High returns despite responsible investment rules – Norwegian Pension Fund yields 6.9% in 2016

The Norwegian Pension Fund (NPF) manages assets worth more than 840 billion €, constituting the largest government pension fund worldwide. The fund’s assets mainly stem from Norway’s oil revenues and are supposed to offset oil price fluctuations and maintain pensions for current and future generations.

The NPF’s ethics commission evaluates all investment options to ensure the fund’s activities are in line with the OECD Principles of Corporate Governance, the UN Guiding Principles on Business and Human Rights and the UN Global Compact. Accordingly, the fund already excludes companies that violate human rights, as well as tobacco manufacturers and arms producers with business practices that contradict international law. Since 2016, the fund does not invest in companies whose profits are generated to more than 30% from coal production.

In 2016, the ethics commission excluded in total 64 companies from different industries. While a recently published report estimates that the fund could have made a higher profit without the exclusion of tobacco and arms companies, the exclusion of coal companies was found to be financially beneficial for the NPF.1

Yet, while the coal divestment has been a major step, so far the fund does not exclude oil and gas companies based on their climate change impact. Companies operating in the oil and gas sector only account for 6.4% of the fund’s market value, but are responsible for almost half of its CO2 emissions. The Norwegian NGO Future in our Hands recently published a report with recommendations for further exclusions and divestments for the NPF, extending the scope of the ‘Climate Criterion’ established in January 2016. Future in our Hands proposes divestment from a number of companies operating in the oil and gas industry with a very high emission intensity, such as ExxonMobil, Eni Spa, BP, Petrobras and Total. Further, the report recommends to divest from companies that heavily lobby against regulation on climate and environmental protection.2

Yngve Slyngstad, the manager of the fund, emphasizes that the rate of return is only one criterion next to environmental and human rights concerns. For this reason, the fund sponsors several research projects with the goal to analyze and establish sustainable business practices. It further uses its voting rights at annual general meetings to promote sustainable and ethical behavior within the business sector. In 2016, a list of requirements to operate in line with the universal human rights was sent to all companies the fund is invested in.

For the third time, the fund has also measured its carbon footprint by calculating the direct and indirect carbon dioxide emissions of all invested companies, based on the fund’s share in the company. Accordingly, the fund’s investments account for an estimated 96 million tons of carbon dioxide emissions.

Despite the emphasis on sustainability and the exclusion of several companies, many controversial companies still remain in the fund’s portfolio, such as Nestlé, Blackrock, Royal Dutch Shell and HSBC. Furthermore, a substantial portion of the 6.9% yield in 2016 resulted from companies active in aerospace and defense, oil and gas production or raw materials and minerals trade. Consistent exclusion criteria for companies violating human rights or environmental protection are crucial for sustainable and socially responsible financial operations. German financial institutions in particular still have a long way to go in developing transparent exclusion criteria, which reflect the social and environmental expectations of their customers. Also governments have an obligation to ensure that international investment projects are in line with social and environmental norms and standards. However, every consumer can assume responsibility by demanding transparency and sustainable investments from his bank or insurance company.

Please find here the annual report of the NPF and the two attachments Responsible Investment and Return & Risk:

https://www.nbim.no/en/transparency/reports/2016/annual-report-2016/

https://www.nbim.no/en/transparency/reports/2016/responsible-investment-2016/

https://www.nbim.no/en/transparency/reports/2016/return-and-risk-2016/


  1. Norwegian Pension Fund Annual Report 2016: https://www.nbim.no/en/transparency/reports/2016/annual-report-2016/ []
  2. Future in our Hands – Climate Offenders in the Norwegian Government Pension Fund Global: https://www.framtiden.no/english/recommends-exclusion-of-exxonmobil.html []
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