Norges Bank Investment Management welcomes the opportunity to provide comments to the PRI’s consultation on the strategic plan for the period 2018-21.
Norges Bank Investment Management is the investment management division of the Norwegian Central Bank and is responsible for investing the Norwegian Government Pension Fund Global. The fund had assets of USD 957 billion at 30 June 2017.
You can find our response to the specific questions in the appendix to this letter. The response has also been delivered through the online portal.
In addition to giving our response to the four questions set out in the consultation, we wish to take this opportunity to comment generally on some aspects of the proposed strategy and the Blueprint. We support the PRI and its ambition with the Blueprint to provide a framework and to state a vision for how the PRI and the wider responsible investment community should progress over the next decade.
We have previously given our comments to the two formal consultations that formed the basis for the Blueprint and the strategy; i) Sustainable financial system, principles and impact in August 2016 and ii) Proposals and methods to strengthen PRI signatory accountability in September 2017.
Strengthen, deepen and expand PRI’s core work
We agree with the PRI chair in his message that the core of PRI’s work should continue to focus on supporting comprehensive ESG incorporation and strong stewardship of the companies that investors influence. We also agree with the importance of empowering asset owners as key to moving responsible investment forward. We support PRI’s ambition to increase signatories’ understanding of how to exercise their rights as active owners and to coordinate collaborative engagements to increase investors’ collective influence. The focus on enhancing the PRI web-page further to create an efficient hub for all signatories, across type, size and geography, will contribute to making learning resources available to signatories.
In the consultation on sustainable financial system, principles and impact, PRI expressed the ambition to support research into the sustainability of financial markets. We support this ambition and believe supporting such research, as well as general research on sustainability and responsible investment, to be a key function of PRI.
Assessments of environmental, social and governance risks by investors rest on premises that are still not fully understood or described. There is a need to promote the development of theoretical and empirical analysis to uncover, investigate and assess potential obstacles to achieving a sustainable financial system. We encourage PRI to frame initiatives around this ambition.
New insights on financial dynamics and implications of environmental, social and governance risks may provide signatories with knowledge that can inform their own priorities and decisions. Over time, we believe such research may make it clearer how sustainability affects markets and investments. In our own work, we have made the promotion of academic research to understand the portfolio’s long-term risk and return a priority.
Impact and the SDGs
As a long-term and global financial investor, we support the ambitions of the Sustainable Development Goals (SDGs). The SDGs are of relevance to investors. They give useful indication of the direction of international efforts to address global challenges. Action taken by governments and companies to promote the SDGs may result in potential investment opportunities and changes to investment risk.
Investors operate within a framework of principles and guidelines, amongst others, standards covering responsible business conduct or corporate governance. Many investors will decide to work to promote topics related to the SDGs and report on such efforts. We support PRIs ambition of providing insights on the SDGs, and on how implementation of the goals are likely to impact the financial market and investors.
Most responsible investors invest according to a financial objective. We welcome the SDGs within such an objective. Using ‘SDG-impacts’ as a benchmark for measuring responsible investment achievements must avoid creating unclear or multiple objectives. It should be possible to be a responsible investor and signatory of PRI, without directly linking objectives and outcomes of activities to SDGs or other policy goals.
We believe it is useful and appropriate for investors to set goals, communicate priorities and as relevant, report milestones and results from their responsible investment management. In this way, reporting on activities and results become appropriate to the context and strategic choices of individual investors.
Measuring impact can be a very complex exercise. We believe it would be challenging for PRI to define relevant and consistent reporting metrics across strategies, asset classes and investor types. We therefore do not think PRI should attempt to capture impacts of signatories’ responsible investment activities on the SDGs via its Reporting Framework at this stage. We would recommend that PRI solicit the views of academics and experts outside the area of responsible investment to assess both the premises for, merits, and practicalities of such impact assessments. Learning from such analysis can be directly relevant for signatories in their broader reporting efforts.
We reiterate our support for PRI, the principles, and remain at your disposal should you wish to discuss the topics raised in this letter further.
Carine Smith Ihenacho
Global Head of Ownership Strategies
Senior Analyst Ownership Strategies