Biggest wealth fund asked to assess impact of Aramco listing
14 Feb 2018 - 0:11
After the world’s biggest wealth fund shocked energy markets in November when it proposed cutting oil and gas stocks from its equity index, it now faces a conundrum on how to handle the impending public offering of the world’s largest oil company.
Saudi Arabian Oil Co. "will own petroleum resources to a much greater extent than the oil companies currently listed on stock exchanges and will contribute to a higher resource rent risk,” Norway’s Finance Ministry said in a letter to Norges Bank published on Tuesday. It has asked the central bank and the fund to review what impact a listing of Saudi Aramco will have on the fund’s reference index.
Yngve Slyngstad, the head of Norges Bank Investment Management, told Bloomberg on Tuesday that he would consider the Saudi Aramco as any other public offering.
Norway Wealth Fund Should ‘Immediately’ Cut Oil, Ex-Staffer Says
Norway’s sovereign wealth fund is now the biggest of its kind, hitting a $1 trillion valuation in November.
The sovereign wealth fund, the biggest of its kind, owns 1.4 percent of all listed companies and actively pushes for higher environmental, social and governance standards for its vast portfolio.
"We expect all companies we are invested in to have effective anti-corruption measures in place,” Chief Executive Officer Yngve Slyngstad said in the statement. "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 expects companies to establish clear policies on anti-corruption, integrate measures into their operations and report and engage on anti-corruption programs, it said in a document on
Tuesday, when it presented its annual responsible investment report. The fund voted at more than 11,084 shareholder meetings, and earmarked 67.8 billion kroner as environmental investments that returned 21.7 percent in the year.
Norway’s wealth fund is becoming increasingly activist in its approach to investing, with a particular focus on corporate governance issues and voting. It has attacked excessive CEO pay and refuses to invest in companies that fail to live up to its environmental and ethical standards. Because the fund largely follows indexes when it invests, the ability to influence companies by voting is key to its strategy.
Last year, the fund called for more transparency from companies on taxes and said that these should be paid where the economic value is generated. It also proposed reining in long-term incentive packages for chief executive officers and urged boards to be more transparent on executive pay.