Mandate for the Expert Group on investments in coal and petroleum companies and climate gas emissions

Background

The objective of the Government Pension Fund Global (GPFG) is to support saving by the Norwegian State to fund the pension expenditure of the Norwegian national insurance scheme and to safeguard long-term interests relating to the use of the State's petroleum revenue. The investment objective is to achieve the highest possible international purchasing power for the capital in the Fund, given a moderate level of risk. In this way we seek to ensure that the nation's savings benefit both current and future generations.

In 2004, ethical guidelines were introduced for the management of the GPFG. These were revised in 2009, when the current guidelines for the observation and exclusion of companies were adopted. The guidelines state, inter alia, that the Fund's assets may not be invested in companies engaged in certain forms of production, and that companies may also be excluded from the investment universe of the Fund when there is an unacceptable risk that a company may contribute to or be responsible for grossly unethical activities.

In January 2013, the Ministry asked the Strategy Council for the GPFG to evaluate how the combined resources and expertise of the Ministry of Finance, the Council on Ethics and Norges Bank can best be utilised to strengthen the strategy on responsible investments. The report was presented on 20 November 2013, and contains ten recommendations about how the strategy can be strengthened, including that the exercise of ownership and exclusion should become parts of a more integrated chain of policy instruments. The report and recommendations were later released for public consultation. The report, the consultation comments received and the Ministry's assessments will be presented to the Storting (the Norwegian parliament), in the annual white paper on the GPFG on April 4 2014. The Storting will then have an opportunity to discuss the strategy, including the full range of instruments and how responsible investment practice should be organised.

The assignment of the Expert Group

Reference is made to Innst. 141 S (2013–2014) and the Storting's deliberation of this. In the management strategy for the GPFG, the Ministry of Finance has adopted several policy instruments for the work on responsible investments, including exclusion, observation and the exercise of ownership. Until now, the prevailing view has been that there is no need for "negative filtering" to exclude companies producing coal and petroleum from the Fund. Moreover, the exercise of ownership rights and exertion of influence have been considered a more effective strategy for addressing climate-related issues and promoting change than exclusion¹⁾.

The Expert Group shall evaluate whether the exclusion of coal and petroleum companies is a more effective strategy for addressing climate issues and promoting future change than the exercise of ownership and exertion of influence. The Group shall also advise on possible criteria for the potential exclusion of these types of companies.

The Expert Group shall build on the conclusions reached following the consideration of the recommendations made by the Strategy Council for the GPFG regarding the strengthening of the work on responsible investment.

The group shall not advise on the general strategy for responsible investment practice or other aspects of the GPFG's management strategy.

The Expert Group shall present its recommendation by the end of November 2014.

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1) The report prepared prior to the introduction of the ethical guidelines in 2004, Official Norwegian Report (NOU) 2003:22, Management for the Future, stated the following, among other things: "The committee is of the opinion that there is no basis for negative filtering of companies producing coal power or petroleum to exclude them from the fund. In the committee's view, the exercise of ownership and exertion of influence will be a more effective strategy for addressing climate-related issues and securing change than exclusion."