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Adherence of the Government Pension Fund Norway (GPFN) to the Santiago principlesThe Santiago Principles or Generally Accepted Principles and Practices (GAPP) is an initiative The International Forum of Sovereign Wealth Funds (IFSWF) was established in 2009 with the purpose of promoting the Santiago Principles. The Santiago Principles encompass 24 Generally Accepted Principles and Practices (GAPP) for sovereign wealth funds promoting inter alia transparency, good governance, accountability, and prudent investment practices. Norway is not a member of the IFSWF, but fully supports these principles. of the International Forum of Sovereign Wealth Funds (IFSWF).The Principles recognise the importance of Sovereign Wealth Funds (SWF) to demonstrate to their home countries and domestic stakeholders, to the countries in which they are invested and to the international financial markets in general that such investment vehicles are properly set up and that investments are made on an economic and financial basis.The Principles are underpinned by the following guiding objectives for SWFs:To help maintain a stable global financial system and free flow of capital and investment;To comply with all applicable regulatory and disclosure requirements in the countries in which the SWFs invest;To invest on the basis of economic and financial risk and return-related considerations; andTo have in place a transparent and sound governance structure that provides for adequate operational controls, risk management and accountability.The Government Pension Fund comprises the Government Pension Fund Global (GPFG) and the Government Pension Fund Norway (GPFN). The GPFN and the GPFG do not constitute separate legal entities. The Ministry of Finance has reviewed the legal and operational superstructure related to the management of the Funds.This self-assessment documents the adherence of the GPFN to the Santiago Principles. For the adherence of the GPFG to the Santiago Principles please see the stand-alone self-assessment for the GPFG.Key sources of information are highlighted for each principle. On the aggregate level the Ministry would like to draw the attention to the following formative documents, to which reference is made throughout:Government Pension Fund ActFolketrygdfondet Act (in Norwegian only)Management mandate for the Government Pension Fund NorwayGuidelines for Observation and Exclusion from the Government Pension Fund GlobalRegulation on Risk Management and Internal Control – applies to Folketrygdfondet to the extent suited (in Norwegian only)Regulation on Financial Reporting at Folketrygdfondet (in Norwegian only)Further information on the Fund and the sources referred to in this self-assessment are available on the Ministry of Finance’s and Folketrygdfondet’s websites:www.government.no/gpfwww.ftf.no

Adherence of the Government Pension Fund Norway (GPFN) to the Santiago principles

The Santiago Principles or Generally Accepted Principles and Practices (GAPP) is an initiative[1] of the International Forum of Sovereign Wealth Funds (IFSWF).

The Principles recognise the importance of Sovereign Wealth Funds (SWF) to demonstrate to their home countries and domestic stakeholders, to the countries in which they are invested and to the international financial markets in general that such investment vehicles are properly set up and that investments are made on an economic and financial basis.

The Principles are underpinned by the following guiding objectives for SWFs:

To help maintain a stable global financial system and free flow of capital and investment;

To comply with all applicable regulatory and disclosure requirements in the countries in which the SWFs invest;

To invest on the basis of economic and financial risk and return-related considerations; and

To have in place a transparent and sound governance structure that provides for adequate operational controls, risk management and accountability.

The Government Pension Fund comprises the Government Pension Fund Global (GPFG) and the Government Pension Fund Norway (GPFN). The GPFN and the GPFG do not constitute separate legal entities. The Ministry of Finance has reviewed the legal and operational superstructure related to the management of the Funds.

This self-assessment documents the adherence of the GPFN to the Santiago Principles. For the adherence of the GPFG to the Santiago Principles please see the stand-alone self-assessment for the GPFG.

