Pension Fund Global’s New Climate Guidelines

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    Stockholm (NordSIP) – Norges Bank Investment Management (NBIM), the manager of Norway’s EUR 1.3 trillion Government Pension Fund Global, has released its updated expectation on companies regarding the climate.  It also outlined new guidelines on corporate use of voluntary carbon credits.  NBIM will require all of its more than 9,000 portfolio companies to meet the new expectations.

    Transparency on net-zero targets is a must

    NBIM’s core expectations are centred around net-zero 2050 commitments as a minimum basis for investment and engagement with companies.  It should be accompanied by Board-level oversight of climate strategy, with full transparency on related governance structures and mechanisms.  NBIM wants its portfolio companies to disclose climate impact throughout their value chains, and report on Scope 1, 2, and 3 emissions, with some allowance for incomplete data on the latter.  Companies’ 2050 net-zero commitments should be underpinned by interim targets consistent with 1.5 degree pathways and the implementation of time-bound and quantifiable transition plans.

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    Beyond these core expectations, NBIM also offers guidance on best practice for investee companies relating to corporate climate strategy, ambition and target setting, transition plans, delivery and transparency.  This sets out the international targets and standards NBIM would like companies to follow, including the Paris Agreement, International Sustainability Standards Board (ISSB), Greenhouse Gas Protocol, Partnership for Carbon Accounting Financials (PCAF), Nature-related Financial Disclosures (TNFD) and Science Based Targets Network (SBTN).

    Use of carbon offsetting must be limited

    Perhaps prompted by the recent series of controversies relating to the Voluntary Carbon Markets (VCMs), NBIM has also laid out what it will accept as a credible use of carbon credits by portfolio companies.  Carbon credits are to be last resort to supplement ongoing emission reduction measures and must demonstrate additionality and adhere to the highest available markets standards.  In that respect NBIM expresses its support for the Integrity Council for the Voluntary Carbon Market’s (IC-VCM) Core Carbon Principles that were published over the summer.  It does add a note of caution in acknowledgement of the new standards being a work-in-progress.

    NBIM’s problematic portfolio positions

    Among its expectations on portfolio companies’ approach to the climate crisis, NBIM states that: “Companies should align their lobbying activities with the objectives of the Paris Agreement and address membership of trade bodies or associations that is or may appear incongruent with the company’s climate change policy.”  NBIM’s year-end 2022 equity holdings reveal holdings in 8 out of the 10 most negative and influential companies in the Corporate Climate Policy Footprint report published by InfluenceMap.  These include large positions in Chevron, ExxonMobil and BASF, the 3 worst lobbyists identified by InfluenceMap, alongside holdings in Gazprom, Toyota, Sempra Energy, Southern Company and Nippon Steel.  NBIM were also found to have voted against a climate shareholder resolution at BP’s latest annual general meeting.  It remains to be seen whether those of NBIM’s investee companies that are currently failing to adhere to Paris Agreement net-zero pathways will take heed of the newly released expectations.

    Image courtesy of Wesley Tingey on Unsplash (edited)
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