Norges Bank Investment Management)

PRI reporting framework 2017

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ESG incorporation in actively managed fixed income

Implementation processes

FI 04. Incorporation strategies applied

04.1. Indicate 1) Which ESG incorporation strategy and/or combination of strategies you apply to your actively managed fixed income investments; and 2) The proportion (+/- 5%) of your total actively managed fixed income investments each strategy applies to.

SSA
0 Screening alone
0 Thematic alone
0 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
100 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (non-financial)
0 Screening alone
0 Thematic alone
0 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
100 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%

04.2. Describe your reasons for choosing a particular ESG incorporation strategy and how combinations of strategies are used.

Across all fixed income investment mandates consideration must be given to economic, financial, environmental, social and corporate governance (ESG) risk factors.

Criteria for observation and exclusion have been endorsed by the Storting - the Norwegian parliament. These criteria relate to 1) specific product types and entail that the fund must not invest in companies which themselves, or through entities they control, produce weapons that violate fundamental humanitarian principles through their normal use, produce tobacco, or sell weapons or military material to certain countries. 2) if there is an unacceptable risk of conduct that is considered grossly unethical. The Executive Board of Norges Bank decides on observation and exclusion of individual companies, based on a recommendation from the Council on Ethics. Exclusions take place across all asset classes.

NBIM may also choose not to invest in certain companies or groups of companies/sectors. Such divestments take place across asset classes.

NBIM has a green bond portfolio including green bonds issued by supra-nationals,sovereigns, agencies, local authorities and treasuries.

There is a specific process within NBIM where countries are approved ahead of investments, which is implemented across all asset classes.

More information is given in the report on "Responsible Investment 2015": https://www.nbim.no/contentassets/2c3377d07c5a4c4fbd442b345e7cfd67/government-pension-fund-global---responsible-investment-2016.pdf

 

04.3. Additional information [Optional].

It follows from the mandate from the Ministry of Finance to Norges Bank that the GPFG in exceptional cases may be barred from investing in fixed income instruments issued by governments or government-linked issuers. The GPFG is not a foreign policy instrument, and it is only in exceptional cases with large-scale international sanctions or restrictive measures, that such restrictions apply to investments in government bonds.
 


FI 05. ESG issues and issuer research (Private)


FI 06. Processes to ensure analysis is robust

06.1. Indicate how you ensure that your ESG research process is robust:

06.2. Describe how your ESG information or analysis is shared among your investment team.

06.3. Additional information. [Optional]


(A) Implementation: Screening

FI 07. Types of screening applied

07.1. Indicate the type of screening you conduct.

Select all that apply
SSA
Corporate (non-financial)
Negative/exclusionary screening
Positive/best-in-class screening
Norms-based screening

07.2. Describe your approach to screening for internally managed active fixed income

Criteria for observation and exclusion that have been endorsed by the Storting - the Norwegian parliament. These criteria relate to 1) specific product types and entail that the fund must not invest in companies which themselves, or through entities they control, produce weapons that violate fundamental humanitarian principles through their normal use, produce tobacco, or sell weapons or military material to certain countries. 2) if there is an unacceptable risk of conduct that is considered grossly unethical.

The Executive Board of Norges Bank decides on observation and exclusion of individual companies, based on a recommendation from the Council on Ethics. In such cases, the Bank may also consider using other tools in its ownership work. The aim is to establish a unified chain of available tools for responsible investment management.

NBIM may also choose not to invest in certain companies or groups of companies/sectors. NBIM has gradually increased the scope of risk-based divestments, both geographically and thematically. In total, NBIM have divested from 187 companies in the past four years. There is a specific process within NBIM where countries are approved ahead of investments. More information is given in the report on "Responsible Investment 2015": http://www.nbim.no/contentassets/96608d5f04eb4a138fa88f8fdf937b70/responsible-investment-2015.pdf

07.3. Additional information. [Optional]


FI 08. Negative screening - overview and rationale

08.1. Indicate why you conduct negative screening.

SSA

SSA

Corporate (non-financial)

Corporate (non-fin)

08.2. Describe your approach to ESG-based negative screening of issuers from your investable universe.

Criteria for observation and exclusion that have been endorsed by the Storting - the Norwegian parliament. These criteria relate to 1) specific product types and entail that the fund must not invest in companies which themselves, or through entities they control, produce weapons that violate fundamental humanitarian principles through their normal use, produce tobacco, or sell weapons or military material to certain countries.2) if there is an unacceptable risk of conduct that is considered grossly unethical.

NBIM may also choose not to invest in certain companies or groups of companies/sectors. NBIM has gradually increased the scope of risk-based divestments, both geographically and thematically. In total, NBIM have divested from 187 companies in the past four years. There is a specific process within NBIM where countries are approved ahead of investments. More information is given in the report on "Responsible Investment 2015": http://www.nbim.no/contentassets/96608d5f04eb4a138fa88f8fdf937b70/responsible-investment-2015.pdf

08.3. Additional information. [Optional]


FI 09. Examples of ESG factors in screening process (Private)


FI 10. Screening - ensuring criteria are met

10.1. Indicate which systems your organisation has to ensure that fund screening criteria are not breached in fixed income investments.

Type of screening
Checks
Negative/exclusionary screening?
Norms-based screening

10.2. Additional information. [Optional]


(B) Implementation: Thematic

FI 11. Thematic investing - overview (Private)


FI 12. Thematic investing - themed bond processes

12.1. Indicate whether you encourage transparency and disclosure relating to the issuance of themed bonds as per the Green Bonds Principles:

12.2. Describe the actions you take when issuers do not disburse bond proceeds as described in the offering documents.

Green bonds may be removed from the index and the portfolio if the issuer fails to report on the use of proceeds at least annually or if reporting indicates that investments fall outside of eligible categories.

12.3. Additional information. [Optional]


FI 13. Thematic investing - assessing impact

13.1. Indicate how you assess the environmental or social impact of your thematic investments

          Relevant and material ESG factors integrated into the investment analysis processes
        

13.2. Additional information. [Optional]


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