Key sources of information are highlighted for each principle. On the aggregate level the Ministry would like to draw the attention to the following formative documents, to which reference is made throughout:

Government Pension Fund Act

Folketrygdfondet Act (in Norwegian only)

Management mandate for the Government Pension Fund Norway

Guidelines for Observation and Exclusion from the Government Pension Fund Global

Regulation on Risk Management and Internal Control – applies to Folketrygdfondet to the extent suited (in Norwegian only)

Regulation on Financial Reporting at Folketrygdfondet (in Norwegian only)

Further information on the Fund and the sources referred to in this self-assessment are available on the Ministry of Finance’s and Folketrygdfondet’s websites:

www.government.no/gpf

www.ftf.no

GAPP Principle 1

The legal framework for the SWF should be sound and support its effective operation and the achievement of its stated objective(s).

GAPP 1.1 Subprinciple The legal framework for the SWF should ensure the legal soundness of the SWF and its transactions.

GAPP 1.2 Subprinciple The key features of the SWF’s legal basis and structure, as well as the legal relationship between the SWF and the other state bodies, should be publicly disclosed.

Status: Implemented

The Norwegian Parliament has established the legal framework for the GPFN in the Government Pension Fund Act. The Act frames the legal basis and governance structure of the Fund. The overall responsibility for managing the Fund is placed with the Ministry of Finance. The operational management of the GPFN is carried out by Folketrygdfondet. Folketrygdfondet is according to the Act on Folketrygdfondet organised as a company of special statute and is wholly owned by the Ministry of Finance. The GPFN does not constitute a separate legal entity and does not have its own executive board or administrative staff but refers to a specific capital deposit placed by the Ministry of Finance with Folketrygdfondet.

The Government Pension Fund Act states that the investment objective shall be the highest possible return at an acceptable level of risk and that within the scope of this objective, the Funds shall be managed responsibly. The Ministry of Finance has pursuant to this Act laid down the mentioned objective and premise, and further regulations on the management of the Fund in a separate management mandate to Folketrygdfondet. In the mandate the Ministry instructs the general investment framework for the Fund and stipulates requirements regarding risk management, reporting and responsible management. Within the limits set by the Ministry, Folketrygdfondet shall seek to generate the highest possible return, net of costs, measured in Norwegian kroner.

Sources: Government Pension Fund Act, Folketrygdfondet Act, GPFN mandate, Ministry of Finance’s website.

GAPP Principle 2

The policy purpose of the SWF should be clearly defined and publicly disclosed.

Status: Implemented

The Government Pension Fund consists of the Government Pension Fund Global (GPFG) and the Government Pension Fund Norway (GPFN). There is no transfer of capital between the GPFG and the GPFN. The purpose of the Government Pension Fund, as stated in the Government Pension Fund Act, is to support government savings to finance the pension expenditure of the National Insurance Scheme and facilitate spending of government petroleum revenues that reflects long-term considerations, thus ensuring that the petroleum wealth benefits both current and future generations.

The Government Pension Fund Act states that the investment objective shall be the highest possible return at an acceptable level of risk and that within the scope of this objective, the Fund shall be managed responsibly. The Ministry of Finance has pursuant to this Act laid down the mentioned objective and premise, and further regulations on the management of the Fund in a separate management mandate to Folketrygdfondet.

In the mandate the Ministry sets the general investment framework for the Fund and stipulates requirements regarding risk management, reporting and responsible management. Within the limits set by the Ministry, Folketrygdfondet shall seek to generate the highest possible return, net of costs, measured in Norwegian kroner. The mandate further specifies that Folketrygdfondet shall make investment decisions and exercise ownership rights independently of the Ministry.

Source: Government Pension Fund Act, GPFN mandate.

GAPP Principle 3

Where the SWF’s activities have significant direct domestic macroeconomic implications, those activities should be closely coordinated with the domestic fiscal and monetary authorities, so as to ensure consistency with the overall macroeconomic policies.

Status: Implemented

There is currently neither inflow to nor withdrawals from the GPFN. The return on portfolio investments net of costs is added to the Fund capital. According to the Government Pension Fund Act the capital of the Fund may only be used for transfers to the central government budget pursuant to a resolution by the Norwegian Parliament.

