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standards in order to promote good corporate governance and responsible business practices

The objective for the management of the fund is the highest possible return with acceptable risk. Responsible investment supports this objective in two ways. First, we seek to improve the long-term economic performance of our investments. Second, we aim to reduce the financial risk associated with the environmental and social behaviour of the companies we invest in. We work to promote well-functioning markets, develop the fund’s assets and support responsible business practices at companies.


The fund is global and owns a small slice of the world’s largest listed companies. We are therefore dependent on global solutions to common challenges such as climate change. We take our starting point in international principles and standards from the UN and the OECD, which provide a framework for our work with companies and other stakeholders.

We contribute to the further development of standards. In 2021, we participated in 14 public consultations relating to responsible investment and were in regular contact with international organisations, regulators and other standard setters. These consultations concerned topics that are important to us, such as good corporate governance, climate reporting and responsible business practices. We also had meetings with the Task Force on Climate-Related Financial Disclosures (TCFD), the International Financial Reporting Standards (IFRS) Foundation, the European Commission, the European Securities and Markets Authority (ESMA), the UK Financial Reporting Council (FRC) and national standard setters in Germany and Sweden.

We express clear expectations of the companies and markets we invest in. Companies must have effective governance, and our rights as a shareholder must be protected. Companies must also understand how they impact on the environment and society. We followed up our eight expectation documents during the year by engaging with selected companies, assessing companies’

sustainability reporting, and supporting various industry initiatives.

In January 2021, we took a big step in openness by publishing all our voting intentions five days before shareholder meetings.

In August, we published a new set of expectations for how companies should take biodiversity and sustainable uses of ecosystems into account in their business activities.

Ever-increasing losses of species and deterioration of ecosystems may reduce companies’ ability to create value for investors in the long term. Companies should therefore understand both their dependency and their impact on nature, and integrate these considerations into their governance structure, strategy, risk management, measurement and reporting. We also updated our expectation documents on climate change and children’s rights.

We published a new position paper during the year on board diversity. Diversity brings different perspectives and approaches to the board which can contribute to better decision-making and so increase the value created

by a company in the longer term. It can also increase a company’s credibility. The board should have a formal nomination process to identify potential candidates who can add diversity. Boards where either gender has less than 30 percent representation should consider setting targets for gender balance and report on progress towards them.

We support initiatives that bring companies or investors together to find common standards for sustainable business conduct. These initiatives work best when numerous companies in a particular industry or value chain face the same challenge. The initiatives we support look at challenges such as supply chain management and reporting.

We support and initiate research projects with a view to understanding and improving market practices. We collaborate with academic institutions to access the latest research and obtain analyses that can inform our investment strategy, risk management and ownership. In 2021, we supported two research projects looking at the financial consequences of climate change and three projects studying corporate governance and ownership structure.

We initiated a pilot project led by Saphira Rekker of the University of Queensland Business School to compare different methods of measuring long-term transition risk associated with climate change.


We integrate environmental, social and corporate governance considerations into the management of the fund. We gather data on markets, industries and companies to gain a broader understanding of risks and opportunities in our investments. This information forms the starting point for our active ownership with individual companies.

To perform analyses of this kind, we need relevant, comparable and reliable data on environmental, social and governance topics. We collect corporate sustainability data in an internal database, assess companies’ reporting, and analyse greenhouse gas emissions from companies in the portfolio.

We conducted a total of 4,196 assessments of companies’

reporting in 2021. We assessed the reporting of 1,500 companies on climate change, 701 on human rights, 500 on children’s rights, 500 on water management, 250

on anti-corruption, 250 on ocean sustainability, 268 on deforestation, 200 on tax and 27 on biodiversity. The companies assessed accounted for 75.8 percent of the equity portfolio’s market value at the end of the year.

We contact companies we consider to have weak or limited disclosure. We wrote to 110 companies in 2021 to urge them to improve their reporting. The average improvement in performance at the companies we contacted in 2020 was 11.9 percentage points. The overall improvement from 2020 to 2021 at the companies covered by our assessments was 4.7 percentage points. The difference was greatest at companies we contacted about climate change, human rights and ocean sustainability, and least for water management and tax transparency. All in all, we saw improvements at 64.9 percent of the companies we contacted.

We support the recommendations of the Task Force on Climate-Related Financial Disclosures set up by the G20’s Financial Stability Board. We are working with companies to ensure that they are equipped for the transition to a low-carbon economy. We invest specially in climate solutions, adjust the portfolio through divestments, and consider climate issues in our investment decisions. We also analyse various climate scenarios for the fund. Based on our percentage holdings, companies in the equity portfolio emitted 90.2 million tonnes of CO2-equivalents in 2021.

We take three main approaches to identifying and managing environmental, social and governance risks in the portfolio.

The first is to screen companies prior to inclusion in the fund’s equity benchmark. The second is continuous monitoring of companies in the portfolio through incident analysis or more in-depth thematic analyses of specific markets and industries. The third is an annual review of companies against our sustainability expectations.

Our environment-related equity mandates returned 21.6 percent in 2021. Since its inception in 2010, the annualized return on equity investments has been 10.4 percent. At the end of 2021, we had 107.7 billion kroner invested in environment-related equity mandates.

Our environment-related investments are in three main areas: i) low-carbon energy and alternative fuels, ii) clean

energy and energy efficiency and iii) natural resource management. Companies must have at least 20 percent of their business in one of these areas to be included in our environmental universe.

