Norway’s giant sovereign wealth fund has criticised the Principles for Responsible Investment’s (PRI) new three-year strategy for being tough for investors to achieve, with the network’s informative style also drawing the NOK10.9trn (€1trn) fund’s ire.
Norges Bank Investment Management (NBIM), which runs the Government Pension Fund Global (GPFG), made the comments in a letter accompanying its response to the PRI’s consultation on its new 2021-2024 strategic plan which is headlined as “building a bridge between financial risk and real-world outcomes”.
The Oslo-headquartered management organisation said the strategy change being proposed was so far-reaching that it needed to be voted on by the principles’ signatories, and said what was being asked of investors was “challenging”.
In the letter, NBIM said the PRI’s new purpose statement ‘Global investors leading for a sustainable future’ represented a change of direction for the investor network, and that the new strategy emphasised alignment with real-world outcomes in investment-related decisions.
Carine Smith Ihenacho, chief governance and compliance officer at NBIM, and Wilhelm Mohn, NBIM’s head of sustainability, wrote: “While the term alignment may be subject to interpretation, we believe attributing the impact of companies to investor actions across strategies, asset classes and investor types is challenging.
“Establishing such a relationship is even more difficult for many minority investors who have only a marginal influence on their investee companies,” the pair said.
Bringing in a new purpose statement for the PRI with a strategic direction beyond its mission should be thoroughly discussed and anchored with the PRI’s signatories, they wrote.
“We believe that substantial strategic developments which may represent a de facto amendment of the PRI’s articles of association or a new principle should be treated as such, and therefore be subject to a signatory vote,” NBIM wrote.
Smith Ihenacho and Mohn went on to single out initiatives 11 and 20 in the strategy plan for their support, which concerned, respectively, the ambition to contribute to academic research and more collaborations between academics and investors and building investors’ understanding of human rights.
The pair also took issue with the way the PRI had presented information in the consultation documents.
“We find the format chosen by the PRI lacking in relevant context and therefore at times challenging to comment on,” Smith Ihenacho and Mohn said.
As an example, they said a reference to requests received in earlier signatory surveys “appears anecdotal and does not indicate whether the statements represent the input from only one, a few or a majority of signatories”.
NBIM said several of the PRI’s proposals could use more context and discussion.
Some of the feedback from NBIM echoes its response to other PRI strategy-focused consultations, such as its letter to the investor network in October 2019 expressing reservations about the emphasis on real-world impact and outcome-based reporting on the Sustainable Development Goals.
Separately, NBIM published a framework today to help companies report on their anti-corruption work.
The seven-page guidance note includes a set of indicators that NBIM said firms might want to consider when reporting on the effectiveness of their anti-corruption efforts to external stakeholders.
The indicators - which are grouped into the themes of culture, risk management, third parties, compliance function and oversight – were developed with the Basel Institute on Governance, taking in feedback from several big healthcare companies, according to NBIM.
“For investors like Norges Bank Investment Management, such information is important to analyse opportunities and risks to investments,” the SWF manager said.