Tax and transparency Corporate taxation plays a key role in funding public services in industrialised countries and may be even more important in many developing countries. Companies for their part benefit from societys legal and financial infrastructure. By paying taxes, they help finance this infrastructure. 82 In 2018, we performed an initial analysis of 30 selected companies to understand how their boards decide their tax management policies. The analysis looked at companies that generate substantial revenues from activities outside their domestic market. We looked primarily at companies in the consumer goods and services, financial, mining, oil and gas, pharmaceutical and technology sectors. Global norms and standards for tax disclosure are evolving. Our provisional analysis therefore covered a smaller number of companies then our analyses of our other expectations. The companies reporting was evaluated against a number of indicators, including the companys policy for and approach to tax planning, its management of tax risks, and the boards accountability for tax matters. We based our assessment on the most recently reported information from the companies. Our analysis revealed major differences between markets. Companies required to publish their tax strategy under UK law were more open about their tax practices than companies registered in other jurisdictions. There were also some variations between sectors, with mining and consumer goods and services generally being more transparent about tax. We also found variations in companies reporting on governance, policies and risk management, particularly in the level of reporting. Most companies provided information on tax risks and Exercising ownership Responsible Investment 2018 Government Pension Fund Global relations with tax authorities. Some provided information on the relationship between tax and the companys more general objectives. A small number of companies explained how they work on internal pricing between related companies and activities in secrecy jurisdictions. Tax policies in the consumer sector We have launched an initiative on tax policy for companies providing consumer goods and services. The sector has been in the spotlight in recent years due to a number of tax-related controversies. Consumers are also questioning more often how much tax companies in this sector pay in different countries. The aim of the initiative is therefore to increase companies Chart 8 Results for companies we assessed on tax and transparency Chart 8 Results for companies we assessed in 2018. Number of companies on tax and transparency in 2018. Number of companies 14 14 12 12 10 10 8 8 6 6 4 4 2 2 0 0 Very weak Weak Medium Good Very good Responsible investment Government Pension Fund Global 2018 No. 05 b Our mission is to safeguard and build financial wealth for future generations 1 How we work Establishing principles We aim to contribute to well-functioning markets and good corporate governance. We recognise a set of international standards and contribute to their further development. Our expectation documents, position papers and voting guidelines make clear our priorities a 2018 at a glance 13 Submissions 11,287 5 2,256 Academic projects Companies reporting assessed Shareholder meetings voted at Percent of shareholder meetings voted at 98 50 199 56.7 8.3 30 13 Board level meetings 107,441 Equity portfolio carbon emissions. Thousand tonnes CO2 equiva Contents 1 2 INTRODUCTION ESTABLISHING PRINCIPLES 1. Foreword ____________________________ 8 1. Standards __________________________ 22 2. Overview ____________________________ 12 2. Expectations _______________________ 32 3. Research ___________________________ 40 4 3 4 5 EXERCISING OWNERSHIP INVESTING SUSTAINABLY 1. Voting ______________________________ 44 1. Risk assessments ___________________ 90 2. Dialogue ___________________________ 56 2. Investments _______________________ 104 3. Follow-up __________________________ 70 3. Divestments _____ 6 Introduction Responsible Investment 2018 Government Pension Fund Global 1 Introduction 7 8 Introduction Responsible Investment 2018 Government Pension Fund Global Introduction 1.1 Long-term and responsible We have a single objective the highest possible return with moderate risk. This return is dependent on value creation at the companies we invest in. Oslo, 7 February 2019 Yngve Slyngstad CEO, Norges Bank Investment Management Companies activities have 10 Introduction Responsible Investment 2018 Government Pension Fund Global Introduction 1.1 Closer dialogue with companies 2018 was marked by several new initiatives. We published our principled position on anti-corruption, ocean sustainability, board composition and independence, and the UN Sustainable Development Goals. Oslo, 7 February 2019 Carine Smith Ihenacho Chi 12 The future value of the fund is dependent on the value created by the 9000 companies in which