Norway wealth fund sends green investment signal

Sovereign wealth fund plans to tie investment decisions to climate risk in the future

Nicolai Tangen

Photo: Tor Erik Schrøder / NTB
Nicolai Tangen, CEO of Norges Bank Investment Management, discusses the impact of environmental degradation on investments such as the sovereign wealth fund.

David Nikel
Trondheim, Norway

 

Its original money came from oil and gas, but the Norwegian Government Pension Fund Global is now increasing its attention on the environmental impact of its investments.

However, it said there are companies in its portfolio that aren’t doing enough to cut emissions. The warning comes as Norway’s government reassess the mandate given to the world’s biggest sovereign wealth fund.

The government has previously said it wants to halve emissions by 2030. Climate issues are also set to be a major factor in Norway’s upcoming 2021 general election.

A few years ago, the fund failed to win political approval to dump its entire portfolio of oil investments. Fund manager Norges Bank Investment Management still holds stakes in fossil fuel giants, including Exxon Mobil, Chevron, and BP.

A green focus

A new government-commissioned expectation paper on biodiversity and ecosystems warns companies that environmental protection will be instrumental in future investment decisions.

The expert group recommended that Norway changes the mandate under which the fund operates to better handle climate risk. It comes amid increasingly alarming evidence 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 wherever there is a risk of significant biodiversity and ecosystem impact, states the paper. But it’s the disclosure requirements that are sure to interest environmental campaigners the most.

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 main operations.

Long-term value

“An increasing loss of species and deterioration of ecosystems can affect companies’ ability to create value for investors in the long term,” said Nicolai Tangen, CEO of Norges Bank Investment Management.

Investors versus oil

Norway’s wealth fund has started to take a more active role in the companies in which it invests. “We use the tools we have,” said Carine Smith Ihenacho, the fund’s chief corporate governance officer.

In May, ExxonMobil failed to stop a revolt that handed board seats to an activist-focused investor group. Norway’s wealth fund used its votes to demand more transparency from ExxonMobil on political contributions to prevent lobbying on climate policies.

Previously, the fund said it wants its companies to have better gender balance on corporate boards. It has also begun to diversify away from bonds, equities and real estate into renewable energy investments.

This article originally appeared in the Sept. 17, 2021, issue of The Norwegian American. To subscribe, visit SUBSCRIBE or call us at (206) 784-4617.

David Nikel

David Nikel is a freelance writer based in Norway. He runs the popular www.lifeinnorway.net website and podcast and is the author of the Moon Norway guidebook, available now in all good bookstores.

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