The $1.35 trillion Norway Wealth Fund announced on Thursday that it would increase its interaction with businesses about how they manage climate risk by voting against board members it believes are not taking sufficient action.
The Norway Wealth Fund, also known as the Government Pension Fund of Norway, is a sovereign wealth fund managed by the Norwegian Ministry of Finance. They established it in 1990 with the purpose of investing the country’s surplus oil and gas revenues for future generations.
It is one of the largest investors in the world. The fund invests in state oil and gas production profits and is run by a division of Norway’s central bank. It has invested in 9,200 enterprises across 70 nations.
They estimate the assets under its management to be worth over US$1 trillion as of 2022. It invests in a diverse range of assets, including equities, bonds, real estate, and infrastructure, with the aim of generating long-term returns for the country.
The wealthiest fund cares about industries managing climate risk
The Norway Wealth Fund operates with a long-term investment horizon and aims to maximize returns while also considering ethical and environmental criteria. For example, the fund has divested from companies involved in the production of tobacco and controversial weapons, and it is also actively investing in renewable energy and other environmentally sustainable projects.
The Fund is a significant source of financial stability and wealth for Norway, and it is also a leader in responsible and sustainable investing practices.
In its yearly report on responsible investments, the fund stated that now it will vote against board members if a company has had serious failures in the oversight, management, or disclosure of climate risk.
If the managers cannot manage climate risk…
The fund has long had climate change conversations with the businesses it invests in. Due to insufficiently handling climate risk, it voted against the re-election of 61 directors at 18 corporations last year.
According to Carine Smith Ihenacho, the fund’s chief governance and compliance officer, this figure will rise this year.
She told the reporters that the Fund expects there will be more firms they would vote against this year. Ihenacho also added that it would again concentrate on the biggest emitters, such as those in the heavy industries, cement, steel, electricity, and oil and gas sectors.
Industries must reduce their greenhouse gas emissions to zero
Following a directive from the government of Norway, the fund presented proposals to businesses in September that would help them reduce their greenhouse gas emissions to zero by the year 2050, in accordance with the Paris Agreement.
The fund spoke about climate change in 810 meetings with businesses that account for 33% of the equity portfolio’s value in 2022. One of the companies they spoke to was oil giant Shell, about the company’s energy transition plan and climate change.
By the way, the fund no longer prints the report and instead makes it available online as a sign of its focus on climate change.