we invest. Introduction Responsible Investment 2018 Government Pension Fund Global Introduction 1.2 Overview Our mission is to safeguard and build financial wealth for future generations. In delivering a long-term return, we are dependent on sustainable growth, well-functioning markets and good corporate governance. The objective for the management of the fund is the highest po 14 Internationally agreed standards on corporate governance promote long-term value creation. We recognise a set of international principles and standards from the UN and the OECD. Introduction Responsible Investment 2018 Government Pension Fund Global Introduction Establishing principles Standards provide consistency across markets and raise the bar for all companies. In Section 2 of the report, we explain how we participate in the development of international standards and use them, together with our own expectations and positions, to guide com 16 The fund has a small stake in around 9,000 companies across the globe. We manage our responsibilities and exercise our rights as an owner to promote long-term value creation at companies. Introduction Responsible Investment 2018 Government Pension Fund Global Introduction Exercising ownership The fund has a small stake in around 9,000 companies across the globe. In Section 3 of the report, we explain how we manage our responsibilities and exercise our rights as an owner. Our aim is to promote long-term value creation at companies. Voting is the most imp 18 Environmental, social and governance issues can have an impact on companies performance. We work to identify, measure and manage risks and opportunities that could affect the funds ability to generate a long-term return. Introduction Responsible Investment 2018 Government Pension Fund Global Introduction Investing sustainably Responsible investment is an integral part of the funds investment strategy. In Section 4 of the report, we explain how governance and sustainability data can inform our investment decisions. Our aim is to identify long-term investment opportunities and reduce the 20 Establishing principles Responsible Investment 2018 Government Pension Fund Global 2 Establishing principles 21 Standards The fund is invested in around 9,000 companies across the globe. We benefit from international standards that promote long-term value creation, and we contribute to their development. We also publish expectations of the companies we invest in. 22 Standards provide greater consistency acr Establishing principles UN The UN Global Compact is a broad coalition between the UN and the business world that promotes corporate social responsibility. The initiative is based on ten general principles derived from the Universal Declaration of Human Rights, the ILO Declaration on Fundamental Pri 24 In 2018, we had meetings with the OECD, the UN Global Compact and the European Commission as well as standard setters in France, Germany, Japan, South Korea, Sweden, Switzerland and the UK. Establishing principles Responsible Investment 2018 Government Pension Fund Global Establishing principles Development of international standards As a market participant, we contribute to the further development of standards that serve the long-term interests of the fund. We participate in consultations and engage regularly with international organisations, regulators and other s 26 composition of stock indices. We believe that indices that include companies with voteless shares present challenges for users requiring formal influence over the companies they invest in. MSCI proposed weighting share classes by the percentage of votes in public hands. We commended MSCI on its Establishing principles board candidates. We stressed the boards responsibility for environmental and social issues material to the company, and repeated our position that the number of votes received by each candidate in board elections should be counted and published. Australia has clear guidelin 28 Reporting standards We support the development of improved standards for reporting on sustainability both nationally and internationally. As an investor, we benefit from timely corporate disclosure of highquality data and from having access to information on sustainability. important that the q Establishing principles 2.1 Submissions Recipient Topic Submitted Financial Reporting Council Revisions to the UK Corporate Governance Code 28.2.2018 Hong Kong Exchanges and Clearing Limited Proposal for a listing regime for companies from emerging and innovative sectors 23.3.2018 Singapo 30 The fund invests globally. It has holdings in 70 countries to spread risk and capture global growth. Establishing principles Responsible Investment 2018 Government Pension Fund Global Establishing principles 2.1 Membership of organisations and initiatives Topic Organisation Description Corporate governance African Corporate Governance Network (ACGN) Network of director membership organisations in Africa Asian Corporate Governance Association (ACGA) Membership organisatio Expectations We publish expectations of companies, position papers on governance issues and guidelines for our voting. These documents communicate our priorities to the wider market and provide predictability in our long-term ownership. 