Transcription
Well, I would say the outlook is very uncertain, and it's interesting because the companies which have reported so far, uh, this season have, a lot of them have dispelled the, uh, the outlook. So, uh, very uncertain what the, what the outlook is going to be on the back of what's going on in the Middle East. We are seeing, of course, consequences in the energy market. We are seeing more consequences in Asia. Uh, we expect that to move into Europe and then subsequently into the US and potentially lead to to higher prices.
We spoke to the finance minister, Yen Stolenberg. He was very clear that this is an index fund that tracks the global market. Given the precariousness and and and the situation at the moment in the world economy, is this a moment to maybe reconsider and make it a more actively managed fund?
>> Well, interestingly, I think this is a period where it's very good to be an index fund. Uh, because what's happening with AI and technology and so on is deflationary and it's positive for the markets, but it's difficult to know exactly how you're going to navigate the market. So, in a way, I'd rather be invested in the whole market at this stage rather than trying to pick individual stocks. So, from that point of view, to have this clear mandate from the ministry is a very good thing to have.
>> But being an index fund means inevitably, if if there is a downturn, especially in the sector where the fund has made some of its biggest gains in recent months, in the tech sector, if there is a correction, then potentially the losses and the hit to the fund could be fairly substantial, and is that right for the Norwegian people?
>> Well, absolutely. Well, so that's absolutely correct. Uh, we are an index near fund, and that means that you participate in the, uh, in the upturns, and you participate in the downturns, and that's the way you have to be positioned as a as a long-term investor. Now, we invest with a very, very long time horizon. Uh, we are broadly diversified across the whole world. We own 7,000 companies, and so, uh, for sure, if markets go down, we'll go down too.
There are some estimates about one of the upsides from the higher oil and gas price that Norway gets as Europe's, Western Europe's biggest petroleum producer, that after the Ukraine war, Russia's full-scale invasion of Ukraine, revenues in the subsequent years jumped by $140 billion. Since the Iran war began, Norda Financial Services estimates that oil revenues for Norway went up by 8 billion in the last couple of months. Some say there's then a moral imperative attached to that to not just put it in the fund, to use it to bolster democracy, to protect, to help defend Europe, which Norway would also benefit from. Is that not just as important as the fund invested for future generations?
>> Well, I think it's important to say that we now have five times as much money invested in the fund as we have on, you know, of oil and gas left on the shelf. So, uh, the impact, uh, through the fund, uh, via the financial market is more important than than what the oil price does. Now, when it comes to how the money is spent, that's not my responsibility. That's, uh, up to the politicians to decide that.
One of the things that, um, politicians are also grappling with is this issue of of ethical investments. Um, the fund divested some of its holdings in Caterpillar, um, because of its involvement in Israel. There is talk in the parliament of of holding back on any further ethical, um, divestment decisions. As someone overseeing the fund, what do you think the best interests financially for the fund are in terms of returns? Is it to have more of an ethical stance, or is it to just follow where the the biggest gains are going to come from?
>> Well, we've had, uh, ethical guidelines, uh, for a long, for a long time, and then the government decided to suspend these guidelines and to put down a commission which is looking at them, uh, from scratch, and that's what's happening now. So, we'll hear more in the autumn what the results will be from this, and I suspect that there will be some new rules, uh, put in place from, uh, next summer.
Where does the fund, and where do you stand on the issue of sustainability? Because recently the fund has has rode back on, um, its expectations of companies to to to meet previous climate-related targets, saying that actually the overall target of limiting, um, global warming, uh, to 1 and a half degrees CC is unachievable. So, there's no point expecting companies to try and stick that. Arguably, if we're so far off keeping within that target, there's more of an imperative on companies who are, you know, some of the biggest emitters to do more to tackle that.
No.
>> Yeah. I, I beg to disagree slightly with with your, uh, with your statement, because our, uh, philosophy and our views have not changed. They are the same. Uh, we think companies need to behave in a sustainable way. Uh, what is very important is that when we advocate overviews, is always tied to financial outcomes. Uh, and it's important for us that that's kind of the number, the number one goal, uh, that that we have as a fund. Now, if you are not sustainable, and then you will just not have a business in the long term, and that's why it's important to, uh, to get to these goals.
Uh, so, in in terms of, um, for example, voting in support of the BP chair, um, and the, um, the notion that having to water down the climate goal reporting requirements within the company. Is that a sort of signal to other companies that, um, you're not going to actively push them on their climate-related target?
>> No, you should not see it, uh, in that view at all. Um, we have a lot of shareholder proposals all the time that we vote at. We actually vote at more than 100,000 proposals every year. If a shareholder proposal is too descriptive, and we already think that the company is doing a lot, we will typically not support it. So, uh, some of these proposals are are really complex and needs a lot of work to understand the implications.
>> Um, talking about voting against shareholder proposals or in favor of shareholder proposals, um, very well publicized when you as a fund voted against Elon Musk's pay package a couple of years ago or last year. Um, one of the biggest, the biggest IPO that's in line to go ahead this year is SpaceX. Will the fund be investing? Have you had conversations with Mr. Musk?
>> Um, well, we are in, we are in the process in that IPO, as we are in all IPOs. We have a separate department called ECM, European Cap, uh, Equity Capital Markets. They would typically be involved in most of the pre-IPO processes around the world, and we are also part of that process.
>> Have you invited him to today's conference?
[laughter]
>> Uh, no, we were pretty full. We got a lineup, a tremendous lineup. Uh, so we have not invited him.
>> Too full to invite Elon Musk.
>> Well, we cannot invite everybody, but, uh, uh, clearly the job they've done with SpaceX is is very, very impressive. The job they've done with with Tesla is impressive. So, I don't think you cannot see that as a reflection of of view on, uh, on those companies.
>> And he hasn't been in touch to say, where was my invitation to the biggest sovereign wealth fund conference, investor conference in the world?
>> No. Uh, that's great.
>> Okay. Um, let's talk a little bit about AI. Uh, because a lot of financial services companies are using AI to be more efficient, to guide their their decisions in some cases.
What role do you see artificial intelligence having in the way you operate the fund?
>> Oh, it's, it's, it's huge, right? We have been, um, really pushing this for the last 3 years. We are talking about it every time we get together. We, it impacts the way we recruit. We got ambassadors across the firm. We got events across the firm. We have kind of forced training schedules. We got AI teams. I mean, we are just all over it. And we are seeing that the effects are really coming through. So, over the last year, we estimate that we've become roughly 20% more, uh, productive as a firm. We, uh, the use of AI is generating huge savings in our trading costs because we, we can internalize more of the trading that we do. So, we don't have to put it out to the market. So, I would say it impacts pretty much everything we do, and it's a, it's a phenomenal thing.
>> And from what you've seen so far of the the way it's guided any investment decisions, have the returns on those AI-guided decisions been as successful and as big as the human-guided decisions?
>> Well, we, we do not use AI to make investment decisions. We always have a human in the loop, and so they do not make autonomous decisions.
Do you foresee a time where maybe AI would make the investment decisions?
>> I, I can't really see that happening here. Of course, there were a lot of, uh, conferences and so on where that's now already taking place, but we are not doing