Source: Government Pension Fund Act.

GAPP Principle 4

There should be clear and publicly disclosed policies, rules, procedures, or arrangements in relation to the SWF’s general approach to funding, withdrawal, and spending operations.

GAPP 4.1 Subprinciple The source of SWF funding should be publicly disclosed.

GAPP 4.2 Subprinciple The general approach to withdrawals from the SWF and spending on behalf of the government should be publicly disclosed.

Status: Implemented

The capital base of the GPFN originates primarily from surpluses in the national insurance accounts after the introduction of the National Insurance Scheme in 1967 and until the late 1970s. The Government Pension Fund Act, which is publicly available, legislates the funding of and withdrawal from the GPFN. The legislation is consistent with the macroeconomic purpose of the Fund to support government savings to finance pension expenditures of the Norwegian National Insurance Scheme. The income to the GPFN is the return generated by the Fund net of costs incurred by the operational manager (Folketrygdfondet). The return is added to the Fund on an ongoing basis. The capital in the Fund may only be used for transfers to the central government budget pursuant to a resolution by the Norwegian Parliament.

Sources: Government Pension Fund Act, GPFN mandate, Ministry of Finance’s website.

GAPP Principle 5

The relevant statistical data pertaining to the SWF should be reported on a timely basis to the owner, or as otherwise required, for inclusion where appropriate in macroeconomic data sets.

Status: Implemented

Folketrygdfondet reports publicly biannually on the performance of the GPFN. The reports cover Fund performance, risk and costs and are published on the website of Folketrygdfondet. The asset manager also publishes biannual listings of all investments, both equities and fixed income. The market value of the Fund forms part of the central government accounts. All relevant data on the return on the Fund and assets under management are included in the central government accounts.

Sources: GPFN mandate, Ministry of Finance and Folke- trygdfondet website.

GAPP Principle 6

The governance framework for the SWF should be sound and establish a clear and effective division of roles and responsibilities in order to facilitate accountability and operational independence in the management of the SWF to pursue its objectives.

Status: Implemented

The Norwegian parliament has laid down the regulatory framework for the GPFN in the Government Pension Fund Act. The Ministry of Finance holds the overall responsibility for the management of the Fund and acts as the asset owner. The Ministry has issued general investment guidelines in a separate management mandate to Folketrygdfondet. The Board of Folketrygdfondet is responsible for the asset management operations at Folketrygdfondet. The Board has issued supplementary governing documents for the management of the GPFN and delegated the operational management of the Fund to the CEO of Folketrygdfondet.

The management mandate set by the Ministry of Finance specifies that Folketrygdfondet shall make investment decisions and exercise ownership rights independently of the Ministry.

The Ministry of Finance has further issued Guidelines for Observation and Exclusion of companies from the Government Pension Fund Global (GPFG). Decisions on exclusion (or re-inclusion) of individual companies pursuant to these guidelines also apply to the investments of the GPFN. The management mandate stipulates the responsibility of the Ministry to notify Folketrygdfondet of any exclusion or re-inclusion of companies under the Guidelines. The ethically motivated guidelines are in place to reduce the risk of the Fund being invested in companies deemed in serious violation of fundamental ethical norms, see Adherence of the GPFG to the Santiago principles for more details.

Sources: Government Pension Fund Act, Folketrygdfondet Act, GPFN mandate, Guidelines for Observation and Exclusion.

GAPP Principle 7

The owner should set the objectives of the SWF, appoint the members of its governing body(ies) in accordance with clearly defined procedures, and exercise oversight over the SWF’s operations.

Status: Implemented

The asset owner (Ministry of Finance) has stated the overall investment objectives of the Fund in a management mandate issued to the operational manager (Folketrygdfondet). See response to principle 1 and 6 for further information on the objectives of the GPFN and division of roles and responsibilities in the management of the Fund.