32 We see good corporate governance as a premise for responsi Establishing principles Companies should manage risks and opportunities related to ocean sustainability. Our expectations are primarily directed at company boards. Our underlying expectation is that the board takes overall responsibility for company strategy and addresses relevant sustainability ch 34 In September 2018, we presented our expectations of companies on ocean sustainability. Establishing principles Responsible Investment 2018 Government Pension Fund Global Establishing principles for dialogue with companies, and we have also used them to support our work on developing principles for sustainable ocean business with the UN Global Compact. Updated expectations We also made some updates to existing expectation documents in 2018. We make minor adjustment fundamental industry insight, and at least two of the independent members should have worked in the industry. The board should also explain to shareholders the relevance of candidates qualifications. 36 Time commitment of board members Board members should devote sufficient time to fulfil their re Establishing principles Corporate Governance Advisory Board Åse Aulie Michelet, Svein Rennemo and Harald Norvik were appointed as external members of a new Corporate Governance Advisory Board for the fund in 2018. The board serves as an advisory forum for the Chief Corporate Governance Officer, who 38 Since 2008, we have published our expectations of companies. We want companies to be prepared to handle long-term global challenges. Establishing principles Responsible Investment 2018 Government Pension Fund Global Establishing principles 2.2 Expectations of companies Markets The fund UN Global Compact established 2000 UN Principles for Responsible Investment established 2006 Childrens rights and climate change defined as focus areas 2007 Company dialogue on climate risk in the US and child labour i Research We are keen to develop our understanding of good corporate governance and sustainability, and how they impact on financial risks and returns. We fund research projects and collaborate with academic institutions to obtain high-quality analyses that can inform our investment strategy. We pri Establishing principles Climate change data We are supporting research into the financial impacts of climate change, an area previously given little attention in finance research. The NFI invited proposals from institutions and researchers capable of facilitating academic discourse and contributing 42 Exercising ownership Responsible Investment 2018 Government Pension Fund Global Exercising ownership 2.3 3 Exercising ownership 43 Voting We voted at 11,287 shareholder meetings in 2018. Voting is one of the most important tools we have for exercising our ownership rights. We use our voting rights to safeguard the funds assets and aim to vote at all shareholder meetings. We are open about how we vote. Our guidelines, expectati Exercising ownership 3.1 Voting priciples G20/OECD Principle Norges Bank Investment Management voting guidelines Institutional investors, stock markets and other intermediaries Vote in a principled and consistent manner to maximise the long-term profitability of the companies we are invested in to be voted on, the boards position on these items, and the relevant deadlines. Consideration of items The majority of our voting decisions fall within the scope of our published voting guidelines. There are, however, cases where the guidelines are less relevant due to the nature of the resolution. Exercising ownership Voting at shareholder meetings Once we have decided how we wish to vote, we use the platform to send instructions to our agent, which then forwards them to the shareholder meeting. Voting in 2018 We voted on 113,546 resolutions at 11,287 shareholder meetings in 2018. Of these r In a few cases, the candidate will not receive enough votes to be elected. In 2018, 409 candidates were not elected due to a lack of support. This corresponds to 0.9 percent of all director elections and compares with 0.7 percent in 2017. Chart 11 Share against management, by topic. Percent Chart S Exercising ownership Table 2 3.1 Votes against board recommendations among the funds top 50 holdings in 2018 Company Portfolio rank Resolutions voted against Subject of resolution(s) Apple Inc 2 United States 1 Proxy Access Alphabet Inc 3 United States 4 Remuneration, equal treatmen 50 We voted on 9,718 proposals on executive remuneration in 2018. Exercising ownership Responsible Investment 2018 Government Pension Fund Global