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22 September 2008
Global Pensions: SWFs fall behind with SRI
Source: www.globalpensions.com
by Steven Dignall 22 September 2008
NORWAY – The US$381bn Government Pension Fund-Global, a self-proclaimed leader in ethical investments, does not apply best practice in sustainable investments, according to Innovest.
The financial analyst’s report, commissioned by the World Wildlife Fund (WWF), found that the world’s second largest sovereign wealth fund was significantly lagging behind top public pension funds, primarily due to not applying the latest best practices for positive screening and targeted environmental investments.
In particular, it revealed that better company management of carbon issues translated into better investment performance globally – more than 3% greater return annually.
The report also found public pension funds such as ABP in the Netherlands and the California Public Employees’ Retirement System (CalPERS) were leading the way in socially responsible investing, while the Norwegian government pension fund was not fully addressing the impacts of global warming.
“Sovereign wealth funds can incorporate climate risk considerations directly and systematically into their actual stock selection and portfolio construction processes”, the report said.
“It is at this level that investors can send the strongest message to companies, produce significantly changed company behaviour, and, most importantly, improve their long term, risk-adjusted returns.”
The analysis found funds using socially responsible investment through positive screening strategies and using their influence as large investors to encourage improved company behaviour enhanced investor returns, risk management and reputation.
Innovest senior consultant and report lead author Karina Wong told Global Pensions: “Socially responsible investment can no longer be seen as a purely ethical exercise that reduces profit while doing good.
“Rather, in an increasingly resource restricted world, sustainable business models are a crucial indicator for long term profitability and risk reduction.”
The Norwegian fund is based on petroleum revenues and owns more than 1% of all European stocks.
WWF-Norway chief executive officer Rasmus Hansson said: “Loaded with petroleum cash, Norway has a special responsibility to invest in low carbon development.
“The Norwegian government is currently revising the ethical guidelines for the fund and now has a unique opportunity to introduce more progressive instruments for sustainable investment, such as positive screening and a climate technology investment fund.”
Norway''s Government Pension Fund-Global was unavailable to comment.
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