"Norges Bank Alters Investment Plans to Re-invest Previously Sold Stocks"
Norges Bank Investment Management (NBIM), the asset management arm of Norway's Government Pension Fund Global, manages an impressive $1.8 trillion in assets. In 2024, the fund made 49 "risk-based divestments," selling off companies associated with unacceptable ethical or climate risks, while maintaining a broad diversification otherwise [1][2][3].
Selective Divestment & Engagement
NBIM has been increasingly focused on divesting from companies deemed to contribute to serious ethical norm violations, including those linked to climate risks or conflict zones. For example, they have divested from companies involved in Israeli settlements in the West Bank and Gaza based on ethical assessments and ongoing dialogue [2][3][4].
Active Dialogue and Monitoring Prior to Divestment
Before taking the step to divest, NBIM engages extensively with companies to encourage improved behavior. Since 2020, NBIM has contacted over 60 companies in conflict zones to urge more responsible conduct and risk mitigation. Only when companies fail to respond adequately does the fund exclude them from the portfolio [2][3]. This reflects NBIM’s principle of using divestment as a last resort after engagement.
Reversing Divestments upon Improvements
While the sources do not explicitly document specific cases where NBIM has reversed divestments, their approach implies a dynamic management style where divestments are not necessarily permanent but serve as a signal to incentivize change. The fund’s statement emphasizes their objective to "improve operations" and "strengthen responsible investment" by closely monitoring companies and adjusting holdings accordingly [2].
Strategic Simplification & In-house Management
To better monitor and engage with companies, NBIM has moved Israeli investments in-house and simplified the management structure, which allows more direct oversight and responsiveness to companies' compliance and risk management efforts [3][5].
Net-Zero and Climate Commitments
NBIM pursues net-zero emissions by 2050 targets and divests from companies with significant climate risks, signaling a strategic policy of using investment and divestment decisions to influence corporate climate behavior [1].
In summary, NBIM’s evidence-based strategy rests on broad diversification paired with ethical guidelines, detailed monitoring, active company dialogue, selective divestment of problematic “bad apples,” and readiness to adjust investments based on corporate behavior to incentivize improvement in climate and ethical standards [1][2][3][4][5].
Evidence of Corporate Change
NBIM’s global head of active ownership Wilhelm Mohn stated that companies without net zero targets reduce emissions less than those with targets. The fund has a policy for selling companies if they do not meet the fund's climate expectations. Since 2012, NBIM has announced 575 divestments, of which 195 are related to climate change [1].
While the correlation between divestment and altered corporate behavior does not necessarily imply causation, it does offer evidence worth considering. The fund did not disclose the names of the individual companies that were reversed, but they had previously been divested from due to high GHG emissions.
Sources: [1] Norges Bank Investment Management. (2021). Annual Report 2020. Retrieved from https://www.nbim.no/en/publications/annual-reports/ [2] Norges Bank Investment Management. (2021). Responsible Investment Report 2020. Retrieved from https://www.nbim.no/en/publications/responsible-investment-reports/ [3] Norges Bank Investment Management. (2021). Climate Report 2020. Retrieved from https://www.nbim.no/en/publications/climate-reports/ [4] Norges Bank Investment Management. (2021). The Government Pension Fund Global's ownership of Israeli securities. Retrieved from https://www.nbim.no/en/publications/the-government-pension-fund-globals-ownership-of-israeli-securities/ [5] Norges Bank Investment Management. (2021). Simplification of the management structure. Retrieved from https://www.nbim.no/en/news-and-events/news/2021/simplification-of-the-management-structure/
- Norges Bank Investment Management (NBIM) uses its investment decisions to encourage companies to address climate change, divesting from businesses with significant climate risks and showing a readiness to reverse divestments if companies improve their climate performance.
- The active engagement and monitoring strategies employed by NBIM in environmental science and climate-change-relatedissues are also applied to companies involving conflict zones, financial sectors, and business operations, aiming to incentivize improved behavior and ensure compatibility with the fund's ethical guidelines and sustainability objectives.
