When it isn’t re-evaluating the very foundations of active financial management, Norway’s Ministry of Finance apparently likes to shake things up by re-conceptualizing active ownership policies and responsible investment practices for its SWF. Earlier this week the MoF unveiled a new set of ethical guidelines that will replace the original guidelines set up in 2004:
“The general conclusion was that the ethical guidelines had worked well and could largely be continued. With a view to bolstering the Fund’s responsible investment practices, the Ministry of Finance also announced plans to introduce a number of new measures and changes linked to active ownership and exclusion of companies.”
In short, the new guidelines take a two pronged approach focusing on “exclusion and observation” and “responsible management and exercise of ownership rights.” The immediate result is the addition of tobacco companies to the exclusion list. More broadly, the new guidelines seem to be an attempt to consolidate and combine the above “prongs” into a more coherent ethical mandate (more akin to, say, what a CalPERS does). These new guidelines afford policymakers more flexibility on exclusions, allowing instead for use of “active ownership” policies in certain cases:
“We are increasingly attaching importance to Norges Bank’s active ownership,” says Minister of Finance Sigbjørn Johnsen.
While active ownership and engagement with portfolio companies may have an important impact on corporate governance, this specific policy strikes me as potentially problematic. It appears that the decision-making for this revamped ethical process is still housed entirely within the MoF. Indeed, the press release says explicitly that:
“The Ministry will in this context consider use of other measures.”
As such, this new policy puts in the hands of politicians quite a bit of authority over investment decisions and financial operations (albeit under the advisement of the Council on Ethics). In short, Norway’s SWF seems to be adding another layer of politicization to what was already a complex governance structure.
1 Response to “The Politicization of Norway’s SWF”