The hierarchy of regulation, supervision and reporting related to the management of the GPFN is outlined in the figure below. Objectives have been set and appropriate supervisory functions established at all levels of the governance hierarchy. The Ministry of Finance’s supervision of the GPFN is regulated according to the Government Pension Fund Act and in the Folketrygdfondet Act and specified in the management mandate issued to Folketrygdfondet. The management of the GPFN is based on a governance structure in which the Norwegian Parliament, the Ministry of Finance, the Board of Folketrygdfondet and administration of Folketrygdfondet hold different roles and responsibilities. The Board consists of seven members appointed by the Ministry.

Important decisions pertaining to the overall level of risk in the GPFN shall be anchored with Parliament. The Ministry of Finance adopts, based on the deliberations of Parliament, a general investment framework and provisions for the execution of the management assignment. The provisions issued by the Ministry are supplemented by more detailed limits and regulations at the various decision-making levels. The governance model implies all in all a highly detailed regulation of the management of the Fund.

Sources: Government Pension Fund Act, Folketrygdfondet Act, GPFN mandate, Ministry of Finance’s and Folketrygdfondet’s websites.

GAPP Principle 8

The governing body(ies) should act in the best interests of the SWF, and have a clear mandate and adequate authority and competency to carry out its functions.

Status: Implemented

See also response to principle 7. The authority of the governing bodies is established through legislation and regulations discussed elsewhere in this document. The management mandate issued by the Ministry of Finance to Folketrygdfondet seeks to ensure that the manager acts in the best interests of the GPFN and covers management objective, strategic benchmark indices and corresponding risk limits, responsible investment practices, risk management, costs and reporting requirements. The management mandate also establishes a clear division of roles and responsibilities between the asset owner (Ministry of Finance) and the operational manager (Folketrygdfondet).

Folketrygdfondet is organised as a company of special statute under the Ministry of Finance. The Ministry selects the external auditor and appoints the Board of Folketrygdfondet. The Board is responsible for the execution of the management assignment and appoints the internal audit and the CEO of Folketrygdfondet.

The Board has issued supplementary provisions for the asset management, including principles for risk management, investment mandate and job description to the CEO of Folketrygdfondet. The CEO of Folketrygdfondet is responsible for the day-to-day management of the GPFN.

The Board receives extensive reports on the risk and return on the Fund, compliance, and internal control on a quarterly basis.

Sources: Government Pension Fund Act, GPFN mandate, Folketrygdfondet’s Website.

GAPP Principle 9

The operational management of the SWF should implement the SWF’s strategies in an independent manner and in accordance with clearly defined responsibilities.

Status: Implemented

The Ministry of Finance has issued a mandate to Folketrygdfondet detailing the management assignment of GPFN within clearly defined responsibilities. Folketrygdfondet executes investment decisions and exercises ownership rights independently of the Ministry within the limits of the management framework. See reply to principle 6, 7 and 8 for more details.

Sources: Government Pension Fund Act, GPFN mandate.

GAPP Principle 10

The accountability framework for the SWF’s operations should be clearly defined in the relevant legislation, charter, other constitutive documents, or management agreement.

Status: Implemented

The accountability framework is stipulated in various legal documents, including the Government Pension Fund Act, the Folketrygdfondet Act, GPFN mandate and Regulation on Financial Reporting.

The Parliament-appointed Office of the Auditor General is responsible for the supervision of the Ministry of Finance. The Auditor General shall ensure that the Ministry’s efforts related to the GPFN are in accordance with the decisions and intentions of the Norwegian Parliament. The Ministry of Finance submits a separate annual white paper to Parliament on the management of the Government Pension Fund. These annual Fund reports are available on the Ministry’s website.