Exercising ownership Executive remuneration Remuneration plays an important role in attracting talented executives and motivating them to do their best for the company. The board is responsible for recruiting the CEO and deciding on appropriate remuneration. Say on pay arrangements give shareholder 52 We have seen a decline in the number of governance-related shareholder resolutions in the US. We voted on 398 in 2018, compared to 460 in 2017. Shareholder support for these resolutions has increased over time, with 12.8 percent gaining majority support in 2018. The fund supported 80.4 percent o Exercising ownership However, only a small share of these resolutions win majority support: just 11 in 2018. These included environment-related resolutions at TransCanada Corp and Kinder Morgan Inc. We voted in favour of both resolutions and published our voting intentions ahead of both meetings. O 54 Through our voting, we seek to strengthen governance, improve financial performance and promote responsible business practices. Exercising ownership Responsible Investment 2018 Government Pension Fund Global Exercising ownership 3.1 The funds voting at shareholder meetings 1998 First equity investments Public voting guidelines 2003 First vote at shareholder meeting: HSBC Holdings Plc, 28 March Executive Board principles for corporate governance 2004 2005 All voting handled internally 2008 A Dialogue As a long-term investor, we engage in dialogue with companies. The aim of our dialogue is to promote good corporate governance and responsible business practices. 56 In 2018, we held 3,256 meetings with 1,420 companies. The size of our investments gives us access to board members, senior Exercising ownership position on corporate governance to 20 members of the business federation AFEP (Association française des entreprises privées) which issues the national corporate governance code. Dialogue on strategic topics In our dialogue with companies, we prioritise a set of strategic top documents, position papers or voting guidelines. Practices often vary between the companies we engage with. We follow up areas where we believe companies can improve. We also engage with leading companies to learn from their experience. 58 Sustainability Our long-term investment horizon means that Exercising ownership deforestation. We are also encouraging banks to improve their due diligence to avoid financing deforestation. We have contacted five regional banks about these topics. Deforestation in Brazil We also continued our dialogue with companies that buy and sell soya and meat in Brazi 60 component of lithium batteries used in electric vehicles, is associated with very poor working conditions, including the use of child labour. We contacted 14 companies to understand how they are managing the risk of human rights violations of this kind in their supply chains. We also asked them Exercising ownership implementation of these policies. Some also published statistics on policy breaches, the reasons for them, and the actions taken to prevent further occurrences. In our dialogue, a number of Australian and Chinese companies explained how they have been working to comply with nat Often we encounter the same individual on the boards of more than one of our companies, and it is important to us that this person is in a position to represent our interests on all of these boards. We find that companies understand our position. Some board members with numerous directorships have r Exercising ownership meetings with 67 companies in 2018. We stressed that this did not reflect a lack of confidence in the current incumbent, but called for a commitment to separate these roles the next time a CEO is recruited. standpoint. The resolution was supported by more than 92 percent of th Selected company dialogue on strategic topics Category Expectation Company Details Environment Climate change DBS Group Holdings Ltd Financing of palm oil 2017 Banco do Brasil SA Financing of soy, beef 2018 Banco Bradesco SA Financing of soy, beef 2018 CJ CheilJedang Corp Soy commodi Exercising ownership Category Expectation Company Details Goverance Board accountability and effectiveness Akzo Nobel NV Industry expertise 2017 Wells Fargo & Co Industry expertise 2017 Total SA Industry expertise 2017 The Weir Group Plc Long-term and transparent remuneration 2017 shareholder meeting, and when discussing changes to their articles of association and authorities to increase or reduce share capital. We discussed shareholder rights at 108 company meetings in 2018. We looked during the year at shareholders right to call extraordinary meetings. This is an important Exercising ownership emphasised our climate expectations. The company subsequently announced that it would no longer finance new coal-fired power production. Corporate actions Corporate actions are initiated by a public company and affect the securities issued by that company. They