OSLO (Reuters) – Norway’s $1.4 trillion wealth fund, the world’s largest, will not divest from companies that are major emitters of greenhouse gases to meet plans to make its investment portfolio carbon-neutral by 2050.
It will however be an “active shareholder” in such companies by pushing them to make the transition to net zero emissions, and divest from them if it believes their business models are not sustainable, the deputy head of the central bank – which is in charge of the fund – said on Tuesday.
The fund invests Norway’s revenues from oil and gas production into stocks, bonds, property and renewable projects abroad. It invests in some 9,100 firms globally and owns on average 1.4% of all listed global stocks.
It estimates its portfolio’s carbon footprint was 107.6 million tonnes of CO2 equivalent in 2019 – roughly twice what Norway emitted that year.
Like many other long-term investors, the fund is looking at how to adapt to climate change.
In August, a government-appointed panel recommended the fund should push the firms it invests in to cut their emissions to nil by mid-century, in line with the Paris Agreement of 2015.
Jonas Gahr Stoere, at the time leader of the opposition and now prime minister, said the panel’s recommendation would be made part of the fund’s mandate.
On Tuesday, bank deputy governor Oeystein Boersum said that, while the bank supported the panel’s recommendation, this should not be interpreted “as a plan to divest from companies with high emissions”.
“That is not our intention,” and instead, the fund would be an “active shareholder”, he said in a speech.
Taking the example of high-emitting sectors such as steel and cement production, Boersum said “their products will still be needed in the low-carbon economy”.
“Much of our dialogue on transition plans is therefore about the technological advances and investments needed. We also raise the need for industry standards and the issue of lobbying, which is a major challenge,” he said.
The fund will however divest from companies with unsustainable business models, he added.
One campaigner gave a guarded welcome to the bank’s plan.
“They are taking big steps forward, but they have a long way to go,” said Martin Norman at the Australasian Centre for Corporate Responsibility, a research and shareholder advocacy group.
Short- and medium-targets could have been set. “We need emission cuts now,” he said.
(Graphic: Market value of Norway’s wealth fund, https://graphics.reuters.com/NORWAY-SWF/qzjvqajwgvx/chart.png)
(Editing by Terje Solsvik and John Stonestreet)