Since 1971, when oil began flowing from fields off the Norwegian coast, the industry has created thousands of jobs and transformed Norway into one of the world's leading oil exporters. The investable funds have also enabled Norway to embrace a model of "responsible investment"--an approach that seeks financial returns via investments in ethical and sustainable entities.
Since 1996, the Norwegian government has funneled surplus oil revenues into its Government Pension Fund Global, which is now worth more than $600 billion and which grew by more than $100 billion in 2012 alone. What's more, the fund relies exclusively on responsible investment principles.
These observations piqued the curiosity of Carlson School Assistant Professor Gurneeta Vasudeva. "I hypothesized that it (the responsible investment approach) involved establishing the legitimacy of the fund's international investments and influencing other investors including Norwegian companies to adopt the principles." Her research confirmed the hypothesis.
The fund's remarkable growth--which has been rigorously certified as "responsible" by the Norwegian government's Council on Ethics--has helped persuade a growing number of Norwegian companies to embrace responsible investing.
As Vasudeva explains, this is a new, somewhat counter-intuitive role for governments. "We've traditionally seen governments as being regulation-centric--they attempt to change behavior through rules and laws," she says. "What's interesting in this case is that the Norwegian government has altered corporate behavior through role-modeling."
"My results also contradict the argument that the state has a greatly diminished impact and relevance in the global, open economy," she adds. "Norway is an active investor in the global economy, and its investing approach has had a powerful impact on Norwegian companies and industries."
"Weaving Together the Normative and Regulative Roles of Government: How the Norwegian Sovereign Wealth Fund's 'Responsible' Conduct is Shaping Firms' Cross-Border Investments" Vasudeva, G., Organization Science, (in press)