Investments - ownership strategies
Active ownership
The fund's well-diversified portfolio and long-term approach make it more exposed to certain market issues that shorter term investors often are less concerned with. These include issues that are crucial for the legitimacy of the markets, such as how the markets function, as well as social and environmental matters.
Active ownership is about how NBIM exercises shareholder rights and carries out its obligations in relation to the companies in which the fund is invested. The key principles of openness and transparency in the management of the fund, as set down by Norges Bank’s Executive Board, also apply to its active ownership.
As a shareholder, NBIM is in a position to address topics relating to traditional shareholder rights, such as the right to equal treatment and influence. In addition, we focus on topics that influence the development and regulation of companies’ input factors – with regards to both human resources such as labour and natural resources such as access to clean water and clean air.
The Government Pension Fund Global’s average holding in the global equity market is around 1 percent, but even with relatively low percentage holdings the fund is frequently among a company’s largest shareholders. The large overall size of the fund also provides NBIM with influence beyond the size of its stake in individual companies and places NBIM in a better position to influence markets and individual companies than many other investors.
NBIM practices active ownership in a number of ways: exercise of voting rights; dialogue and engagement with individual companies; collaboration with other investors; submissions to regulatory authorities; research and public communication.
We give high priority to contact with individual companies. NBIM’s engagement with a company normally involves long-term objectives and a process that stretches over a number of years. The aim of engagement is to communicate our expectations and help companies to evaluate and improve their governance processes. Our engagements with individual companies will normally not be disclosed, in order to protect confidentiality and to ensure good and effective processes.
While we, as a shareholder, will hold a company’s board of directors accountable for the matters we raise, it is important that our engagement is not viewed as an attempt to micro-manage the company. If, over time, a company does not make satisfactory improvements, we may seek other ways of influencing the company, such as openly recommending the replacement of directors or filing shareholder proposals.