include dividen Severe environmental damage In October 2013, the Ministry of Finance asked Norges Bank to include oil spills and environmental conditions in the Niger Delta in our ownership work with the oil and gas companies Eni SpA and Royal Dutch Shell Plc for a period of five to ten years. The ministry also ask Exercising ownership reductions in oil spills and environmental damage in the Niger Delta. In February 2018, AngloGold Ashanti Ltd announced a plan to redevelop the Obuasi mine as a mechanised underground operation starting up in the third quarter of 2019. The plan was ratified by the Ghanaian parl Follow-up We work with companies, investors and other stakeholders to improve the information made available to the market and promote responsible business practices. This is particularly relevant where many companies in the same industry or value chain face the same challenges. 70 An important pa Exercising ownership 3.3 Good results on sustainability disclosure. Examples from various sectors Childrens' righs Climate change Water management The Coca-Cola Co Iberdrola SA Danone SA NIKE Inc SSE Plc Kellogg Co Stora Enso OYJ Westpac Banking Corp Gildan Activewear Inc Marks & Spenc 72 Children are the key to future prosperity but also the most vulnerable members of society. Exercising ownership Responsible Investment 2018 Government Pension Fund Global Exercising ownership Childrens rights Children are the key to future prosperity but also the most vulnerable members of society. As a fund investing for future generations, we attach importance to companies respecting childrens rights and taking action to prevent child labour. We have been assessin In 2017, we signed an agreement with UNICEF to establish a network for childrens rights in the apparel and footwear sector. The aim is to help improve the management of childrens rights in companies supply chains. 74 Since 2017, the network has brought together a group of leading companies in the Exercising ownership Water management Companies that use water unsustainably can impose substantial costs on other companies and society as a whole, and this in turn can impact on the funds long-term return. We have been assessing companies exposed to water risks since 2010. In 2018, we assessed 59 In June 2018, we organised a working meeting with CDPs water programme, inviting a number of companies and investors to discuss how companies can best manage and report on this type of risk. Large companies such as AnheuserBusch InBev SA, the Coca-Cola Company and the Campbell Soup Co attended the m Exercising ownership Climate change Climate change could affect company and portfolio returns over time. It could also open up business opportunities. We have been assessing how companies disclose on climate risks since 2010. In 2018, we assessed the reporting of 1,700 companies in 12 sectors: auto 78 Exercising ownership Responsible Investment 2018 Government Pension Fund Global Exercising ownership metrics as described in our expectation document on climate change. We found that 60 percent of companies had very weak reporting on deforestation. Reporting by pulp and paper companies is better than that of consumer goods companies. Generally speaking, European companies repo 80 Human rights We consider respect for human rights to be fundamental to good business practices and legitimate markets. We therefore encourage companies to be transparent about how they work on human rights and integrate them into business operations. We also want to know more about companies pro Exercising ownership The global apparel supply chain Good working conditions are essential for a sustainable apparel sector. However, there is no universal standard for assessing and monitoring working conditions in the apparel supply chain. Companies perform assessments of this kind as part of the Tax and transparency Corporate taxation plays a key role in funding public services in industrialised countries and may be even more important in many developing countries. Companies for their part benefit from societys legal and financial infrastructure. By paying taxes, they help finance this infr Exercising ownership transparency on tax, share experience and challenges with tax policies, and encourage companies to publish the boards strategies and policies on tax. Companies have highlighted three main challenges when it comes to tax transparency. The first has to do with public country-byco 84 In 2018, we surveyed corruption risks in the pharmaceutical sector. Exercising ownership Responsible Investment 2018 Government Pension Fund Global Exercising ownership Anti-corruption Corruption at companies and their agents, or in entire markets, undermines economic efficiency. Corruption disadvantages compliant companies and can reduce investors returns. In 2018, we published expectations of companies on combating corruption. Based on these 86 Exercising ownership Responsible Investment 2018 Government Pension Fund Global Exercising ownership Ocean sustainability How companies manage risks and opportunities related to sustainable uses of the ocean could affect our long-term return as an investor. We published expectations on ocean sustainability in 2018. We used these to perform an assessment of which companies disc 88 Investing sustainably Responsible Investment 2018 Government Pension Fund Global Investing sustainably 3.3 4 Investing sustainably 89 Risk assessments One important task in our responsible investment management is to get companies to move from words to numbers so that we can measure and evaluate their efforts and better understand risks and opportunities in our investments. 