Hamar, 12 October 2020
DEPUTY GOVERNOR JON NICOLAISEN
MANAGEMENT OF THE GOVERNMENT
PENSION FUND GLOBAL
THE GPFG’S ROLE IN ECONOMIC
POLICY
From natural resources to financial wealth
Sources: The Norwegian Petroleum Directorate, Ministry of Finance and Norges Bank 3
0%
25%
50%
75%
100%
0%
25%
50%
75%
100%
1997 2007 2017 2027
Continental shelf The fund
A large fund – NOK 10 400 billion
-3 000 0 3 000 6 000 9 000 12 000
1998 2001 2004 2007 2010 2013 2016 2019
Fund value
Cumulative. In billions of NOK
1)Government’s net cash flow
Return
Non-oil budget deficit
Krone exchange rate
A fund owned by the Norwegian people
Governance model
5
Central government budget
The petroleum fund mechanism
Transfer
Non-oil revenues
Expenditure Government Pension
Fund Global (GPFG)
Fiscal rule Petroleum revenues and
return on investments
Petroleum revenue spending
0 2 4 6 8 10 12 14
2000 2005 2010 2015 2020 2025 2030
Government petroleum revenue spending 3% path
Percentage of trend mainland GDP
Source: Ministry of Finance 7
INVESTMENT STRATEGY
The objective is high long-term return
Section 2 Government Pension Fund Act
9
The objective of investment in the Government Pension Fund
shall be to achieve the highest possible return within the limits
of acceptable risk. Within this framework, the Fund shall be
managed responsibly.
The benchmark is important
0 50 100 150 200 250 300 350 400
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Portfolio Benchmark
Index
Evolution of strategy over time
0 1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 9 000 10 000
1996 2000 2004 2008 2012 2016 2020
40% equities Government
bonds only 60% equities
70%
equities First real estate
investment All emerging equity
markets
Ethical guidelines Bonds – extended
investment universe
More companies
GPFG. In billions of NOK
Source: Norges Bank 11
Asset allocation
Actual portfolio
1Strategic benchmark index
70
30 Equities
Fixed income 69.6
27.6 2.8
Equities
Fixed income
Real estate
investments
Invested in more than 9 000 companies in 73 countries
1)North-America 44%
3%
Rest of the world Europe 34%
Asia and Oceania 19%
1) At 31 December 2019. 13
Source: Norges Bank
RESPONSIBLE INVESTMENT
The objective is high long-term return
Section 2 Government Pension Fund Act
15
The objective of investment in the Government Pension Fund
shall be to achieve the highest possible return within the limits
of acceptable risk. Within this framework, the Fund shall be
managed responsibly.
A chain of measures
Responsible investment
Ethical decisions
Establishing principles
Exercising ownership
Investing sustainably
Observation Exclusion
“The fund should not be invested in companies that violate
fundamental ethical norms.”
“Long-term return depends on sustainable growth, well-
functioning markets and good
corporate governance.”
Ownership: Voting and dialogue - 2019
Three categories of company dialogue We vote at all shareholder meetings
Dialogue on strategic topics
Sustainability Governance Dialogue on incidents
Corporate actions Risk incidents
Dialogue on ethical guidelines
3 412 meetings with 1 474 companies
17
11 518 shareholder meetings
116 777 resolutions
Return effects of risk-based divestments
-0.1 0 0.1 0.2 0.3
2011 2013 2015 2017 2019
Total
Climate change Human rights
Water management Anti-corruption Other
Equities. Percentage points
1Ethical exclusions – guidelines
Product-based
Thermal coal mining or coal- based power production
Tobacco
Specific weapon types
Conduct-based (examples)
Severe environmental damage
Greenhouse gas emissions
Human rights violations
Gross corruption
19
“The fund should not be invested in companies that violate fundamental ethical norms.”
Decisions on conduct-based exclusions are taken by the Executive Board on the advice of the Council on Ethics.
Established by the Ministry of Finance, on behalf of the Storting:
Return effects of ethical exclusions
-3.00 -2.00 -1.00 0.00 1.00
2006 2008 2010 2012 2014 2016 2018 2020
Conduct-based exclusions Total
Product-based exclusions
Equities. Percentage points
1)Hamar, 13 October 2020
DEPUTY GOVERNOR JON NICOLAISEN