The Ministry of Finance and external auditor are responsible for the supervision of the Board of Folketrygdfondet. The mandate states that Folketrygdfondet to the extent suited shall comply with the Regulation on Internal Control and Risk Management drafted by the Financial Supervisory Authority of Norway. The Internal Audit is an independent and objective supervisory function that on behalf of the Board assesses whether there is adequate and effective risk management as well as appropriate and satisfactory internal control within the organisation.

Sources: Government Pension Fund Act, Folketrygdfondet Act, GPFN mandate, Regulation on Financial Reporting, Ministry of Finance’s and Folketrygdfondet’s websites.

GAPP Principle 11

An annual report and accompanying financial statements on the SWF’s operations and performance should be prepared in a timely fashion and in accordance with recognised international or national accounting standards in a consistent manner.

Status: Implemented

The financial statements are reported in accordance with International Financial Reporting Standards (IFRS). Performance figures shall be designed in compliance with the Global Investment Performance Standards (GIPS) methodology.

The management mandate issued to Folketrygdfondet states minimum requirement as to the contents of biannual and annual reports, and further articulates that there shall be the greatest possible transparency within the limits defined by a sound execution of the management assignment. The reports shall consist of a descriptive part and extracts from Folketrygdfondet’s accounts concerning the management of the GPFN and shall be adopted in accordance with the current accounting regulations for Folketrygdfondet. The descriptive part shall include a true and fair summary of the performance of the Fund, management costs, management strategies, value added by operational management and relevant risks within asset management, including utilisation of the limits defined in the mandate.

In addition, an account shall be given of the organisation of the investment management. Folketrygdfondet is to report on its responsible management activities, including the integration of principles for responsible investment into the organisation, the use of various measures and the effect of ownership efforts.

Sources: GPFN mandate, Regulation on Financial Reporting at Folketrygdfondet.

GAPP Principle 12

The SWF’s operations and financial statements should be audited annually in accordance with recognised international or national auditing standards in a consistent manner.

Status: Implemented

The Act on Folketrygdfondet states that the external auditor of Folketrygdfondet is appointed by the Ministry of Finance. Folketrygdfondet is currently being audited by KPMG AS. The financial statements are regulated by the Norwegian Accounting Act and Regulation on Financial Reporting at Folketrygdfondet. See response to principle 11 for further information.

Sources: Folketrygdfondet Act, Regulation on Financial Reporting at Folketrygdfondet, Folketrygdfondet website.

GAPP Principle 13

Professional and ethical standards should be clearly defined and made known to the members of the SWF’s governing body(ies), management, and staff.

Status: Implemented

The Ministry of Finance has established and published ethical standards for all Ministry employees. These include principles of transparency, objectivity, and independence, as well as restrictions on transactions in financial instruments. Professional standards are as a rule defined at the point of employment.

Folketrygdfondet has established ethical and professional standards and laid down ethical rules for its employees, including rules on advance approval and reporting requirements on transactions in financial instruments.

Source: Ministry of Finance’s and Folketrygdfondet’s websites.

GAPP Principle 14

Dealing with third parties for the purpose of the SWF’s operational management should be based on economic and financial grounds, and follow clear rules and procedures.

Status: Implemented

The general principles governing the relationship between Folketrygdfondet and external managers of GPFN assets are defined in the management mandate. Folketrygdfondet may make use of external managers and outsource operational functions as long as risk management and internal control considerations are attended to. Agreements with external managers shall be designed to safeguard the economic interests of the Fund and shall further take into account the time horizon of the relevant investment strategies. At present, Folketrygdfondet does not employ external managers in the management of GPFN. The mandate states that Folketrygdfondet, to the extent suited, shall operate in compliance with the Regulation on Internal Control and Risk Management drafted by the Financial Supervisory Authority of Norway. At present, Folketrygdfondet does not employ external managers in the management of Fund.

Sources: GPFN Mandate, Folketrygdfondet’s website.

GAPP Principle 15

SWF operations and activities in host countries should be conducted in compliance with all applicable regulatory and disclosure requirements of the countries in which they operate.

