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Norwegian SWF takes issue with PRI’s ‘real-world impact’ chapter

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The manager of Norway’s sovereign wealth fund has taken the Principles for Responsible Investment (PRI) to task over some aspects of its work in a letter relating to the organisation’s 2019 signatory survey, the consultation on which ends today.

Explaining some of its responses to the online survey, Norges Bank Investment Management wrote that it had reservations about PRI’s focus in its 2017 long-term strategy document on “real world impact” and “outcome-based reporting on the SDGs”, as shared in response to previous consultations

“We consider the Blueprint’s chapter on ‘enabling real-world impact aligned with the SDGs’ as a departure from the Six Principles and PRI’s mission, which do not provide direction for the PRI to work on how investors should advance global development and support international political commitments,” wrote NBIM’s chief corporate governance officer Carine Smith Ihenacho and head of sustainability Wilhelm Mohn.

Furthermore, they said, the chapter could be interpreted as an expectation that financial investors should have dual or multiple objectives.

“However, as a long-term and global asset owner, we have a general interest in understanding how issues related to sustainability, as well as the achievement of the SDGs, may impact the economy and the companies we invest in, and thus long-term risk and return,” the pair said.

carine smith ihenacho

Carine Smith Ihenacho, chief corporate governance officer at NBIM

From that perspective, they said, NBIM saw the benefits of PRI supporting research and knowledge on such issues and how they could affect financial markets and investors in general.

On the topic of policy and research, NBIM said that given PRI’s growing signatory base, it was important that as far as possible, messages conveyed by the PRI to policy makers represented broadly-held views among signatories and outcomes permissible under their respective mandates.

“With a signatory base representing different interests, the PRI may need to introduce more rigorous processes to gather views of signatories and ensure that its policy work remains balanced when engaging on public policy issues,” wrote Ihenacho and Mohn.

Impact ‘de facto a new principle’

On the issue of governance, NBIM said it felt certain key points relating to this – including the governance and processes in place at PRI for taking important decisions – were not covered in the signatory survey, which had only one question on the PRI’s governance.

Noting that safeguards in the PRI’s articles of association give signatories reassurance that the PRI’s activities match the declaration approved when joining, NBIM singled out the right for signatories to vote on any amendment to the Six Principles.

“We believe it is important that any substantial strategic development which may represent de facto a new principle is treated as such, and therefore subject to a signatory vote,” argued Ihenacho and Mohn.

Although they said the Blueprint’s new chapter on “real-world impact aligned with the SDGs” was not linked to an existing principle, NBIM believed it represented a substantial strategic development, which can be seen as de facto a new principle.

On top of this, the pair called for more transparency in consultation processes, saying questions should be unambiguous and focus on specific points and proposals. They said the PRI should make sure that a majority in each signatories’ category supported a proposal, and that ‘don’t know’ answers should also be taken into account.

“When a proposal does not get the clear support of signatories, the PRI should amend it to reflect signatories’ feedback,” they wrote.

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  • carine smith ihenacho
  • Norges Bank

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