The work of the Council on Ethics. Oslo October 14, 2014 Ylva Lindberg

Transcription

1 The work of the Council on Ethics Oslo October 14, 2014 Ylva Lindberg

2 Contents 1. The Norwegian Government Pension Fund Global (NGPF) in brief 2. The ethical guidelines of the NGPF 3. The work of the Council and practical examples 2

3 The NGPFG as of 31 December 2013 Invests in more than 8,500 companies in more than 82 countries Has a market value of more than 750 billion USD Invests in shares, bonds and real estate 3

4 The ethical obligations of the Fund Conclusions of the Graver Commission Future generations should benefit from the petroleum wealth The Fund should respect the fundamental rights of those who are affected by the companies in which the fund invests. The Fund shall achieve a sound return in the long term The Fund shall avoid being invested in companies which are or will be complicit in grossly unethical activities. 4

5 Benchmark Index Composition Strategic Benchmark Index Global Equities (60 %) Global Fixed Income (35-40 %) Global Real Estate (0-5 %) Index provider FTSE Group Index provider Barclays Index provider IPD 5

6 Tools employed by the Fund as a responsible investor Voting Engagement and follow-up of individual companies Litigation Shareholder resolutions Cooperation with other investors Industry initiatives Improvement of market standards Communication and expectation documents Exclusion or observation of individual companies 6

7 Responsible investments Governance structure Ministry of Finance General framework, Decides on observation & exclusion Exercise of ownership rights Recommendations to the Ministry on observation & exclusion Norges Bank Council on Ethics 7

8 The Council on Ethics Independent council of experts Led by Prof. Ola Mestad Supported by a secretariat of eight people Meets monthly Cases are normally presented to the Council on a number of occasions during the course of an assessment. 8

9 Guidelines for the exclusion and observation of companies from the NGPF Exclusion based on products (April 2013: 40 companies) Exclusion from the investment universe Exclusion based on conduct (April 2013: 22 companies) Production of weapons that violate fundamental humanitarian principles through their normal use; Production of tobacco; Sale of weapons or military material to certain states (at present Burma). Serious or systematic human rights violations; Serious violations of the rights of individuals in situations of war or conflict; Severe environmental damage; Gross corruption; Other particularly serious violations of fundamental ethical norms. 9

10 Exclusion based on products ( 2.1) The assets in the Fund shall not be invested in companies which themselves or through entities they control: a) Produce weapons that violate fundamental humanitarian principles through their normal use; b) Produce tobacco; c) Sell weapons or military material to states mentioned in section 3.2 of the guidelines for the management of the Fund (Myanmar). The Council uses consultants to continuously monitor the portfolio. 10

11 Exclusion based on products examples Chemical weapons Biological (bacteriological) weapons Certain conventional weapons: blinding lasers, incendiary weapons, non-detectable fragments Antipersonnel mines Cluster munitions Nuclear weapons Tobacco 11

12 Exclusion based on products Number of excluded companies as of April 2013 Antipersonnel mines 1 Cluster munitions 5 Nuclear weapons 12 Sale of military material to Burma 1 Production of tobacco 21 12

13 Exclusion based on conduct The Ministry of Finance may, on the advice of the Council of Ethics, exclude companies from the investment universe of the Fund if there is an unacceptable risk that the company contributes to or is responsible for: a) serious or systematic human rights violations, such as murder, torture, deprivation of liberty, forced labour, the worst forms of child labour and other child exploitation; b) serious violations of the rights of individuals in situations of war or conflict; c) severe environmental damage; d) gross corruption; e) other particularly serious violations of fundamental ethical norms. 13

14 News-monitoring Exclusion based on conduct a typical evaluation process Suggestions by organizations or others Sector studies What is the company s responsibility? Are the violations severe and systematic? Does the information seem credible? The Council decides Contact the company Consultants/expert opinions Find credible information Probable future development? A draft recommendation is sent to the company for comments 1) Identification of companies potentially violating the ethical guidelines 2) Selection of companies for an initial assessment 3) An in-depth assessment of companies 4) Recommendation for exclusion or observation 14

15 Once a recommendation has been issued A final decision is made by the Ministry of Finance If followed, shares and bonds are sold off (by NBIM) The decision and the recommendation are made public The process may take several months. 15

16 Excluded companies Excluded companies are regularly reassessed (annually). Companies remain excluded as long as the reason for exclusion remains. If the reason for exclusion is no longer present, the Council issues a new recommendation to reverse the exclusion. 16

17 Exclusion based on conduct Number of excluded companies as of April 2014 Serious or systematic human rights violations 2 (3) Severe environmental damage 15 Other particularly serious violations of fundamental ethical norms. Serious violations of the rights of individuals in situations of war or conflict

18 The observation of companies The Ministry may, on the basis of advice from the Council on Ethics, decide to put a company under observation. Observation may be chosen if there is doubt as to whether the conditions for exclusion have been fulfilled, uncertainty about how the situation will develop, or if it is deemed appropriate for other reasons. Regular assessments shall be made as to whether the company should remain under observation. The decision to put a company under observation shall be made public, unless special circumstances warrant that the decision be known only to Norges Bank and the Council on Ethics. 18

19 Observation of companies Number of companies under observation as of October 2013 Corruption 1 19

20 Environmental damage Is the damage serious and enduring? Is the damage due to a contravention of international norms or national laws? What effects will the company s activity have on people s health? Has the company failed to act to avoid the damage? Has the company done enough to reduce the damage caused by its actions? Is it probable that the practice will continue in the future? 20

21 Environmental damage examples 21

22 Is there some kind of connection between the company s activities and the violations? Has the company actively contributed to the violations? Human Rights Has the company known about the violations but failed to stop them from taking place? Are the violations currently taking place, or is there an unacceptable risk of said violations taking place in the future? 22

23 Human rights examples 23

24 Gross corruption Is it probable that the company has carried out activities which may be categorised as gross corruption? Is there an unacceptable risk that the use of corruption will continue in the future? The company s earlier involvement in corruption, its reaction to accusations of corruption, its compliance system and ongoing investigations are emphasized. 24

25 The rights of individuals in situations of war or conflict Are the company s activities contrary to international humanitarian law? Which effect will the company s activity have on the circumstances of the local population? Is it probable that the company s activities will continue in the future? 25

26 Guidelines, recommendations and other relevant documents are available on the Council s website in Norwegian and English

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