Norway’s wealth fund ‘has no exposure left’ in Adani Group

Norges Bank Investment Management (NBIM) has “no exposure left” in its investment portfolio to any companies linked with the Adani Group, mainly due to the Indian conglomerate’s handling of environmental risks.

At the launch of NBIM’s Responsible Investment Government Pension Fund Global 2022 report, Christopher Wright, head of environmental, social and governance (ESG) risk monitoring, highlighted that between 2014 and the end of 2022 the sovereign wealth fund divested from six Adani-linked companies due to their approach to deforestation and greenhouse gas emissions.

By the end of 2022, the fund remained invested in three Adani-linked companies, which were Adani Green Energy, Adani Total Gas and Adani Ports, with holdings worth roughly NOK2bn ($196m).

Wright said: “In the five weeks since year-end, we have further reduced our exposure in Adani companies significantly. And so today, for all intents and purposes, we have no exposure left in these nine companies.”

NBIM manages the Norwegian Government Pension Fund Global and manages assets worth more than NOK12,000bn or about $1.4trn.

Impact of divestments

The report highlighted that the sovereign fund has two distinct instruments for removing companies – the first is based on ethical exclusions and the second is ESG risk-based. It detailed that last year, NBIM made 74 risk-based divestments, which is the highest amount in a single year since 2012.

It stated that since 2012, the total 440 risk-based divestments have increased the cumulative return on equity management by 0.26 percentage points (pp) or 0.01pp annually. The report also detailed that risk-based divestments linked to climate change have increased the cumulative return on equity management by 0.14pp.

However, in 2022, the strong performance of energy and basic materials negatively impacted the returns of NBIM’s risk-based divestments, with a 0.04pp decrease. Also, its annual report highlighted that the fund’s ethical exclusions have reduced the cumulative return on its benchmark index by around 2.9pp or 0.07pp annually.

When questioned on the impact divestments are having on the fund, Nicolai Tangen, NBIM’s CEO, said: “It’s not an option to own these companies.”

“We divested because we think that there is a risk of human rights violations, for bad stuff with climate, water management and mistreatment of employees. It’s not a consideration that it’s costing us a bit of money not to own them. It’s just a complete no-go to be in these companies.”

‘Worrying’ ESG backlash

At the launch, Tangen also highlighted the importance of ESG considerations in NBIM’s investment decisions and labelled the backlash against it as “worrying”.

“ESG has never been more important. There is clearly a backlash against ESG in the world, and we just need to continuously work relentlessly in this field,” he said.

This follows a wave of anti-ESG bills that have been proposed or adopted in multiple Republican states in the US. The bills prohibit or significantly limit state governments from adopting ESG-focused investments or from doing business with financial institutions that adopt specific ESG policies.

As part of the report, the fund published a full list of all company meetings where ESG was discussed in 2022. Wilhelm Mohn, NBIM’s global head of corporate governance, highlighted that ESG was explored in 66% of all the meetings the fund had with companies last year. He stated that these conversations were broad and discussed topics from climate change to capital management.

Mohn stated that some topics have been increasing, such as climate change, which was raised in 810 meetings last year, which represents “33% of NBIM’s equity portfolio, NOK2,500bn or thereabout”.

Net Zero Investor contacted Adani Group for comment, but has not received a response.