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