Pre-screening of companies with sustainability risk
14 December 2021
In May this year, we announced that we would begin to systematically assess the sustainability risk of companies that will enter the fund’s equity index. Since we started this work in June, we have assessed 442 companies that were added to the index, a process we refer to as pre-screening. So far this year, we have chosen to refrain from investing in nine companies.
Through our analyses, we uncovered risks related to inadequate management of environmental pollution and human rights, and we concluded that these nine companies could add financial risk to the fund in the long term. During the second half of the year, we have also identified an additional 65 companies with high sustainability risk that we will consider following up through our investment processes and in our ownership work.
"Our pre-screening builds on and strengthens our long-standing work with risk-based divestments. It’s about weeding out companies that we do not want to be invested in. In addition, pre-screening gives us a better overview of the sustainability risk in the companies that we choose to invest in at an earlier stage", says CEO of Norges Bank Investment Management Nicolai Tangen.
We have performed a mapping of companies in markets and sectors with particular challenges relating to the environment and to working conditions. We made relevant assessments of the individual companies.
"This is an important, but challenging job. This work has illustrated that the quality and availability of sustainability data for companies that are added to the index is generally low. Most of these companies are small, and many have only recently been listed", says Chief Risk Officer Dag Huse.
In addition to the nine companies that we chose to refrain from investing in, we divested from 43 companies this year that we consider not to have sustainable business models. This includes companies exposed to significant risks related to climate change, water management, and corruption. Since 2012, we have divested from 366 companies that we consider not to have sustainable business models.
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