For children - of children?

Article in Aftenposten 22 December 2009 by Magdalena Kettis, Head of Social and Environmental Issues, Ownership Strategies, Norges Bank Investment Management (NBIM).

Children all over the world will receive new toys and games for Christmas. Unfortunately, the chances of that happening at the expense of other children's rights.

A review of 29 toy and game manufacturers in the portfolio for the Government Pension abroad shows that very few companies have taken steps to prevent children involved in the production of toys. Only five of the companies report that they have policies against child labor, and only one has a system to verify whether the activity violates the rights of children. Five of the companies report that they constantly analyze the risk of child labor in its operations, while six say they have introduced the control of the supply chain, according to the survey conducted in November by the fund manager, Norges Bank Investment Management (NBIM).

The companies surveyed produce well-known and popular brands that probably is on many Christmas wish lists. They have a total market value of about 1100 billion. Just over half are located in Japan and other Asian countries, while about ten are from the USA. The survey is based on publicly available information.

The risk of children involved in the production of toys is thus barely under control, and the toy sector must obviously be monitored going forward. NBIM is, which manages the Government Pension abroad, well-positioned to do this through an active corporate governance. With a market capitalization of 2,549 billion Norwegian kroner at the end of the third quarter and investments in more than 8000 companies worldwide, the "oil fund" the largest endowment fund. NBIM has appointed children's rights as one of its priority areas of corporate governance.

About 150 million children aged five to 14 years will today participate in child labor, according to a UN report from November. NBIM analyze annually the sectors and companies in the portfolio where the rights of children are most vulnerable. The analysis is based on guidelines in NBIM Investor Expectations Wed Children's Rights, a document that explains the expectations we have for the companies' handling of child rights and child labor. Toy sector is new this year. We are planning additional five reports early next year in the sectors of steel, textiles, cocoa, technological equipment and the mining industry.

NBIM user ownership actively to ensure the Fund's long-term financial interests and show responsibility with regard to social and environmental issues. One of the most important tools in this work is direct dialogue between investors and companies. In some cases, achieved the best results when the dialogue be conducted with several companies in the same sector at the same time so you can have impact on the industry level. Dialogue NBIM has led multi-national companies in the seed industry of child labor in bomullsfrøproduksjonen in India is an example of this. The dialogue resulted this year in an industry standard for child labor and a shared commitment from the companies to try to eliminate child labor in production. To gain the sector level, not just in individual companies, will become increasingly important.

Many companies have inadequate reporting on social and environmental issues and could lead to a valuation problem. Liability companies take environmental and social issues that affect how their long-term value is perceived. It affects investors 'long-term decisions and the companies' ability to attract capital. Investing in a company that does not provide the social and environmental cost of the company's operations may in the long run be bad shop.