Status: Implemented

The compliance and legal department, the department for operations IT, and the accounting and risk management department are charged with ensuring compliance with all applicable regulatory and disclosure requirements of the countries in which the GPFN is invested.

Sources: GPFN mandate, Folketrygdfondet’s website.

GAPP Principle 16

The governance framework and objectives, as well as the manner in which the SWF’s management is operationally independent from the owner, should be publicly disclosed.

Status: Implemented

The governance framework is transparent and publicly disclosed. Both the overall framework and objectives are established by Parliament and laid down in legislation (the Government Pension Fund Act and the Folketrygdfondet Act). Further details on the division of roles and responsibilities between owner and manager are set out in the management mandate issued by the Ministry of Finance (asset owner) to Folketrygdfondet (operational manager). The mandate stipulates that Folketrygdfondet shall make investment decisions and exercise ownership rights independently of the Ministry.

The Ministry submits an annual report to Parliament (white paper) on the management of the Government Pension Fund. In addition to presenting the financial performance of the Fund, such reports cover discussions of investment beliefs and the investment strategy. The report to Parliament also includes an account of the governance of the Fund. The Fund reports are publicly available on the Ministry website.

Sources: Government Pension Fund Act, Folketrygdfondet Act, GPFN mandate, Ministry of Finance’s website.

GAPP Principle 17

Relevant financial information regarding the SWF should be publicly disclosed to demonstrate its economic and financial orientation, so as to contribute to stability in international financial markets and enhance trust in recipient countries.

Status: Implemented

Folketrygdfondet reports to the Ministry of Finance on the performance of the GPFN on a quarterly basis.

Annual and biannual reports by Folketrygdfondet on Fund performance are publicly disclosed. See response to principle 11 for further information as to the contents of such reports. Relevant financial information is also included in the government budget and the government accounts.

Sources: GPFN mandate, Regulation on Financial Reporting, Ministry of Finance’s and Folketrygdfondet’s websites.

GAPP Principle 18

The SWF’s investment policy should be clear and consistent with its defined objectives, risk tolerance, and investment strategy, as set by the owner or the governing body(ies), and be based on sound portfolio management principles.

GAPP 18.1 Subprinciple The investment policy should guide the SWF’s financial risk exposures and the possible use of leverage.

GAPP 18.2 Subprinciple The investment policy should address the extent to which internal and/or external investment managers are used, the range of their activities and authority, and the process by which they are selected and their performance monitored.

GAPP 18.3 Subprinciple A description of the investment policy of the SWF should be publicly disclosed.

Status: Implemented

The Government Pension Fund Act states that the investment objective shall be the highest possible return at an acceptable level of risk and that within the scope of this objective, the Fund shall be managed responsibly. The investment policy is formed accordingly. The annual white paper submitted to Parliament by the Ministry of Finance reports on the development of the investment strategy of the GPFN. The strategy is founded on investment beliefs and the distinctive characteristics of the Fund. The strategy is operationalised in the management mandate set by the Ministry. The mandate specifies objectives, risk tolerance and investment strategy. The objective of the asset manager is to maximise long-term return net of costs measured in Norwegian kroner, subject to the specified risk limits.

The mandate also covers provisions on risk exposures, leverage, benchmark indices and outsourcing. Folketrygdfondet has published additional information on its investment strategies and risk management approach. Furthermore, the mandate stipulates that all dealings with third parties shall be in accordance with the economic interests of the GPFN. At present, Folketrygdfondet does not employ external managers in the management of Fund. Folketrygdfondet may, however, make use of external managers and outsource operational functions if risk management and internal control considerations are attended to.

Sources: Government Pension Fund Act, GPFN mandate, Ministry of Finance’s and Folketrygdfondet’s websites.

GAPP Principle 19

The SWF’s investment decisions should aim to maximise risk-adjusted financial returns in a manner consistent with its investment policy, and based on economic and financial grounds.

