Norway’s US$1.2-trillion wealth fund will ask the companies in its portfolio that emit the most carbon dioxide (CO2) for more detailed climate-related data in order to understand the risk posed to its investments, a top official said.
The world’s largest sovereign fund, which invests Norway’s oil revenues, has for the past two decades been at the forefront of efforts to get companies to makes disclosures about the impact of their business on the environment.
“What we want to see is whether they have a business model that can survive also in a low-carbon society and to understand how will they address that,” said Carine Smith Ihenacho, the fund’s chief corporate governance officer.
“We want scenario analysis, including a two-degree scenario analysis, and we want the company to be open about the assumptions for the analysis,” she said, without naming the companies the fund was contacting.
The 2015 Paris Agreement calls on countries worldwide to limit global warming this century to well below 2 C above preindustrial levels.
Norway’s fund is invested in 9,200 companies, or 1.5 per cent of the world’s stocks. It listed its own carbon footprint at 107.6 millions of tonnes of CO2 equivalent in 2019, which is double Norway’s and had risen from 107.4 millions in 2018.
The fund has recently changed CEO, appointing hedge fund veteran Nicolai Tangen, who started this week.
LOBBYING ON AGENDA
How companies lobby on climate change has risen higher up the agenda of investors from a decade ago, as they seek to understand the interaction with policy makers.
Last month, Norway’s Storebrand Asset Management began divesting from firms, citing their climate lobbying practices.
During the latest annual general meeting (AGM) season, the Norwegian wealth fund voted in favour of all motions on the topic put forward at AGMs of firms it is invested in.
Although only five motions called for more transparency on a company’s climate lobbying, Ms. Smith Ihenacho said she expected more such demands during the next AGM season.
“This is very much on shareholders’ agenda,” she said, citing in particular the need to know about companies’ membership of associations.
“We want to know where the discrepancies are between a company’s policy association and a trade association they may support financially,” she said.
The wealth fund is unlikely to follow Storebrand’s lead, however, as it prefers engagement with firms in which it invests, Ms. Smith Ihenacho said.
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