Partner to the Norwegian local government and healthcare sector for a sustainable transition
The overall objective of KLP’s investment strategy is to contribute to the lowest possible pension costs for our owners through a good return on the pension assets. KLP is invested in over 9,600 companies around the world, in all sectors and in both developed and emerging markets. An important principle behind our investment strategy is to have widely diversified portfolios in order to spread the risk. If the value of the investments is to increase over time, the underlying economic activity must be responsible and sustainable. We are therefore constantly working towards greater accountability in the business world in order to reduce the risk of breaches of international norms and to contribute to effective and well-functioning capital markets.
Sustainable management of pension assets
Investing pension assets is not just about generating returns, it is also about doing so in a sustainable way. At KLP, we have a goal to reach net-zero emissions from the investment portfolio by 2050, and we are working on a full-scale restructuring plan for KLP’s investment strategy. To achieve our goals, we are an active investor and owner, and use several tools to push companies towards long-term sustainable development and value creation. Responsibility in our investments and in ownership is rooted in the Group’s strategies and policies. These include fundamental expectations in the areas of environment, climate and social factors, and are based on international standards such as the OECD Guidelines for Multinational Enterprises, the UN Guiding Principles on Business and Human Rights, the UN Global Compact principles and the UN Sustainable Development Goals.
Key management principles are:
- Long-term investment horizon with stable allocation, to harvest risk premiums in the market
- Large investment universe with good diversification through investments in a wide range of different asset classes, sectors, geographies and companies.
- Large portfolio providing for economies of scale and cost-effective management
- Risk management adapted to the company’s long-term risk capacity
- All investments subject to a responsible investment policy
All of KLP’s investments are in line with government-established frameworks, and with policies and guidelines set by KLP’s Board of Directors. This includes rues for the types of risk that can be taken in fund management and ensures that the investments are in line with the company’s goals for corporate social responsibility and sustainability. Diversification of risk across sectors and countries is also important.
KLP takes a strategic approach to managing the pension assets, focusing on cost-effective management, among other things. So the company bases its investments less on a short-term tactical market approach, and more on being able to harvest risk premiums in the market in the long term. This means that KLP’s management strategy in the liquid markets is mainly index-tracking.
The risk in fund management is adjusted to minimise the likelihood of the company not satisfying statutory solvency requirements. Care is also taken to maintain risk capacity over time to be able to harvest risk premiums in the various markets. Good financial strength through high buffer capital is key to achieving the company’s goal of the lowest possible pension costs over time. This means that the company’s solvency is viewed in a longer-term perspective when determining the level of risk in its management of the pension assets. Through the year, risk is managed dynamically through a policy rule for handling large market movements. KLP’s management of listed shares is mainly administered by KLP Kapitalforvaltning, a wholly owned subsidiary of KLP.