Responsible long-term management of the Government Pension Fund

The Ministry of Finance today published the white paper The Government Pension Fund 2021. The white paper addresses the Government efforts in further developing the investment strategy and strengthening of the responsible investment framework. The performance of the Government Pension Fund Global (GPFG) and the Government Pension Fund Norway (GPFN) is also presented.

– The Government has adopted comprehensive measures to limit the negative impact of the coronavirus pandemic. We intend, in line with the fiscal policy guidelines, to scale back petroleum revenue spending when the economic situation is normalised. Along with responsible long-term investment management, this will ensure that the petroleum wealth may also benefit future generations, says Minister of Finance Jan Tore Sanner (Conservative Party).

Strong performance of both the GPFG and the GPFN

– We must be prepared for financial market volatility and for considerable fluctuations in the year-on-year value of the Fund. We are, however, well placed to withstand such market turbulence. A long-term investment strategy will serve us well over time, says the Minister of Finance.

Climate risk in the GPFG

Climate change will affect companies and global economic developments in coming years. Company earnings may be affected by changes in stakeholder preferences upon the transition to a low-carbon economy, physical changes resulting from climate change, as well as climate policy and technological developments. This entails financial risk, which needs to be managed by investors. The Ministry has therefore launched an initiative to further expand knowledge of how climate change, climate policy and the Green Shift may affect investors like the GPFG.

An expert group has been commissioned to prepare a report on the implications of financial climate risk and climate-related investment opportunities, including discussion of alternative approaches to these issues in the investment management. The Ministry has concurrently request analyses and assessments from Norges Bank. The Ministry will present its assessments of climate risk and climate-related investment opportunities in the white paper on the Government Pension Fund in the spring of 2022.

– Assessments of financial climate risk form an integral part of Norges Bank’s risk management, investment decisions and active ownership. Climate is nonetheless a financial risk factor that we need to understand better. The initiative now launched by the Ministry will expand our knowledge on this matter, says the Minister of Finance.

GPFG tax and transparency initiatives

– Norway takes an active role in international efforts to increase transparency, exchange of information and achieve an appropriate allocation of taxation rights globally. Matters concerning closed tax jurisdictions, international tax avoidance and appropriate allocation of taxation rights globally should be addressed and resolved through international cooperation and consensus-based solutions, says the Minister of Finance.

Enforcement of existing tax rules, as well as the development of tax regulations in domestic law and through international standards, are government responsibilities.

Norges Bank supports the Fund’s long-term financial interests through responsible investment practices. As a long-term financial investor, the emphasis is placed on real, long-term company earnings, and not on any potential short-term gains resulting from aggressive tax planning.

– The Government is committed to transparency and ethical awareness in the management of the Government Pension Fund. It is positive that Norges Bank is highlighting its work on tax and transparency issues. Going forwards, I expect that the Bank, on an ongoing basis, considers how these efforts can be further strengthened, says Minister of Finance Jan Tore Sanner.

Norges Bank has prepared expectations documents on several topics, including tax and transparency. The documents are based on internationally recognised principles and are directed at the board of directors of investee companies. Expectations documents are, among other things, used as a basis for the Bank’s company dialogues. In the expectations document on tax and transparency, Norges Bank expresses an expectation that companies pursue appropriate, prudent and transparent tax practices.