NBIM ramps up net zero divestment and engagement
The $1.4trn manager of Norway’s sovereign wealth fund has released its responsible investment 2023 report, highlighting an increased focus on achieving its net zero commitments.
Norges Bank Investment Management (NBIM) has ramped up divestment and targeted net zero engagement with portfolio companies, including oil and gas supermajor Shell, its responsible investment report has revealed.
The report, which was published today (7 February), outlined that in 2023 the $1.4trn manager of Norway’s sovereign wealth fund divested from 86 companies following assessments on ESG risk. More specifically, to reduce climate change risks, it divested from 11 companies.
Climate-related divestments were due to the companies in question being exposed to coal mining or coal-based electricity generation, the report revealed.
Currently, NBIM has an ambition for its portfolio companies and unlisted real estate investments to reach net zero emissions by 2050.
Alongside divestments, the report also focused on NBIM’s net zero stewardship throughout 2023, with the fund engaging with companies from its equity portfolio that make up 70% of its financed scope 1 and 2 emissions, which include 24 oil and gas companies.
RENEWABLE INFRASTRUCTURE SUMMIT
12/03/24, London | Asset owner knowledge sharing & due diligence
Engagement with Shell and Eni
A key example highlighted in the report was NBIM’s engagement with oil and gas supermajors Shell and Eni SpA, with the manager’s executive board deciding last year to extend dialogues with the two companies until the end of 2025.
NBIM has been engaging with both companies over reducing the environmental damage of oil spills in the Niger Delta.
The report highlighted that the issue of oil spills was followed up with Shell and Eni at four meetings within 2023.
It stated that following engagement: “Although both companies have reduced the number of operational spills, neither of the companies has been able to meaningfully reduce the number or volume of oil spills occurring due to theft and sabotage. Shell has also had significant delays in cleaning up affected sites.
“The companies report that the operational and security context in the Niger Delta has been very challenging, with an increase in organised oil theft.”
However, due to this both companies have now “agreed to sell their onshore businesses in Nigeria”, the report stated. Shell’s sale of its onshore business SPDC in Nigeria was confirmed by the international energy and petrochemical company last month.
NBIM’s engagement under fire
NBIM’s engagement with Shell came under fire from campaigners last year, being labelled as “naïve” and overly reliant on information provided by the oil giant. However, some industry professionals perceive NBIM’s decision to extend its engagement deadline with Shell and Eni as recognition of the companies’ “lack of progress”.
Commenting on the extended engagement, the report said: “We [NBIM] will continue to follow up the companies’ oil spill management efforts and seek to contribute to the companies exiting the Niger Delta in a responsible and orderly fashion.”
The African Network for Environment and Economic Justice (ANEEJ) stated: “We are optimistic that NBIM will now use its full shareholder power to ensure that Shell stops the oil leaks and pays compensation, whilst upholding and leveraging effective communication with Nigerian communities as their engagement with Shell and Eni develops further. Their commitment to transparency will set a positive example for other investors to follow suit.”
However, the group did state that it was “discouraged” to see NBIM’s latest report “once again repeat Shell’s claim that most oil spills are not its fault but due to theft and sabotage”.
“Oil theft in Nigeria is a serious issue, but there is a lack of recognition of the company’s operational failures, despite the evidence presented in reports and witness statements that clearly show that Shell could have done much more to prevent and remediate oil spills,” ANEEJ added.
Another example of NBIM potentially getting tougher with its net zero stewardship of portfolio companies is its shareholder voting and proposals highlighted in the responsible investment report.
It outlined that NBIM voted against the board members of 22 companies for climate reasons, with it supporting 27 ‘say on climate’ shareholder proposals in 2023.
Notably, the manager of Norway’s sovereign wealth fund voted against climate proposals for BP and Total last year.
Another key focus of the report was NBIM’s investment in renewable energy infrastructure, with the fund aiming to have of up to 2% invested in the assets.
Currently, renewable energy infrastructure represented 0.1% of the fund at the end of 2023.
However, investments in the area did increase during the previous year, with the fund acquiring a 49% stake in a 1.3 GW portfolio of solar plans and onshore wind farms in Spain and a 16.6% stake in a 960 MW German offshore wind construction project.