Norway’s $1.3tn oil fund calls for greater gender equality

Norway’s $1.3tn oil fund has finally revealed its position on gender equality as the world’s largest sovereign wealth investor said that all companies with less than 30 per cent female directors should consider having a target to boost the number.

The fund, which owns the equivalent of 1.4 per cent of every listed company in the world, first formulated its views on gender equality in 2018 but they remained unpublished because of worries they could be perceived outside Norway as an attempt to impose “Nordic values”. One state official said at the time that Norway’s government had not been comfortable with the proposal.

The Norwegian fund published a position paper on “board diversity” on Monday saying directors should have a “diversity of competences and backgrounds”. It added that if one gender had less than 30 per cent representation on a board, companies would weigh diversity targets and report on the progress.

“As a sovereign wealth fund we are careful about pushing issues that are seen as political. But this issue on gender balance isn’t political, it absolutely makes business sense,” Carine Smith Ihenacho, the fund’s chief corporate governance officer, told the Financial Times.

The fund’s new chief executive, former hedge fund head Nicolai Tangen, is keen to use environmental, social and governance issues to boost its returns. He has already announced that the fund from this year will announce all its voting decisions five days ahead of annual shareholder meetings.

Norway was the first country in the world to introduce a gender quota for boards, deciding that public companies should have at least 40 per cent of each gender from 2008. The policy has worked smoothly despite an initial outcry, but has done little to address the low number of female executives in Norway.

Yngve Slyngstad, Tangen’s predecessor as head of the fund, told the FT in October 2018 that it had hesitated over lobbying for gender balance “because it has to be clearly understood both internationally and with regards to our own governance structure that this is not in any way moving into an area that looks like politics”.

Ihenacho said that the fund had already begun voting last year against directors on nomination committees at 16 large and midsized companies in the US and Europe that had no female directors. One of those targeted according to voting records was Southern Copper, part of Grupo México. This year, it will target companies in developed countries with fewer than two female board members.

In its position paper, the fund noted that there were potential negatives to introducing a demand on gender diversity, such as an unclear link as to whether it improves performance and the possibility that it could crowd out other criteria for non-executive directors. But Ihenacho stressed that these were outweighed by the value of different perspectives, improvements to decision-making, and because “diversity is increasingly important to the legitimacy of boards”.

Headhunters in Norway said the quota law forced them and boards to look beyond their traditional talent pools for directors. Ihenacho said the 30 per cent target may not be ambitious in Scandinavia but “globally, it’s a big stretch in many markets”.

The Norwegian fund has taken an increasingly active stance on ownership matters in recent years, setting out its expectations on issues such as how chief executives should be paid, how theirs and chair roles should not be combined, equity issuance and different voting classes of shares.

Letter in response to this article:

Africa should strive for its own ‘Nordic values’ / From Nana Adjoa Hackman, Managing Partner, Africa Legal Associates, Accra, Ghana