The in-house manager of Norway's sovereign wealth fund continued to focus on responsible investment in 2020 despite the coronavirus pandemic, voting at almost 12,000 shareholder meetings and holding nearly 3,000 company meetings.
Norges Bank Investment Management, which runs the assets of the Government Pension Fund Global, Oslo, voted at 11,871 shareholder meetings last year, compared with 11,518 meetings in 2019. It held 2,877 company meetings and had 650 written communications with companies in 2020. In 2019, NBIM executives held 3,412 meetings and had 625 written communications with companies.
GPFG had 10.91 trillion Norwegian kroner ($1.27 trillion) in assets as of Dec. 31.
At shareholder meetings, executives voted on 121,619 resolutions, voting in line with the board's recommendations in 95.1% of cases and at 73.4% of meetings. The fund's responsible investment report said it was "on a par" with voting in 2019.
Director elections accounted for almost half of the resolutions it voted on — "the most important votes we cast," the report said. It voted in line with the board's recommendations in 94.6% of director elections, up slightly from 94.1% in 2019.
Fund executives look for board and committee independence from management and large shareholders and want no other conflicts of interest. A lack of independence on the board or committees was the main reason for voting against director candidates, with 1,079 votes against the board in 2020. The report noted that there has been a gradual increase in independent board members in Germany, Japan and other markets.
NBIM also wants to see a clear separation of roles and responsibilities for the chairmen and CEOs of companies. It made 669 votes against boards for that reason, observing that, while combined roles are particularly common in the U.S., these types of appointments have decreased to 32% among Russell 3000 companies, from 44% in 2012.
Other reasons for voting against directors included a gender imbalance, with executives for the first time voting against the chairman of a nomination committee at large European and U.S. companies with no women on their board, and for board conduct.
The sovereign wealth fund had 100 billion kroner invested in 90 companies under dedicated environmental allocations. Equity investments under these contracts gained 34.3% in 2020, with an annualized 10-year return of 9.5%. At the end of 2019, 62.3 billion kroner was invested in the shares of 77 companies and 17.1 billion kroner was invested in green bonds under dedicated environmental allocations. The 2020 green bond allocation was not available. Equity investments gained 35.8% while the green bond allocation returned 3% in 2019. The annualized return on the equity investments since 2010 was 7.3%. These allocations are managed in-house.
Fifteen companies were excluded from the fund's investment universe in 2020 — five for thermal coal mining or coal-based power production, four for contributions to climate change, four for human rights violations and two for severe environmental damage. The fund currently excludes 106 companies that produce certain types of weapon, tobacco or coal, or that use coal for power production. Four companies were placed under observation in 2020 and three companies' exclusions were revoked.
The fund also divested from 32 companies based on a assessments of environmental, social and governance risks. Since 2012 it has divested from 314 companies.
"The coronavirus pandemic has stress-tested companies around the globe. As the world's largest shareholder, we have closely observed this," Nicolai Tangen, CEO of NBIM, said in a news release accompanying the report. "It has been important to maintain a close dialogue with the companies' boards and management throughout this turbulent year."
