NORWAY - The Norwegian Ministry of Finance has issued a public consultation on the evaluation of ethical guidelines for the Government Pension Fund - Global, which reveal environmental concerns will be an important factor in the management of its real estate portfolio.

The consultation paper provides a background to the existing ethical guidelines used by the Government Pension Fund - Global through both Norges Bank and the Council on ethics, and requests feedback on proposals that could strengthen the fund's profile as a responsible investor.

More specifically, the consultation document notes changes to the investment strategy of the fund - including an intention to allocate 5% to real estate and to expand the benchmark portfolio for equities to include all emerging markets - might also affect the development of the ethical guidelines. (See earlier IPE Real Estate article: Norway pension fund allocates 5% to real estate)

The Ministry of Finance added because of the potential for more influence through its larger ownership stakes, the fund's real estate effort "should be subject to special environmental considerations".

It highlighted this will be the case in the areas of energy efficiency, water consumption, and waste handling, and confirmed the Ministry's investment mandate in relation to real estate will include a requirement that Norges Bank shall "actively participate in the international effort to promote special environmental considerations", and how this would integrate into the investment process.

Kristin Halvorsen, Norwegian minister of finance, said: "We believe that we are at the forefront and can help shape the debate on how investors can best assume responsibility for environmental, social and governance issues."

The Ministry of Finance pointed out the ethical guidelines for the fund would "generally speaking" apply to investments in new asset classes like real estate, but admitted real estate investments will primarily be unlisted real estate funds and companies, so the ownership stake will be high and the investment illiquid for disinvestment purposes.

The focus on real estate is part of Norway's wider review of responsible investment management on behalf of Pension Fund - Global.

Deadline for submitting a response to the consultation is September 15 2008, and the results of the evaluation process will be presented to the Norwegian Parliament in a white paper on the management of the pension fund in spring 2009.