90 We monitor our investments and assess sustainability Investing sustainably analysis is supplemented, where relevant, with analyses from external data providers. Some of this is publicly available or made available via our participation in various initiatives. We also commission research from specialists when we need more sophisticated analysis. Clim 92 Investing sustainably Responsible Investment 2018 Government Pension Fund Global Investing sustainably Carbon footprint We have been analysing the funds carbon footprint since 2015. This analysis provides an insight into the level of greenhouse gas emissions from the companies we are invested in. It can also provide an insight into risks and opportunities across sectors and she their reports or via CDP. 15 percent provided relevant information permitting the calculation of emissions. For 60 percent of the companies in the portfolio, emissions have been estimated using models. This results in greater uncertainty than hard emission data. For 8 percent of companies, emissions Investing sustainably Table 5 Scope 1 and 2 emissions by sector as at 31 December 2018 Equity portfolio Reference index FTSE All Cap Tonnes CO2 equivalents Tonnes CO2 equivalents Tonnes CO2 equivalents 25,884,091 25,558,317 3,176,961,413 Consumer goods 4,752,213 4,521,544 456,633,469 To compare the sectors in our portfolio, we weight each companys emission intensity by multiplying it by the value of our investment in the company divided by the value of the funds investment in the sector. We then add together the results in each sector. Some sectors have a higher emission intensi Investing sustainably Table 7 Scope 1 and 2 emissions by market capitalization, weighted by market value of fund holdings.1 Equity portfolio, reference index and FTSE All Cap. As at 31 December 2018 Equity portfolio Reference index FTSE All Cap Tonnes CO2 equivalents per million dollars investe Sustainability assessments We use our databases of sustainability data to monitor and analyse the companies in our portfolio. We monitor environmental, social and governance risks in the countries, sectors and companies in which the fund is invested. Country analysis In 2018, we continued to develop Investing sustainably 4.1 Sector analysis Number of companies assessed Environmental, social and governance topics Clothing and accessories, Footwear, Apparel retailers, Broadline retailers and Specialty retailers 265 Health and safety of workers, wages and benefits, labour conditions, child l 100 In 2018, we assessed carbon emissions at 78 steel companies Investing sustainably Responsible Investment 2018 Government Pension Fund Global Investing sustainably Company analysis We divide company analysis into two categories: material ownership reports and incident briefs. We produced five material ownership reports in 2018. Here, we systematically analyse companies where the fund has a significant percentage holding. These reports lo 102 Investing sustainably Responsible Investment 2018 Government Pension Fund Global Investing sustainably 4.1 Development of the funds environmental mandates, exclusions and divestments Contributing to positive externalities Avoiding negative externalities From lender to owner 1998 Environmental fund established 2001 Initial exclusion mechanism for investments established Investments Our goal is to use sustainability data to identify long-term investment opportunities. We see potential in companies that contribute to more environmentally friendly economic activity. 