Stockholm (NordSIP) – Following its own assessment and in response to an expert report on “Climate risk and the Government Pension Fund Global” requested by the Norwegian Finance Ministry, Norges Bank Investment Manager (NBIM) endorsed the long-term goal of net-zero emissions from the companies in which the fund is invested.
With over NOK10 trillion in assets under management, NBIM manages the largest sovereign wealth fund in the world and is one of the biggest global asset holders with 11,235 investments across 72 countries. In its earlier assessment, NBIM noted that 80% of the market value of the fund’s equity portfolio is classified as having neutral exposure to transition risk according the MSCI.
The letter, signed by Øystein Olsen, Governor of the Central Bank of Norway, and NBIM CEO Nicolai Tangen (Pictured) returned to the recommended changes to four main areas of NBIM’s management mandate made by the expert group in August. The expert group recommended changes to the management mandate in four main areas:
- A set of principles for managing climate risk,
- A long-term goal for responsible investment of net zero emissions from the companies in which the fund is invested,
- Further development of Norges Bank’s ownership activities, and
- Provisions on measuring, managing and reporting climate risk.
NBIM argues that the principles for managing climate risk should be provided by the Finance ministry. According to the announcement, NBIM “supports the expert group’s recommendation and will, in line with this and through active ownership, be a driving force for the companies in the portfolio to align their business models towards a long-term goal of net-zero emissions.” Although no general target date for net-zero emission portfolios was disclosed, the letter to the finance ministry mentioned the hope of working “towards a goal of net-zero emissions from the properties we own in 2050,” regardubg real estate holdings.
Among the initiatives discussed in the letter to the finance ministry, Olson and Tangen mentioned the importance of engagement and cooperative networks. “One initiative singled out by the expert group is Climate Action 100+. This is a network of investors working together to improve corporate climate disclosures and engage effectively with a select group of companies. Although the fund is one of the world’s largest shareholders, working with others can increase the impact of our ownership efforts. We have therefore started a dialogue with Climate Action 100+ to see how well the initiative aligns with our management mandate, what resources this cooperation might require, and what role we would be expected to play. We regularly carry out similar assessments of other initiatives.”
NBIM makes two salient points regarding “provisions on measurement, management and reporting”. Regarding the decarbonisation pathways for individual companies “intermediate targets for emission reductions at individual companies will be a key tool for following up companies through our ownership work”. As to reporting on climate risk, Olson and Tangen note that NBIM “will report in line with the TCFD framework in our annual reports on responsible investment” but will also continue to monitor developments in the EU Taxonomy.