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The Norwegian Government Pension Fund – Global

Ethical guidelines in a human rights perspective

Presentation on the IOE-meeting in Oslo 17 September 2008State Secretary Henriette Westhrin

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PFG is among the largest (and fastest growing) funds in the world-The Fund’s market value. Billion USD, year end.

Source: Ministry of Finance

0

200

400

600

1996 1999 2002 2005 2008 20110

200

400

600

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But strong increase in pension expenditure is a challenge for public finances

• Calls for a cautious fiscal policy over the next decades

• The Pension Fund has a dual purpose long term saving short- and medium term

stabilization

0

5

10

15

20

25

2006 2015 2024 2033 2042 2051 20600

5

10

15

20

25

Pensions

Expected real return of the Fund

Pension expenditure and expected real return on the Fund as share of mainland GDP

Source: Statistics Norway, Ministry of Finance

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The Fund’s key features

• Aim: Maximize financial returns

• Financial investor with non-strategic holdings. Avg holding < 1 %

• Separation of roles between owner and operational manager

• High degree of transparency to build public support

• Ethical guidelines that are transparent and predictable, based on internationally recognized standards (UN Global Compact, OECD Principles of Corporate Governance, OECD Guidelines for Multinational Enterprises

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Ethical guidelines

Two main ethical obligations:

1) Ensure sound financial returns so that future generations will benefit from the petroleum wealth.

Sound financial return over time, is considered to be contingent on sustainability economically, environmentally and socially.

2) Avoid investments in companies whose practices constitute an unacceptable risk that the Fund is or will be contributing to grossly unethical activities.

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Division of responsibility

• The Ministry of Finance Overarching responsibility for the Ethical

Guideline’s contents and implementation Final decision on exclusion of companies

• Norges Bank Exercises ownership rights in the portfolio

companies

• Council on Ethics Makes recommendations to the Ministry of

Finance on exclusion of companies from the investment universe

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The ethical guidelines and human rights

• Human rights are incorporated in the ethical guidelines:

In Norges Banks mandate for exercising ownership rights which shall be based on the UN Global Compact and the OECD Guidelines for multinational enterprises

In the exclusion mechanism – one of the criteria is: serious or systematic human rights violations, such as murder, torture, deprivation of liberty, forced labour, the worst forms of child labour and other child exploitation

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Two case stories on human rights

• Wal-Mart Excluded as of May 2006

• Monsanto Recommendation on exclusion Ownership efforts Recommendation revoked

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Dilemmas for a responsible investor relating to human rights-issues

• ”Should we stay or should we go?”

• The Sovereign Wealth Funds debate

• Emerging Markets