NORWAY - The exclusion of tobacco-producing companies from the Government Pension Fund - Global and a NOK 20bn (€2.26bn) environmental investment programme are just two of the measures announced by the Norwegian Ministry of Finance following a review of ethical guidelines.

In a report to the Storting, the Norwegian Parliament, on the 'management of the Government Pension Fund in 2008' the Ministry highlighted the investment strategy of the fund, including proposals for "further evolvement", and a review of whether active management of the fund should be continued - with a new external review which is expected to form the basis of a broad assessment in spring 2010.

It also revealed the results of the evaluation of the ethical guidelines, which have produced a "more active and more cohesive perspective on the ethical management", as the Ministry confirmed it is signing up to the UN Principles of responsible Investment (UN PRI) and so requires the pension fund to strengthen its responsible ownership strategy through greater integration of environmental and social aspects and good corporate governance

Other measures planned by the government include:

A watch-list of companies that are in the "grey zone" regarding exclusion; Norges Bank to develop more documents outlining investor expectations, in particular one on environmental issues - such as strategies on climate change - and another on corporate governance, and Establishment of the process in which an excluded company can be reinstated.

The Ministry also confirmed it will exclude tobacco manufacturers from the fund's investments and admitted the action "has been considered on several occasions" but had not implemented it as "negative screening of entire product groups is a very powerful tool and ought to be restricted to exceptional cases".

Since the current ethical guidelines were first proposed by the Graver Committee the government said developments such as an international convention on tobacco control and a national smoking ban seemed to "represent such a clear value basis relating to screening tobacco producers".

That said, it will only veto tobacco producers as an investment option within the fund and not companies selling tobacco,but said there are no plans to exclude other "unhealthy or socially unbeneficial services", such as alcohol, from the pension fund as there is not the same degree of development to provide a "clear anchoring nationally or internationally".

Kristin Halvorsen, minister of finance, also announced plans for a new investment programme "pertaining to environmental issues and initiating a broad climate-change study", with a focus on investments which yield "indisputable environmental benefits", such as climate-friendly energy, improving energy efficiency; carbon capture and storage; water technology and management of waste and pollution.

Halvorsen said: "We expect that the entire amount for the environmental programme and a possible investment programme aimed at sustainable growth in emerging markets will be around NOK20bn, invested over a five-year period. This will entail substantial investments in terms of both the size of the markets and investments in other comparable funds internationally."

The report noted for the environment programme sub-markets in infrastructure and unlisted equities, environmental bonds and "placement of parts of the listed equities portfolio based on an environmental index are most relevant", while the sustainable emerging markets portfolio will also consider investments in "unlisted equities and infrastructure in emerging markets, among other things".

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