Norges Bank Investment Management, manager of Norway’s $1.8 trillion sovereign fund, the Government Pension Fund Global, released its 11th annual responsible investment report on Thursday, highlighting the fund’s shareholder engagement activities.
“As an investor in more than 8,500 companies across 70 countries, we own a small piece of the vast majority of publicly listed companies worldwide,” Nicolai Tangen, NBIM’s CEO, said in the report. “The fund’s return stems from the value created in these companies.”
To NBIM, good corporate governance helps provide a thriving listed sector and public markets that reflect economic value creation, according to the report.
“In order for us to share in this value creation, we depend on companies that are responsible and long-term oriented,” Tangen said. “They must be able to operate in well-functioning markets and in a way that takes care of the world we live in. These are foundations that allow companies to exist and create value.”
Approximately 71.4% of NBIM’s portfolio is in equities. Fixed income comprises 26.6% of all investments, while the portfolio has a 1.8% allocation to real estate. The fund’s renewable energy infrastructure assets make up 0.1% of the portfolio.
Governance
With shares in so many companies, NBIM is a vocal shareholder. In 2024, the fund cast 110,656 votes at 11,154 shareholder meetings, 97% of the portfolio, according to the report. ISS STOXX, which owns CIO, is the fund’s proxy adviser.
“We view shareholder proposals as an important tool for shareholders to express views about the strategic direction of a company, or concerns about potential company mismanagement,” the report stated. “Our general position is to vote with the board, but we may vote in favour of shareholder proposals that raise material concerns in line with our financial interests.”
The fund voted on 2,664 shareholder proposals, of which 2,167 were related to governance topics. Approximately 472 proposals focused on sustainability-related topics. NBIM voted in line with board recommendations in 95% of all resolutions and for all agenda items in approximately 71% of shareholder meetings.
Also in 2024, the fund held 3,313 meetings with its portfolio companies. Of these, governance and sustainability topics were discussed in 1,986 meetings with 950 companies, representing 65% of the value of the equity portfolio, NBIM reported.
The fund also held 234 meetings at the board level with 179 companies, accounting for 25% of the portfolio’s equity value.
Sustainability
The fund also made progress on its 2025 climate action plan, a set of actions to be made between 2022 and 2025 to put NBIM on track to achieving net-zero emissions by 2050.
Approximately 74% of the fund’s financed emissions—32% of companies in the portfolio—are covered by net-zero targets. Approximately 43% of NBIM’s real estate portfolio is aligned with a decarbonization pathway to limit global warming to 1.5 degrees Celsius, and 11% of the equity portfolio is invested in climate solutions or companies with a MSCI low carbon transition score, NBIM reported.
In 2024, as part of its net-zero dialogues, NBIM engaged with 141 companies, responsible for 46% of the fund’s financed emissions. In its discussions with companies, climate change was a topic raised with 480 companies, responsible for 54% of financed emissions.
“Many companies view the energy transition as a business opportunity, making substantial investments in clean technology and efficiency,” said Carine Smith Ihenacho, NBIM’s chief governance and compliance officer, in the report.
Divestments
In 2024, NBIM made risk-based divestments from 49 companies, including those identified as posing heightened risks, which include: potential violations of human and labor rights; insufficient management of corruption risk; and business models highly exposed to environmental risks.
Approximately 15 companies were divested due to their insufficient management related to human capital management. Eight companies were divested from the fund as NBIM determined they had insufficient risk management related to corruption and corporate governance.
NBIM also reversed the divestments of 16 risk-based divestments, specifically companies in the industrials and materials sectors that had been divested from on the grounds of greenhouse gas emissions, poor water management and issues related to deforestation and tax issues.
Four companies that had been divested from due to elevated risk of aggressive tax planning also were reversed, while another four companies that were divested had insufficient risk management related to water use.
Divestments in 2024 had a 0.05-percentage-point impact on returns in the fund’s equity portfolio. Since 2012, risk-based divestments have increased returns by 0.64 percentage points. According to NBIM, divestments linked to climate change and human rights have increased the fund’s cumulative return on equity management by 0.30 and 0.16 percentage points, respectively.
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Tags: ESG, Governance, Government Pension Fund Global, Norges Bank Investment Management, Norway