104 Environment-related mandates The management mandate from the Ministry of Finance requires Norges Investing sustainably We screen our environmental investments against information supplied by specialist external data providers and integrated into our sustainability databases. Our goal is to determine the extent to which our investments are exposed to selected environmental themes through their 106 Investing sustainably Responsible Investment 2018 Government Pension Fund Global Investing sustainably 4.2 Environmental universe internal definitions Categories Groups Definitions Companies that provide solutions to climate change and pollution Low-emission energy and alternative fuels Providers of energy, infrastructure and energy solutions for transport, buildings and and alternative fuels, as it was the first year when more capacity was built for renewable power production than for coal-based and nuclear power. This trend continued in 2018, with renewables accounting for nearly 70 percent of net installed power capacity. Companies in our mandate for low-emission Investing sustainably 4.2 Table 11 Top ten equity holdings in the low-emission energy and alternative fuel segment in the funds environmental portfolio as at 31 December 2018 Millions of kroner Share of portfolio Percent Utilities 3,434 7.9 United States Utilities 3,283 7.6 Sempra Energy 110 Natural resource management Efficient utilisation of natural resources is important for water management, waste management, recycling, agriculture and forestry. Meeting the worlds need for high-quality water in an efficient manner is a global challenge. The infrastructure to achieve this requir Investing sustainably 4.2 Table 13 Top ten equity holdings in the natural resource management segment in the funds environmental portfolio as at 31 December 2018 Millions of kroner Share of portfolio Percent Industrials 1,676 3.9 United Kingdom Industrials 1,482 3.4 Xylem Inc/NY United S Divestments There are companies in which we choose not to invest. These include companies that violate fundamental ethical norms or impose substantial costs on society through their operations. By not investing in these companies, we reduce our exposure to unacceptable risks. 112 The Ministry of F Investing sustainably 4.3 Ethical decisions in 2018 Category Criterion Exclusion Thermal coal mining or coal-based power production 2 PacifiCorp, Tri-State Generation and Transmission Association Inc Severe environmental damage / Human rights violations 4 Evergreen Marine Corp Taiwan Ltd, that derive 30 percent or more of their revenue from the production of thermal coal, and power companies that derive 30 percent or more of their revenue from coal-based power production. In 2018, four companies that produce nuclear weapons and two coal companies were excluded. A total of 105 compani Investing sustainably Impact on the funds equity returns When companies are excluded from the fund, they are also removed from the benchmark index. Product-based exclusions have reduced the cumulative return on the equity benchmark index by around 1.8 percentage points, or 0.07 percentage point ann Risk-based divestments In 2018, we divested from 30 companies following assessments of governance and sustainability risks. Altogether, we have divested from 240 companies since 2012. 116 The integration of environmental, social and governance issues into our risk management may result in divestme Investing sustainably for assessing companies under the coal criterion in the Guidelines for Observation and Exclusion of Companies from the Government Pension Fund Global. The difference with our internal divestment criteria is that we have chosen to divest from companies where it is difficult to Divestments in 2018 Expectation Theme Criteria Climate Change Palm oil production Owns/operates plantations in Malaysia and Indonesia 2018 Relevant percentage of business mix allocated to palm oil production RSPO certification status and plans Rubber production 2 Owns/operates rubber planta Investing sustainably 4.3 Divestments in previous years Expectatation 2018 2017 and earlier1 15 127 Water Management 0 46 Anti-corruption 9 13 Human Rights 4 17 Other 2 7 30 210 Climate Change Total 1 s of 2018, subsidiaries and financing arms of existing divestments are no l Examples of such signs include documented incidents relating to corruption or governance. Human rights We have assessed companies exposure to social risks in areas such as human rights, labour rights, and health and safety. In some cases, we found that companies with high inherent risk exposure had Investing sustainably 4.3 developments and affecting the share price of Chart 14 Return impact of risk-based divestments on individual companies. In the short term, it is the reference portfolio for equities, compared Chart 14that Return impact of risk-based divestments on the for equities, compar 122 Investing sustainably Responsible Investment 2018 Government Pension Fund Global Investing sustainably 4.3 Responsible Investment in the Management Mandate Chapter 1. General provisions Section 1-3. The management objective 1 The Bank shall seek to achieve the highest possible return after costs measured in the investment portfolios currency basket, see section 4-2, first par ISSN 2387-399X Design: Scandinavian Design Group Photos: Hans Fredrik Asbjørnsen, Offset, Getty Images, Shutterstock. Paper: Galerie Art Silk 300 g / Matt 150 g Production: 07 Media AS Print run: 500 NORGES BANK INVESTMENT MANAGEMENT Bankplassen 2, P.O. Box 1179 Sentrum, NO-0107 Oslo, Norway T: +47 24 07 30 00, www.nbim.no