Mandate – Strategy Council 2013

The purpose of the Government Pension Fund Global (GPFG) is to facilitate government savings to finance rising public pension expenditures, and support long-term considerations in the spending of government petroleum revenues. The investment objective is to maximise the purchasing power of the fund capital, given a moderate level of risk. In this way, we aim to ensure that both present and future generations can benefit from our common national savings.

The objective of good financial return is closely linked to the ambition to be a responsible investor. The Fund’s role as a responsible investor is expressed, for example, in the Guidelines for Observation and Exclusion of companies which do not comply with minimum ethical standards. The Council on Ethics for the GPFG advises the Ministry on the observation and exclusion of companies based on these guidelines. Norges Bank manages the Fund’s ownership interests and is mandated to integrate considerations of good corporate governance and environmental and social issues in investment activities in line with internationally recognised principles for responsible investment (RI), whilst bearing the purpose of the Fund in mind.

Currently, the GPFG’s strategy for responsible investment comprises the following elements:

• International cooperation and contribution to the development of best practices
• Environmental related investment mandates
• Research and analysis
• Exercise of ownership rights
• Observation and exclusion of companies

Both the Ministry of Finance and Norges Bank, in their respective capacities as owner and manager of the Fund, participate in international forums in which best practice RI is discussed and developed.

Purpose of the Strategy Council 2013 

• The purpose of the Strategy Council is to contribute in strengthening both the legitimacy and foundation of the long-term investment strategy of the GPFG. Through independent and critical reviews, the Council shall give advice on how to develop the strategy further, increase transparency and encourage debate on important decisions related to the management of the Fund.
  
  
• The Council should assess how gaps to international best practices for RI may be closed, so that the Fund actively contributes to the development of good international standards in the area of RI and active ownership.
  
  

Measures/basis for assessment

• The Council members shall prepare a public report and give a presentation of the report.
  
  
• The main focus of the report shall be on the overarching strategy for RI, building on the experience of the work so far and comparisons with other funds. The report shall not give an evaluation of Norges Bank’s operational management of the GPFG or the Council on Ethics’ recommendations on observations and exclusions.
  
  
• The report of the Graver Committee discussed the issue of consistency between Norwegian policy in different areas and the ethical guidelines of the Fund. Experience shows that this issue is still relevant. These experiences should be part of the basis for the Strategy Council’s assessment.

Priorities for the 2013 report

• The report should review and comment on the overarching objective for the GPFG’s RI-strategy and compare this with comparable objectives expressed by comparable funds.
  
  
• The report should discuss current best practices for RI amongst other funds and compare the findings with the GPFG’s strategy for RI.
  
  
• The report should discuss the role the Fund’s contributions to research, analysis and international initiatives can play in development of best practice. The development of reporting standards that encompass ESG-issues should be included in the discussion.
  
  
• The assessments in the report should cover both the fixed income and equity portfolio of the GPFG.
  
  
• The report should consider how the collective resources and expertise in the Ministry of Finance, the Council on Ethics and Norges Bank can best be utilised to strengthen the work on RI further.
  
  
• The report should assess operational risks in the current setup, and may propose measures to reduce those risks.
  
  
• The report may propose changes to strengthen the work on RI, including operational and institutional changes.

The report should be presented no later than end of October 2013.