Norway Wealth Fund sends green investment signal
The Norwegian sovereign wealth fund plans to tie investment decisions to climate risk in the future.
Its original money came from oil and gas. But the Norwegian Government Pension Fund Global is increasingly interested in the environmental impact of its investments.
Commonly known as the Petroleum Fund, the Norway Savings Account holds stocks, property and other investments worth NOK 12,200 billion ($ 1.36 trillion) at the time of the writing. The Fund manages Norway’s profits from oil and gas licensing and has achieved exceptional financial returns in recent years.
However, he said there are companies in his portfolio that are not doing enough to reduce emissions. The warning comes as the Norwegian government reassesses the mandate given to the world’s largest sovereign wealth fund.
The government has previously said it wants to halve emissions by 2030. Climate issues are also set to become a major factor in the upcoming 2021 general elections in Norway.
A few years ago, the Fund failed to gain political approval to get rid of its entire portfolio of oil investments. Fund managers Norges Bank Investment Management still owns stakes in fossil fuel giants including Exxon Mobil, Chevron and BP.
A green focus
A new waiting document on biodiversity and ecosystems commissioned by the government warns companies that environmental protection will be decisive in future investment decisions.
The expert group recommended that Norway change the mandate under which the fund operates in order to better manage climate risk. It comes as increasingly alarming evidence shows that the impact of climate change is being felt much faster than previously feared.
More specifically, the Fund wants companies to assess their direct and indirect impacts on biodiversity and ecosystems when developing policies. They should also take a precautionary approach whenever there is a risk of significant impact on biodiversity and the ecosystem, the document said.
Read more: The first battle for oil in Norway
But it’s the disclosure requirements that will likely be of most interest to environmental activists.
The Fund wants companies to disclose the material impacts of activities, products and services on biodiversity and ecosystems. They should also disclose the footprint of their major operations.
Long term value
“An increasing loss of cash and deterioration of ecosystems can affect the ability of companies to create value for long-term investors,” said Nicolai Tangen, CEO of Norges Bank Investment Management.
“Companies must therefore understand their dependence and impact on nature, and manage both challenges and significant opportunities through more sustainable use of ecosystems,” he added.
Investors vs. Oil
The Norwegian heritage fund has started to play a more active role in the companies in which it invests. “We are using the tools at our disposal,” said Carine Smith Ihenacho, Chief Corporate Governance Officer of the Fund.
In May, Exxon failed to stop a revolt that ceded seats on the board to an activist-focused group of investors. The Norwegian investment fund used its votes to demand more transparency from Exxon on political contributions to prevent lobbying on climate policies.
Earlier, the Fund had said it wanted its companies to have a better gender balance on boards of directors. It has also started to diversify from bonds, stocks and real estate to investments in renewable energy.