Process
14.08.2009
The companies in KLP's investment world are monitored continuously for breach of our ethical guidelines. Selling the shares is a last resort if the company does not show willingness to improve.
For the analyses that provide the basis for KLP's involvement and exclusions we rely mainly on GES Investment Services (GES), but also on the Ethical Council for the Norwegian Government Pension Fund - Global (NGPF).
Incidents
GES carries out daily news searches in 9000 news sources such as news media, industry journals, newsletters, UN organisations and the authorities to sweep up all potential violations of the guidelines. The Ethical Council also uses similar information searches. The Ethical Council investigates cases on its own initiative or as a result of external approaches or directives from the Norwegian Ministry of Finance.
Investigation
GES then investigates the event by contacting the company and other interested parties, for example international organisations and NGOs (non-governmental organisations) to collect the facts and create the most objective picture possible. All allegations have to be confirmed by the company itself or by a trustworthy official source, for example the authorities or UN bodies. The Ethical Council has its own secretariat which investigates the cases.
Dialogue
GES contacts the company for their comments and a dialogue concerning the event on our behalf. In a number of cases KLP also has direct contact with the company. Dialogue with companies is normally a combination of meetings, e-mail correspondence and telephone conferences. The aim is that the company should work to improve so exclusion can be avoided. KLP's experience is that a strategy that combines dialogue and exclusion is effective, since openness concerning our work gives weight to the demands we make.
Satisfactory result?
If the investigation concludes that the company is associated with breach of norms and over a period of time does not show responsibility or willingness to tackle the problems, GES will recommend KLP withdraws. To avoid exclusion the company must fulfil four requirements:
The reported activity has ceased.
The company has handled the activity and the consequences in a responsible way.
The company has systems and procedures in place to prevent similar occurrences in future.
Paragraphs 1-3 are verified by a third party.
Re-instatement
The dialogue with the company continues after KLP has sold its shares. The aim remains that the company should improve its policy and its procedures so that they no longer breach our ethical guidelines, and therefore it becomes open once again for investment. The four requirements above also apply for the company to be re-included.
Implementation in KLP's asset management
When the list of excluded companies is approved by KLP, it is made known to all managers, both external and internal. The list is also included as part of the audit procedures in our mid-office: any breaches will be captured, reported and corrected.
Publication
KLP publishes exclusions and re-inclusions twice a year (in June and in December). The Ethical Council publishes its advisories continuously.
External asset management
In those funds, investment companies and collective structures in which KLP is a part-owner and cannot directly influence the company's or the fund's investment practices, principles and policy will be maintained through selection criteria and active exercise of ownership. KLP continuously monitors how external managers and funds maintain responsible investment practice. If asset management conflicts with KLP's principles and policy, consideration will be given to withdrawing investment funds. In general KLP wants to encourage other investors to move ahead in this area. Entering into agreements on external asset management or other matters can provide a good opportunity for us to influence other investors and other parts of the finance industry towards a responsible investment tragedy.
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