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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 » ESG incorporation in actively managed fixed income » Implementation processes

Implementation processes

FI 01. Incorporation strategies applied

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

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

In the fixed income portfolios, we have chosen integration as our ESG incorporation strategy because it fits best with our goal of achieving increased returns over time through responsible investment. In our view, the way an issuer handles environmental and social matters can provide an indication of credit risk. We therefore aim to integrate ESG considerations into our ongoing credit assessment procedures. We do this by making use of the ESG analyses that are available for companies that are also in the equity portfolios. For high yield issuers unlikely to be covered by ESG ratings providers, Folketrygdfondet uses an internally developed sector-based ESG framework to assess risk. These analyses are, in turn, incorporated into the credit rating we assign that issuer. We also screen 100% of the corporate issuers in our fixed income portfolios against exposure to ESG controversies. If the external service provider that carries out the normative screening alerts Folketrygdondet to an issuer involved in questionable, unethical, or unsustainable business practices, we incorporate this information into our assessment of the creditworthiness of the company in question. 

Folketrygdfondet's Nordic portfolio is subject to decisions regarding the exclusion of companies from the investment universe of the Government Pension Fund Global.

01.3. Additional information [Optional].

Folketrygdfondet's principles for responsible investment cover all asset classes. For SSA, investments are limited to sovereign bonds and municipal bonds in the Nordic market. Hence, financial risk due to issuers' management of ESG issues is minimal. We nevertheless review annually potential adjustements to our approach to ESG integration per asset class in response to changes in the underlying risk. Thus far, given the risk profile, our integration of ESG into SSA investing does not extend beyond this initial review. 


FI 02. ESG issues and issuer research

02.1. Indicate which ESG factors you systematically research as part of your analysis on issuers.

Select all that apply
SSA
Corporate (financial)
Corporate (non-financial)
Environmental data
Social data
Governance data

02.2. Indicate what format your ESG information comes in and where you typically source it

Indicate who provides this information  

Indicate who provides this information  

Indicate who provides this information  

Indicate who provides this information  

02.3. Provide a brief description of the ESG information used, highlighting any differences in sources of information across your ESG incorporation strategies.

Screening: Folketrygdefondet's Nordic portfolio is subject to the decisions regarding the exclusion of companies from the investment universe of the Government Pension Fund Global.

Integration: Folketrygdfondet subscribes to an ESG controversy news service that alerts investors of potential breaches of international norms on ESG issues. If a potential breach of such norms is discovered at any of the companies or issuers in Folketrygdfondet's portfolios, we receive an alert notifying us of the incident. This information is incorporated into our evaluation of the company or issuer. Folketrygdfondet conducts its own analyses for issuers in the high-yield portfolio, based on a framework that the dedicated ESG resource and FI portfolio managers developed together. The FI portfolio managers use primarily information from the company, including both reporting and one-to-one meetings as a basis for analysis. Sell-side analyses sometimes include ESG information, for example, regarding new environmental regulations. In our experience, however, ESG integration in sell-side analyses is more common on the equity side.

02.4. Additional information. [Optional]


FI 03. Processes to ensure analysis is robust

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

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

          The FI high yield investment team conducts issuer ESG analyses, based on an internal framework developed in collaboration with the dedicated ESG resource.
        

03.3. Additional information. [Optional]

As noted in the previous section, Folketrygdfondet obtains ESG information from several sources, such that the answers to 03.1 and 03.2 are not applicable to every individual source of ESG information. 

Folketrygdfondet's internal ESG frameworks are used by the FI portfolio managers in the high yield space before investing, to identify issues that may affect creditworthiness. We would not share these internal credit assessments, although we address outstanding ESG concerns with issuers directly.

After an investment decision is made, Folketrygdfondet undertakes a new ESG assessment if warranted by a change in the issuer's circumstances. Folketrygdfondet uses an ESG controversy alert service for news articles that link an issuer to controversial activities. 

Folketrgydfondet reports regularly to investment committee meetings on ESG. However, issuer-specific ESG information would only be discussed under extraordinary circumstances as the investment committee discussions typically involve a more overarching approach to the portfolio. 


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