Norway’s Ministry of Finance has backed a move which would see the Government Pension Fund Global (GPFG) reduce its exposure to European equities.

Publishing its annual white paper on the Government Pension Fund (GPF), which is formed of the GPFG and the Government Pension Fund Norway (GPFN), the ministry has proposed increasing the exposure to equities in the USA and Canada.

The idea was first mooted a year ago by the fund’s investment managed, Norges Bank Investment Management (NBIM), in response to the ministry’s request for an assessment by NBIM of the geographical distribution and composition of the benchmark index for equities for the fund.

Minister of Finance, Jan Tore Sanner, said: “The changes we are proposing will ensure the investments better represent the distribution of value creation in listed companies globally.”

In addition, the Ministry of Finance has said it will continue reviewing the composition of the emerging market sub-benchmark and present its assessment in the white paper in the spring of 2021.

The report from the committee that has reviewed the ethically motivated guidelines for the GPFG, together with analysis and assessments from Norges Bank, will form part of the decision basis. New markets will not be included in the GPFG equity benchmark until the ministry has concluded on its composition.

“Emerging equity market investments may contribute to enhanced diversification and bring opportunities for higher expected returns. At the same time, emerging markets are typically characterised by weaker institutions, less transparency and weaker protection of minority shareholders. Such country-specific issues make maintaining the role as a responsible investor more challenging,” the report stated.

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