Norway’s $1.4trn sovereign wealth fund to ‘sharpen’ net zero engagement

The world’s largest asset owner, Norges Bank Investment Management, plans to significantly step up its net zero efforts.

In fact, Norway’s $1.4 trillion sovereign wealth fund has warned investee companies they should do more to move from net zero target setting to actual transition planning.

“As evidenced by a summer of record temperatures, its effects are increasingly affecting economies and companies across the world,” the investment giant said late on Friday.

“Climate risk is financial risk. The solutions to climate change give financial opportunities.”

NBIM went on to publish a number of revised ‘expectations’ for its in investee companies by providing guidance on how they manage the evolving climate-related risks and opportunities.

“We present six core expectations, which apply to all companies and directly inform our voting decisions, and provide further direction on good practices we encourage companies to adopt,” the fund said.

NBIM’s chief governance and compliance officer, Carine Smith Ihenacho, explained that “we really saw the need to sharpen our expectations. We look forward to having even more valuable engagements with companies and their boards on this important topic. We think the core expectations will be particularly useful in our board level dialogues.”

The revised plans contain four chapters, broadly the order in which a company might develop their work: foundations of corporate climate strategy; ambition and target setting; transition plans; and delivery and transparency.

“Many companies now need to move on from disclosures and target setting to the execution phase," stressed Tim Smith, NBIM’s lead investment stewardship manager.

"Companies need to show investors credible transition plans and explain how they will ensure delivery.”

Voluntary carbon credits

In addition, the fund also published its view on corporate use of voluntary carbon credits.

“We believe companies should prioritise reducing own emissions but can use additional and verified credits as a supplement to signal high climate ambitions,” a statement rad.

“We don’t think carbon credits should be counted towards science-based interim emission reduction targets, and we want companies to be transparent about the details of credits they use.”

The fund concluded that “ultimately, carbon removals will be needed by many companies seeking to achieve net zero emissions by 2050.”

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