GAPP 19.1 Subprinciple If investment decisions are subject to other than economic and financial considerations, these should be clearly set out in the investment policy and be publicly disclosed.

GAPP 19.2 Subprinciple The management of an SWF’s assets should be consistent with what is generally accepted as sound asset management principles.

Status: Implemented

The stated objective of the asset management in the mandate is to maximise long-term return net of costs measured in Norwegian kroner, subject to specified risk limits. Within the scope of this objective, the Fund shall be responsibly managed.

The Ministry of Finance has issued Guidelines for Observation and Exclusion from the Government Pension Fund Global (GPFG) based on ethically motivated criteria. The guidelines are in place to reduce the risk of being invested in companies deemed in serious violation of fundamental ethical norms. The guidelines stipulate the process for observation and exclusion of individual companies from the GPFG investment universe. The guidelines are publicly disclosed. Decisions on exclusion (or re-inclusion) of individual companies pursuant to these guidelines also pertain to the investments of the GPFN.

The management mandate issued to Folketrygdfondet requires a broad set of principles for responsible management of the GPFN investment portfolio to be established. The mandate further states that such principles be based on recognised principles and standards, such as Norwegian Code of Practice for Corporate Governance (NUES), UN Global Compact, the OECD Guidelines on Corporate Governance and the OECD Guidelines for Multinational Enterprises. According to the mandate, Folketrygdfondet shall take into account the investment strategy and the longevity of the Fund in the design of the principles for responsible management.

Folketrygdfondet has published a set of ownership principles and expectations documents on specific topics to ensure transparency and predictability in the exercise of ownership rights associated with Fund investments. The overall objective for the exercise of ownership rights is to safeguard the financial interests of the Fund in the long term.

Sources: GPFN mandate, Guidelines for Observation and Exclusion, Folketrygdfondet’s website.

GAPP Principle 20

The SWF should not seek or take advantage of privileged information or inappropriate influence by the broader government in competing with private entities.

Status: Implemented

The GPFN is managed by a separate asset manager, Folketrygdfondet. The division of roles and responsibilities between the Ministry of Finance (asset owner) and Folketrygdfondet (operational manager) entails that Folketrygdfondet has no access to privileged information from the broader government. Folketrygdfondet makes investment decisions based on publicly available information. In the event that Folketrygd- fondet as an investor or potential investor obtains privileged information, laws and regulations as well as internal guidelines are abided by to make sure that (i) such information is not used in investment decisions and (ii) confidentiality is observed.

Sources: Government Pension Fund Act, GPFN mandate, Folketrygdfondet’s website.

GAPP Principle 21

SWFs view shareholder ownership rights as a fundamental element of their equity investments’ value. If an SWF chooses to exercise its ownership rights, it should do so in a manner that is consistent with its investment policy and protects the financial value of its investments. The SWF should publicly disclose its general approach to voting securities of listed entities, including the key factors guiding its exercise of ownership rights.

Status: Implemented

The rationale for the exercise of ownership rights is to safeguard the financial interests of the GPFN in the long run. High financial return over time is considered conditional upon sustainable development in economic, environmental, and social terms, as well as well-functioning, legitimate and effective markets. The mandate requires that Folketrygdfondet`s approach to the responsible management of portfolio investments be based on recognised principles and standards, see response to principle 19 for further information.

The mandate states that Folketrygdfondet is to publicly disclose the principles for responsible management and the use of measures underpinning such efforts. The operational manager has also defined key ownership issues considered of financial relevance, including but not limited to (i) strategy, capital structure and financial targets, (ii) anti-corruption, (iii) board and executive remuneration, (iv) human rights and workers’ rights, (v) climate risk, (vi) environmental risk, and (vii) bond issuance. Folketrygdfondet exercises the ownership rights associated with Fund investments through various measures, including company engagement, voting at general meetings and participation in nomination committees.