Unlisted real estate investments amounted to 2.5 percent of the fund at the end of 2021. We invest and manage our portfolio responsibly and sustainably in order to help achieve our objective of the highest possible return over time and reduce the long-term risk in the portfolio. To measure improvements in the management of our real estate portfolio, we use the international sustainability

benchmark developed by GRESB. We scored 84/100 points overall in 2021, compared with 79/100 in 2020, and performed 6 percent better than comparable buildings. We began work during the year on benchmarking the carbon intensity of the real estate portfolio against decarbonisation pathways consistent with the Paris Agreement produced by the Carbon Risk Real Estate Monitor (CRREM), an

investor-driven project we have also co-financed and helped develop.

When we identify a company with high risk exposure, we carry out further research to assess whether to monitor

the company, initiate dialogue, vote against the board or consider risk-based divestment. In emerging markets, we may also consult our external managers, who have in-depth knowledge of the industries and companies they invest in.

This is particularly important, because it can often be harder to source relevant company data in these markets.

We divested from 52 companies in 2021 following assessments of environmental, social and governance risks. Nine of these companies were identified through our pre-screening of companies being added to the FTSE Global All Cap index, which is the fund’s underlying benchmark index.


We held a total of 2,628 meetings with 1,163 companies in 2021. The size of our investments gives us access to board members, senior management and specialists at companies.

We are interested in understanding how companies are governed and how they address key sustainability issues.

In 2021, we launched new dialogues on net-zero targets for companies with a large carbon footprint, risks and opportunities relating to natural resources for producers

of consumer goods, children’s rights online, and climate challenges for integrated oil and gas companies.

We also continued our dialogues on the environmental impact of cement and concrete production, sustainability in the apparel industry, the energy transition and responsible dismantling in the shipping industry, tax management policies, corruption risks at industrial companies, banks’

financing of carbon-intensive industries, the low-carbon transition in the steel industry, climate lobbying in European heavy industry, forest materials in the production of consumer goods, working conditions in delivery and transport services, due diligence in conflict-affected areas, sustainable fisheries, activities in low-tax environments and closed jurisdictions, targets and metrics for water consumption, forced labour in technology and consumer goods companies’ supply chains, and responsible marketing of breast-milk substitutes.

The fund has holdings in 9,338 companies all around the world. We voted on 116,525 items at 11,601 shareholder meetings in 2021. We voted in line with the board’s recommendation in 95.2 percent of cases, which was on a par with our voting in 2020.

Table 35 Return on the environment-related equity mandates, funding and other return series.

Annualised data, measured in the fund's currency basket. Percent.

Since 01.01.2010 Last 5 years Last 3 years 2021

Return on the environment-related equity mandates 10.4 19.9 30.4 21.6

Return on the financing of the environment-related equity mandates1 5.8 10.5 15.9 24.0

Return on the FTSE Environmental Technology 50 index 11.3 24.6 40.8 15.1

Return on the FTSE Environmental Opportunities All-Share index 14.3 19.7 30.2 24.2

Return on the MSCI Global Environment index 15.0 26.3 41.6 19.9

Return on the benchmark index for equities 10.6 12.8 19.0 20.0

1 The financing of the environment-related equity mandates includes dedicated allocation to environment-related equity mandates in the equity management.

Director elections account for nearly 40 percent of the resolutions we vote on. Who sits on the board is the most important decision we make. As a minority investor in thousands of companies, we leave most decisions to the board. We expect the board to set strategy, supervise management and act in shareholders’ interests. This is in keeping with the principles of good corporate governance.

We voted in line with the board’s recommendation in 94.4 percent of director elections in 2021, compared with 94.6 percent in 2020. The main reasons for voting against board candidates were a lack of independence on the board, combination of the roles of CEO and chairperson, and directors being overcommitted. We have set out our expectations when it comes to directors’ independence and time commitments in public position papers which we have shared with companies.

We have seen an increase in the number of shareholder resolutions addressing environmental and social issues over the years. We support well-founded resolutions that are aligned with our own priorities, especially in areas covered by our expectation documents. We voted in favour of 31.4 percent of these resolutions in 2021, compared with 35.1 percent in 2020.

The Ministry of Finance has issued ethically motivated guidelines for observation and exclusion of companies from the fund. These guidelines set out criteria for exclusion based either on companies’ products or on their conduct.

The fund must not be invested in companies that produce certain types of weapon, base their operations on coal, or produce tobacco. Companies whose operations contribute to violations of fundamental ethical norms may also be excluded based on recommendation from the Council on Ethics. In 2021, Norges Bank’s Executive Board excluded 12 companies, placed 3 companies under observation, and decided on active ownership for 1 company, while reversing the exclusion of 5 companies and removing another 4 from observation.

Responsible investment report

Section 3-3c of the Norwegian Accounting Act requires Norges Bank to report on what it “is doing to integrate human rights, labour rights, gender equality and non-discrimination, social, environmental and anti-corruption matters into its business strategies, its day-to-day operations and its relations with stakeholders”.

The bank meets this requirement with its responsible investment report. The reporting follows the structure of the bank’s sustainability strategy: climate and environment, corporate governance, ethics and culture, and community and social issues.

4 Organisation

68 Management organisation

74 Operational risk management

76 Management costs

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