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Norway’s wealth fund sets anti-corruption expectations

Norway’s sovereign wealth fund, the world’s largest at $1trn (€808.8bn), has set out a series of strong anti-corruption measures it expects the 8,985 companies it invests in to have.

Stop corruption

Norges Bank Investment Management’s chief executive, Yngve Slyngstad, said that the companies needed the measures to be integrated into their business strategy, risk management, and reporting.

“We expect all companies we are invested in to have effective anti-corruption measures in place,” he said.

“Data on corporate governance and sustainability can influence our investment decisions. Our goal is to reduce the fund’s risk. We want companies to move from words to numbers so that we can get a better understanding of financial opportunities and risks.”

The fund’s expectations for the companies included establishing a clear policy on anti-corruption, integrating anti-corruption into business operations, and reporting and engaging on anti-corruption programmes.

The fund’s document which outlined its anti-corruption expectations said corruption at companies and their agents, or in capital markets, undermined economic efficiency, disadvantaged compliant companies, and was detrimental to shareholder value.

“In the long term, broadly diversified investors are likely to see reduced returns due to capital being diverted away from its most efficient allocation. Corruption, and a wider lack of the rule of law, are barriers against the effective participation of countries in the global economy,” the fund said.

“Corruption exposes companies to legal and financial risk through penalties and blacklisting. In addition, corruption exposes companies, their investors and business partners to significant reputational risk.”

During Expert Investor’s conference in Norway in late 2017, 38% of delegates said environmental, social, and governance (ESG) factors were a consideration when making allocation decisions. Another 23% said it was an increasingly important consideration, 23% said it was sometimes a consideration, and 15% said it was never a consideration.

When asked if delegates had an ESG policy when it came to fund selection and portfolio construction, 38% said they did for every client, 44% for when it was required, and 19% did not.

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