Norway wealth fund sets net-zero target for portfolio firms

NORWAY’S $1.2 trillion sovereign wealth fund will require the companies it invests in to reach net-zero emissions by 2050 at the latest, joining many global investors in setting such goals to prevent the financial risks from a “delayed transition.” 

Just 10 per cent of companies in the wealth fund’s portfolio have a net-zero target for 2050, even as many have taken strides toward emission targets, Norges Bank Investment Management chief executive officer Nicolai Tangen and chief governance and compliance officer Carine Smith Ihenacho wrote in an op-ed in Dagens Naeringsliv. 

The fund will push for companies to reach the goal via “credible” interim targets and plans to reduce their scope 1, scope 2 and material scope 3 emissions, the fund said in its climate action plan on Tuesday (Sep 20). Work will start with the companies with the largest emissions, they said in the op-ed, and while the fund aims to be an active owner, divestment remains an option. 

“Selling out of companies doesn’t solve the climate crisis,” Tangen and Smith Ihenacho wrote. “But we will consider selling out of companies with high climate risk and without climate plans where the exercise of ownership doesn’t lead forward.”

Norway’s finance ministry said in a white paper earlier this year that it wants the sovereign wealth fund, the world’s biggest, to use its responsible investment efforts to make sure companies align their activities in a way that’s consistent with global net-zero emissions. 

The fund will change how it engages with the companies it owns by asking for science-based short-term, medium-term and 2050 net zero targets, credible transition plans, and improved disclosures on performance, it said on Tuesday.

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“By 2025, we aim to have a comprehensive system in place for measuring our exposure to climate risks and opportunities and potential portfolio emission trajectories,” the fund said.

It is aiming for a “significantly higher” share of its portfolio companies to have set net zero targets by 2025, and in particular companies with high emissions. It is targeting that all companies in the portfolio have such targets by 2040. BLOOMBERG