Environmental and social responsibility is critically important in today’s global economy. An environmental and social management system (ESMS) helps companies integrate plans and standards into their core operations—so they can anticipate environmental and social risks posed by their business activities and avoid, minimize, and compensate for such impacts as necessary. A good management system provides for consultation with stakeholders and a means for complaints from workers and local communities to be addressed.

For any business, its workforce is its most valuable asset. A sound worker-management relationship is key to the success of any enterprise. Performance standard 2 asks that companies treat their workers fairly, provide safe and healthy working conditions, avoid the use of child or forced labor, and identify risks in their primary supply chain.

Industrial activity and urbanization can increase levels of pollution that may threaten people’s health and the environment. PS3 guides companies to integrate practices and technologies that promote energy efficiency, use resources—including energy and water—sustainable, and reduce greenhouse gas emissions.

Business activities and infrastructure projects may expose local communities to increased risks and adverse impacts related to worksite accidents, hazardous materials, spread of diseases, or interactions with private security personnel. PS4 helps companies adopt responsible practices to reduce such risks including through emergency preparedness and response, security force management, and design safety measures.

When companies seek to acquire land for their business activities, it can lead to relocation and loss of shelter or livelihoods for communities or individual households. Involuntary resettlement occurs when affected people do not have the right to refuse land acquisition and are displaced, which may result in long-term hardship and impoverishment as well as social stress. PS5 advises companies to avoid involuntary resettlement wherever possible and to minimize its impact on those displaced through mitigation measures such as fair compensation and improvements to and living conditions. Active community engagement throughout the process is essential.

Biodiversity loss can result in critical reductions in the resources provided by the earth’s ecosystems, which contribute to economic prosperity and human development. This is especially relevant in developing countries where natural resource-based livelihoods are often prevalent. PS6 recognizes that protecting and conserving biodiversity, maintaining ecosystem services, and managing living natural resources adequately are fundamental to sustainable development.

Indigenous peoples (IPs) may be particularly vulnerable to the adverse impacts associated with project development, including risk of impoverishment and loss of identity, culture, and natural resource-based livelihoods. PS7 seeks to ensure that business activities minimize negative impacts, foster respect for human rights, dignity and culture of indigenous populations, and promote development benefits in culturally appropriate ways. Informed consultation and participation with IPs throughout the project process is a core requirement and may include Free, Prior and Informed Consent under certain circumstances.

Cultural heritage encompasses properties and sites of archaeological, historical, cultural, artistic, and religious significance. It also refers to unique environmental features and cultural knowledge, as well as intangible forms of culture embodying traditional lifestyles that should be preserved for current and future generations. PS8 aims to guide companies in protecting cultural heritage from adverse impacts of project activities and supporting its preservation. It also promotes the equitable sharing of benefits from the use of cultural heritage.

Investing in projects and companies that contribute to mitigating or adapting to climate change is key to ensure sustainable development. Norfund aims to step-up annual investments in climate finance and seeks to invest in climate projects across all investment areas.

Several hard-to-abate sectors are essential for continued development in the markets we operate in. Thus, investing in emission reduction initiatives in such sectors is crucial to balance decarbonization and development. Norfund will seek to apply decarbonization measures for individual investments in portfolio, with a particular focus on hard-to-abate sectors that are key to development (“transition finance”).

Norfund has committed to aligning all new investment with the objectives of the Paris Agreement and we do that through the harmonized EDFI approach, categorizing them as either automatically aligned, misaligned, or conditionally aligned with the Paris goals. By adopting this methodology, we strive to support our investees in the transition to net zero, minimize transition risks and avoid stranded assets, ensuring our portfolio supports a sustainable and climate-resilient future.

Transitioning away from fossil fuels in energy systems is essential to limit emissions. Norfund has low direct exposure to fossil fuels.

Institutions (EDFI) have identified particular sectors and activities in which we do not invest. The EDFI Fossil Exclusion List provides an overview of these. In addition to this list, Norfund has further strengthened its approach to fossil fuels with the Norfund Fossil Fuel Standard.