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Norges CEO Issues Warning to Boards

Norges CEO Issues Warning to Boards

by Starling Insights

Starling Insights Editorial Board

Observations

As the World Economic Forum kicked off in Davos this week, Nicolai Tangen, CEO of Norges Bank Investment Management — known more colloquially as Norway’s “oil fund” — issued a clear directive to the boards of companies in which the fund invests:

"We expect boards to sharpen up," Tangen wrote in a Financial Times article. "They must become increasingly effective in overseeing business strategy and management in a complex business environment".

In the opinion piece, Tangen stated that companies should report on climate matters and set net-zero targets in 2023. The fund's decision to integrate ESG risks, he maintains, is about making sound investment decisions rather than striking a political stance. "In an uninhabitable world," he warned, "the value of our fund is zero."

According to Tangen, an essential quality of a strong board is its broad range of perspectives, competencies, and backgrounds. "We expect boards to have at least 30 percent representation of each gender, and we will increasingly vote against those that fail to meet this condition," he wrote. In past remarks issued by Norges, it appears clear that the investor views diversity, equity and inclusion issues as matters of corporate governance concern.

This call to action follows a continued trend of institutional investors, including asset managers and sovereign wealth funds, adopting a stewardship role with regard to their portfolio holdings. Read more in "The Stewardship Mandate," a piece from our 2020 Compendium by Starling Advisor Siew Kai Choy, former Managing Director of GIC — Singapore's sovereign wealth fund.

"Institutional investors have a stewardship interest in promoting the long-term health of the companies in their portfolios," Choy wrote. “By acting to ensure that boards pursue effective corporate governance objectives, institutional investors align company interests with the investors’ own.”

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