The Norwegian Government Pension Fund Global (GPFG) made a 9.4% return on investments in the first half of this year, with the likes of Alphabet, Microsoft and Facebook reported as the single biggest stock winners in the period.

Norway’s sovereign wealth fund (SWF) saw its value increase to NOK11.67trn (€1.12trn) by the end of June after booking the NOK990bn January-to-June investment gain and seeing the government withdraw NOK167bn for the budget, the fund’s manager Norges Bank Investment Management (NBIM) reported.

Also this morning, in conjunction with its press conference unusually taking place at the national debating event of Arendalsuka in the Norwegian coastal town of Arendal, NBIM unveiled a new expectation document on biodiversity and ecosystems, saying biodiversity would now become a priority.

Nicolai Tangen, NBIM’s chief executive officer, said: “The equity investments had the most positive contribution to the return in the first half of the year, and especially the investments within the sectors of energy and finance.”

According to the interim report, energy companies – which made up 3.2% of the GPFG’s equity portfolio at the end of June – returned 19.5%, and with a 14.5% allocation, financial firms generated an 18.2% return.

“Technology companies returned 16.8%,” he said, adding: “Several major technology companies saw a continued increase within digital advertisement.”

The SWF had 19.8% of its equity investments in the technology sector at the end of June.

Alphabet, Microsoft and Facebook were the top three contributors to the GPFG’s absolute return in the first half, producing NOK38bn, NOK32bn and NOK19bn, respectively, according to the data released.

However, the fund’s fixed-income portfolio suffered a 2.0% loss in the six-month period. “The reopening of the global economy together with further expansionary fiscal and monetary policy made inflation a key theme in financial markets and led to higher global interest rates,” NBIM said in the report.

Government bonds, which accounted for 50.5% of the fixed-income portfolio at the end of June, saw the heaviest losses ending the half-year 3.1% down. UK gilts were particular losers for the SWF, falling 6.6% in local currency over the six months.

Nicolai Tangen at NBIM press conference

“Companies must […] understand their dependency on and impact on nature, and handle both substantial challenges and opportunities through more sustainable use of ecosystems”

Nicolai Tangen, NBIM’s CEO

At the end of June, the GPFG held 72.4% of its assets in equities, 25.1% in fixed income, 2.4% in unlisted real estate, and 0.1% in unlisted renewable energy infrastructure – its newest asset class.

So far, the fund has made just one unlisted renewables investment, having invested €1.37bn in the Dutch off-shore wind farm Borssele 1 & 2 in April.

The new asset class was reported as having made a 1.9% loss by the end of June, however NBIM said in the interim report that this was due mainly to exchange-rate movements when measuring the return in the fund’s currency basket – the value of the investment had not changed from the price originally paid, NBIM said.

Regarding its new expectation document on biodiversity and ecosystems – intended to tell companies it invests in how they should take account of these topics – NBIM said: “Biodiversity will become an area of priority for our ownership work going forward.”

It said the document’s main message was that companies that either depended on, or significantly influenced ecosystems and biodiversity should integrate the considerations mentioned into their governance structure, strategy, risk management, measurement and reporting.

Tangen said an increasing loss of species and deterioration of ecosystems could affect companies’ ability to create value for investors in the long term.

“Companies must therefore understand their dependency on and impact on nature, and handle both substantial challenges and opportunities through more sustainable use of ecosystems,” the NBIM CEO said.

Yesterday, NBIM published its response to the IFRS Foundation’s consultation on proposed constitutional amendments paving the way for an International Sustainability Standards Board (SSB) to set IFRS Sustainability Standards.

The Oslo-based manager said it welcomed the proposal to set up an SSB and develop global reporting standards for sustainability topics.

Among other things, NBIM said it backed the foundation’s ambition for the standards to focus on information that was material to investors, and to include other sustainability topics beyond climate change.

Earlier this month the IFRS Foundation consultation produced mixed investor reactions, with some submitting objection-free responses and others raising clear concerns, but for seemingly diametrically opposed reasons.

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