Norges Bank Investment Management (NBIM), the investment manager for Norway’s €1.2 trillion oil fund, announced the launch of a new climate action plan, and a target to reach net zero emissions for all companies in the fund by 2050.
NBIM was established to manage revenues from Norway’s oil and gas resources. The fund has grown to one of the world’s largest, owning nearly 1.5% of all shares in the world’s listed companies, with holdings in over 9,000 companies in 70 countries.
Under the new climate action plan, NBIM said that it has now set an expectation for all high emitting companies to set 2050 net zero targets “as a matter of urgency,” and for all portfolio companies to do so by 2040 at the latest.
Companies will be asked for short-, medium- and long-term targets and transition plans covering scope 1, scope 2 and material scope 3 emissions, as well as for improved disclosures on performance.
NBIM Chief Governance and Compliance Officer Carine Smith Ihenacho said:
”We set a target of net zero emissions by 2050 at the latest for all companies. And we will engage with the companies to reach this target by setting credible preliminary targets and creating plans to reduce their direct and indirect emissions of greenhouse gases.”
The climate action plan describes NBIM’s approach to managing climate risks and opportunities, setting out the fund’s planned actions between 2022 – 2025, targeting improving market standards, increasing portfolio resilience, and engaging with portfolio companies.
The plan covers actions by the fund at the market, portfolio and company level, as well as engagement and reporting plans. Planned market-level actions include encouraging regulators to set climate-related reporting for listed and unlisted companies, and increasing collaborations with other investors to share best practices and develop common expectations. At the portfolio, NBIM aims to develop principles for measuring and managing climate risk, and stress-test the equity portfolio against various climate scenarios, set climate goals for its unlisted real estate portfolio and increase investments in renewable energy infrastructure. At the company level, NBIM said that it will take an engage-to-change approach, integrate climate risks and opportunities into investment analysis, set net zero engagement agendas. Companies that fall short of peers and do not respond to engagement will be candidates for exclusion.
NBIM also said that it has set up an engagement focus list including companies representing 70% of its equity portfolio’s financed scope 1 and scope 2 greenhouse gas emissions, and the fund manager pledged to report on aspects including implied temperature alignment of its portfolios, climate risk exposure on various scenarios, engagements, and on the share of investments that can be classified as climate-related or environmentally sustainable.
Nicolai Tangen, CEO of Norges Bank Investment Management, said:
”Our goal is to be the world’s leading investor in terms of how climate risk is managed. Our long-term return will depend on how the companies in our portfolio manage the transition to a zero emissions society.”