The manager of Norway’s NOK11trn (€1.1trn) oil fund has backed ideas from the European Commission on sustainable corporate governance, but warned that setting hard and fast rules about the specific expertise boards should have could cause problems.

Norges Bank Investment Management (NBIM) said in response to the consultation, which ends today: “Prescriptive requirements for directors’ ESG expertise will be difficult to implement and may impede board formation.”

In a letter giving feedback to the options floated, NBIM wrote that company boards should guide a firm’s strategy, monitor management performance and provide accountability to shareholders, which meant that collectively they needed a comprehensive understanding of the industry, business and operational context, including relevant sustainability matters.

“We believe the board is responsible for ensuring that it can perform its duties effectively,” Carine Smith Ihenacho, NBIM’s chief corporate governance officer, and the central bank division’s head of sustainability Wilhelm Mohn wrote in the letter.

In its questionnaire for consultation participants, the Commission included a question on enhancing sustainability expertise in the board, saying the current level of expertise did not fully support a shift towards sustainability – so it said “action to enhance directors’ competence in this area could be envisaged”.

The reply options included a requirement for companies to have a certain number or percentage of directors with relevant environmental, social and/or human rights expertise, and a requirement for firms to have at least one director with such skills.

In its response letter, NBIM also highlighted shareholder voting and due diligence as two areas that would benefit from more EU harmonisation, and welcomed the initiative to develop legal requirements for a mandatory due diligence duty across a firm’s operations and supply chain.

“Voluntary due diligence standards have not yet led to the desired standard of corporate due diligence, and harmonisation at the EU level would promote a level playing field for companies,” Smith Ihenacho and Mohn said.

They called on the Commission to consider more EU rules harmonisation to remove obstacles to cross-border voting and streamline the filing process for shareholder proposals.

Overall, NBIM – which manages the Government Pension Fund Global – said it supported the aim of the EC’s sustainable corporate governance initiative to encourage long-term thinking and ESG factors in company decisions.

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