The Board of Folketrygdfondet gives prominence to a high degree of transparency in the exercise of ownership rights associated with the GPFN portfolio investments. An account of Folketrygdfondet’s ownership efforts is published with the annual report. Information on the exercise of ownership rights is published on the website of Folketrygdfondet.

Sources: GPFN Mandate, Folketrygdfondet’s website.

GAPP Principle 22

The SWF should have a framework that identifies, assesses, and manages the risks of its operations.

GAPP 22.1 Subprinciple The risk management framework should include reliable information and timely reporting systems, which should enable the adequate monitoring and management of relevant risks within acceptable parameters and levels, control and incentive mechanisms, codes of conduct, business continuity planning, and an independent audit function.

GAPP 22.2 Subprinciple The general approach to the SWF’s risk management framework should be publicly disclosed.

Status: Implemented

The management mandate issued by the Ministry of Finance stipulates the benchmark indices and permitted deviations from such indices, and further requires the Board of Folketrygdfondet to set supplementary risk limits for the investment activities. The mandate states that Folketrygdfondet shall establish principles for valuation, performance measurement and the management, measurement, and control of risk that, at a minimum, adhere to internationally recognised standards and methods. Folketrygdfondet shall have routines for reporting risk and exposures in the areas covered in the mandate set by the Ministry, including market risk and credit risk, counterparty exposure and operational risk.

The Board holds the overall responsibility for organising the risk management and defining the risk appetite of Folketrygdfondet, within the limits set out in the mandate issued by the Ministry. The Board has published principles for such risk management, and has further stated that the risk management and internal control of Folketrygdfondet to the extent suited be based on the following frameworks and standards:

Regulation on Risk Management and Internal Control – the Financial Supervisory Authority of Norway

Regulations on use of Information and Communication Technology (ICT) – the Financial Supervisory Authority of Norway

Enterprise Risk Management – Integrating with Strategy and Performance – the Committee of Sponsoring Organizations of the Treadway Commission (COSO)

Framework for Internal Control Systems in Banking Organisations – the Basel Committee on Banking Supervision, BIS

Principles for the Sound Management of Operational Risk and the Role of Supervision – the Basel Committee on Banking Supervision, BIS

Internal Control – Integrate Framework – the Committee of Sponsoring Organizations of the Treadway Commission (COSO)

Corporate governance principles for banks – the Basel Committee on Banking Supervision, BIS

The risk management framework of Folketrygdfondet includes procedures for risk identification, assessment, and monitoring. If a particular risk factor falls outside the risk tolerance level, further action shall be taken to mitigate or avoid such risks. The principles for risk management and internal control of the Board are publicly disclosed.

See also response to principle 10 and 18.

Sources: GPFN Mandate, Folketrygdfondet’s website.

GAPP Principle 23

The assets and investment performance (absolute and relative to benchmarks, if any) of the SWF should be measured and reported to the owner according to clearly defined principles or standards.

Status: Implemented

GPFN performance is measured in accordance with the Global Investment Performance Standards (GIPS) and reported to the asset owner on a quarterly basis. The benchmark indices are described in detail in the management mandate issued to Folketrygdfondet.

Source: GPFN Mandate.

GAPP Principle 24

A process of regular review of the implementation of the GAPP should be engaged in by or on behalf of the SWF.

Status: Implemented

The Ministry of Finance emphasises that the GPFN operates in adherence to the GAPP. This self-assessment will be updated when required by amendments to the GAPP or material changes in the management of the Fund.

Fotnoter

1)
The International Forum of Sovereign Wealth Funds (IFSWF) was established in 2009 with the purpose of promoting the Santiago Principles. The Santiago Principles encompass 24 Generally Accepted Principles and Practices (GAPP) for sovereign wealth funds promoting inter alia transparency, good governance, accountability, and prudent investment practices. Norway is not a member of the IFSWF, but fully supports these principles.