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Norwegian Government Pension Fund Norway (Norwegian Ministry of Finance and Folketrygdfondet)

PRI reporting framework 2020

You are in Direct - Fixed Income » Fixed income - Engagement

Fixed income - Engagement

FI 14. Engagement overview and coverage

14.1. Indicate the proportion of your fixed income assets on which you engage. Please exclude any engagements carried out solely in your capacity as a shareholder.

Category
Proportion of assets
Corporate (financial)

14.2. Indicate your motivations for conducting engagement (Corporate, Financial fixed income assets)

Corporate (non-financial)

14.2. Indicate your motivations for conducting engagement (Corporate, non-financial fixed income assets)

14.3. Additional information.[OPTIONAL]

For fixed income instruments, we have the greatest influence before we invest, since bondholders do not have ownership rights. We therefore focus on robust pre-investment ESG analysis to identify issues that may affect creditworthiness. Folketrygdfondet therefore engages in dialogue with issuers prior to investment primarily as a means of gathering information. Once a fixed income investment is undertaken, any subsequent ESG engagement would be carried out by Folketrygdfondet's equity portfolio managers invested in the issuer, as shareholders typically have more influence than bondholders. The fixed income portfolio managers are kept informed during this process. 

If an ESG controversy were to occur for an issuer that is not included in the equity portfolios, then the fixed income team would incorporate that information into our evaluation of the company and address the issue with company management. The fixed income team also engages with issuers through formal bondholder meetings, in times of restructuring, and in relation to proposed changes in the loan agreement. 

We focus on analysing how important factors linked to corporate governance, environmental, and social issues are safeguarded in the companies. The way in which an issuer deals with such factors speaks to the credit risk. We therefore integrate such analyses into our regular credit assessments. We believe that if more investors do the same, this may over time affect the companies' financing costs


FI 15. Engagement method

New selection options have been added to this indicator. Please review your prefilled responses carefully.

15.1. Indicate how you typically engage with issuers as a fixed income investor, or as both a fixed income and listed equity investor. (Please do not include engagements where you are both a bondholder and shareholder but engage as a listed equity investor only.)

Select all that apply
Type of engagement
Corporate (financial)
Corporate (non-financial)
Individual/Internal staff engagements
Collaborative engagements
Service provider engagements

15.2. Indicate how your organisation prioritises engagements with issuers.

Select all that apply
Corporate (financial)
Corporate (non-financial)
Size of holdings
Credit quality of the issuer
Duration of holdings
Quality of transparency on ESG
Specific markets and/or sectors
Specific ESG themes
Issuers in the lowest ranks of ESG benchmarks
Issuers in the highest ranks of ESG benchmarks
Specific issues considered priorities for the investor based on input from clients and beneficiaries
Other

15.3. Indicate when your organisation conducts engagements with issuers.

Select all that apply
Corporate (financial)
Corporate (non-financial)
We engage pre-investment.
We engage post-investment.
We engage proactively in anticipation of specific ESG risks and/or opportunities.
We engage in reaction to ESG issues that have already affected the issuer.
We engage prior to ESG-related divestments.
Other, describe

If ‘other’ has been selected, please give a description

Again, we find this question a bit difficult to answer as the equity team typically leads engagement with companies in which Folketrygdonfdet has both equity and fixed income holdings. Within the management of fixed income securities, we do not have ownership rights. For this reason, there is also not the same regular contact between bondholders and issuers, as long as interest is paid and repayments are made in accordance with the loan agreement. Any engagement with issuers that are not in the equity portfolio would be carried out by the fixed income portfolio managers. Additionally, our engagement with issuers prior to investing - particularly for high yield issuers - involves both information gathering and negotiations regarding the loan agreement, designed to ensure company management does not act contrary to the interests of bondholders. 

 

 

15.4. Indicate what your organisation conducts engagements with issuers on.

Select all that apply
Corporate (financial)
Corporate (non-financial)
We engage on ESG risks and opportunities affecting a specific bond issuer or its issuer.
We engage on ESG risks and opportunities affecting the entire industry or region that the issuer belongs to.
We engage on specific ESG themes across issuers and industries (e.g., human rights).
Other, describe

15.5. Indicate how your organisation ensures that information and insights collected through engagement can feed into the investment decision-making process.

Select all that apply
Corporate (financial)
Corporate (non-financial)
Ensuring regular cross-team meetings and presentations.
Sharing engagement data across platforms that is accessible to ESG and investment teams.
Encouraging ESG and investment teams to join engagement meetings and roadshows.
Delegating some engagement dialogue to portfolio managers/credit analysts.
Involving portfolio managers when defining an engagement programme and developing engagement decisions.
Establishing mechanisms to rebalance portfolio holdings based on levels of interaction and outcomes of engagements.
Considering active ownership as a mechanism to assess potential future investments.
Other, describe
We do not ensure that information and insights collected through engagement can feed into the investment decision-making process.

If ‘other’ has been selected, please give a description

The fixed income portfolio managers are responsible for issuer dialogue, and can call upon Folketrygdfondet's dedicated ESG resource for assistance as needed.

15.6. Additional information.[OPTIONAL]

If a credit event occurs, such as a default on payment or breach of other clauses in the loan agreement, the bondholders must be involved. Folketrygdfondet will attend and vote at bondholder meetings. Normally, a trustee will be appointed to represent the bondholders, but the trustee's authority to make decisions is limited. Folketrygdfondet is often one of the major bondholders and is thus responsible for arriving at a solution that all parties can accept. We therefore often play an active role in renegotiation and default situations. Good loan agreements are important, and Folketrygdfondet will make efforts to ensure that these contain expedient loan clauses adapted to the credit risk we believe the loan represents. We will not invest in a loan unless a trustee is appointed. 


FI 16. Engagement policy disclosure

16.1. Indicate if your publicly available policy documents explicitly refer to fixed income engagement separately from engagements in relation to other asset classes.

16.2. Please attach or provide a URL to your fixed income engagement policy document. [Optional]

16.3. Additional information [OPTIONAL]


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