Foreword – UN-report for promoting the integration of environmental, social and governance issues into institutional investment

The Norwegian Ministry of Finance is the formal owner and has overall responsibility for the management of the Government Pension Fund – Global, one of the largest funds in the world. The Fund is managed by the Ministry on behalf of the people of Norway—both present and future generations—who are the ultimate beneficiaries.

By virtue of our long-term investments in a large number of the world’s companies, we have a responsibility for and an interest in promoting good corporate governance and safeguarding environmental and social concerns. In this vein, the Ministry aims towards integrating material environmental, social and governance issues, such as the risks and opportunities associated with climate change, into different parts of the management of the Fund.

Given the strength of the scientific evidence linking human activity with climate change, and the associated economic, social and political risks, I believe it is prudent for fiduciaries of financial institutions to consider the implications of climate change for strategic asset allocation decisions. The Ministry of Finance has recently detailed plans to establish a new environmental investment programme—aimed at investments that can be expected to yield indisputable environmental benefits, such as climate-friendly energy, improving energy efficiency, carbon capture and storage, water technology and management of waste and pollution. In addition, the Ministry is going to participate in a comprehensive research project managed by the consulting firm Mercer, which aims at assessing the impact of climate change on financial markets, as well as implications for strategic asset allocation. This is set up as a collaborative project where other investors are encouraged to join in.

The Ministry and Norges Bank, which undertakes the operational management of the Fund, are joint signatories to the Principles for Responsible Investment.  Furthermore, the Fund is managed according to a set of Ethical Guidelines. Through the guidelines and the mechanisms under the guidelines, we signal expectations towards companies in the portfolio to respect and uphold widely shared fundamental ethical norms, such as human rights, in the conduct of their operations.

It is in this light that the Ministry welcomes this landmark publication by the United Nations Environment Programme Finance Initiative on the fiduciary responsibility of institutional investors. The report continues the debate initiated by the 2005 ‘Freshfields Report’ of UNEP FI that explored the complex relationship between fiduciary law and environmental, social and governance issues in investment policymaking and practice.

UNEP FI’s work to align investors, companies, markets and economies more closely with the goals of sustainable development is an important contribution to the advancement and dynamism of responsible investment.