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The Norwegian Government Pension Fund Global – Strengthens CSR profile and takes further steps towards infrastructure investments

The Norwegian right-wing Government recently submitted its annual white book to the Parliament on the management of the Government Pension Fund Global (GPFG) in 2014. The GPFG performed well in 2014, with returns of 7.6 % excl. asset management costs.

For more in-depth information about the GPFG, please see our earlier newsletter here.

Development of investment mandate – infrastructure investments next in line

In 2014, an expert group was appointed to consider diversifying the fund’s investments to include infrastructure investments and to increase the allocation in real estate investments.

According to current rules, the fund shall hold 60 % of the assets in equities, 35-40 % in fixed income and up to 5 % in real estate. At year-end 2014, 2.2 % of the Fund was invested in real estate. The white book to the Parliament outlines the process which has been initiated to consider whether the real estate investments quota should be further increased, and if the GPFG shall be permitted to invest in unlisted infrastructure.

The Ministry intends to revisit these issues in the report on the GPFG to be published in the spring of 2016. On the side, Folketrygdfondet, which manages the Government Pension Fund Norway, has expressed a clear interest in investing parts of the Government Pension Fund Norway’s assets in infrastructure. Partly due to the current interest rates, the political climate in Norway is certainly pro-infrastructure investments.

Stronger CSR profile – cleaning up the fund

The Government is committed to transparency and ethical awareness in the management of the GPFG, and has proposed the introduction of a new exclusion criterion, focusing on the conduct of companies in relation to greenhouse gas emissions.

The GPFG, which at the end of December 2014 controlled 1.3 % of world market capitalization, is already bound by strict ethical regulations that bar it from investing in “particularly inhumane” weapons makers, the tobacco industry and companies that are found guilty of violating human rights, causing serious environmental damage, or corruption.

The white book also proposed an increase in the share of earmarked “green” investments, calling for between NOK 30bn and NOK 60bn. The current ceiling is NOK 50bn.

The new proposals must be approved by the Norwegian Parliament, where the Government holds a minority.

 

Authors:

Klaus Henrik Wiese-Hansen (Partner), +47 928 06 986 kwh@steenstrup.no

Martin Brox, +47 952 85 345 mbr@steenstrup.no

The Author

Klaus Henrik Wiese-Hansen
Klaus Henrik Wiese-Hansen Klaus Henrik Wiese-Hansen is a partner at Steenstrup Stordrange’s office in Oslo, and is a member of the M&A and Corporate Practice as well as the Banking and Finance group. He has 14 years' experience in all aspects of financial markets legislation and asset management, including Private Equity, Investment Fund Management, Securities Legislation, Banking and Finance, Insurance, and M&A with respect to these areas. He has advised numerous Norwegian and foreign institutional clients in all aspects of their businesses relating to the aforementioned legal areas.

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