The Government Pension Fund Norway’s (GPFN) investment manager, Folketrygdfondet, has published an updated and expanded set of sustainability expectations for the companies in which it invests.

The document, which applies to all holdings within the GPFN and the Government Fund Tromsø (SFT), outlines how the asset manager intends to use its position as both a shareholder and a creditor to drive long-term, sustainable value creation.

The expectations signpost the areas Folketrygdfondet considers material to financial performance and systemic stability, and build on global standards including the UN Global Compact, Organisation for Economic Co-operation and Development (OECD) guidelines, UN guiding principles on business and human Rights, IFRS S2 and the Taskforce on Nature-related Financial Disclosures (TNFD).

On corporate strategy, the asset manager said it expected boards to define well-reasoned long-term plans covering business model, capital allocation, financial targets and risk considerations.

It noted that targets for return on invested capital should be clearly linked to the company’s risk profile, while surplus capital is expected to be returned to shareholders through dividends, buybacks or capital reductions.

Boards must also follow good-governance principles, including independent oversight and equal treatment of shareholders.

Notably, the document places significant weight on climate transition.

Folketrygdfondet stated that it expected companies to align operations with a net-zero pathway consistent with the Paris Agreement, supported by science-based interim and long-term emissions targets that cover both direct emissions and material Scope 3 impacts.

Boards are expected to integrate climate risk into financial planning and incentives, undertake scenario analysis - including a rapid-decarbonisation pathway - and report transparently on transition plans, carbon pricing assumptions and any climate-related lobbying.

Nature and biodiversity also feature prominently, marking a strengthening of expectations in line with the Kunming-Montreal Global Biodiversity Framework.

Meanwhile, companies exposed to material nature-related risks are expected to assess physical, transition and liability risks, develop goals and roadmaps for a nature-positive transition, and report in line with recognised frameworks such as TNFD.

Boards should ensure nature considerations are integrated into strategic decisions, risk systems and financial planning.

The updated guidance also reinforces expectations on human rights and labour rights, requiring continuous due diligence across operations and value chains, enhanced assessments for high-risk geographies or sectors, and transparent reporting.

Anti-corruption expectations also remain stringent, covering whistleblowing systems, partner due diligence, training, and regular programme reviews.

In a marked expansion, the expectations now extend to bond issuers and lead managers, reflecting Folketrygdfondet’s role as both equity investor and creditor.

Indeed, issuers are expected to provide clear, timely disclosure, facilitate regular reporting and ensure that bond documentation reflects the issuer’s risk profile.

For sustainability bonds, companies are asked to adopt frameworks aligned with International Capital Market Association (ICMA) principles and secure third-party verification.

Folketrygdfondet said the updated expectations reflected its long-term mandate and the premise that sustainable development and well-functioning markets underpin robust financial returns.

The asset manager added that it will use the expectations as the basis for engagement and will provide clear feedback where companies fall short.

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