December 6, 2018 Read More →

Norwegian wealth fund continues long-term push for sustainable investments

Financial Times ($):

It is not perhaps the most obvious idea for an investor that derives all its inflows from oil and gas revenues to prioritise sustainability. But Norway’s $1tn oil fund has been different from the beginning. One of the few sovereign wealth funds in a democracy, the Norwegian fund has put ethical issues at the heart of what it does.

“We are a fund for future generations,” says Carine Smith Ihenacho, chief corporate governance officer at Norges Bank Investment Management, which manages the fund for the Norwegian people. “Sustainability in investments is essential for long-term value creation and also safeguarding the value we have,” she adds.

Because of the fund’s size — on average it owns 1.4 per cent of every listed company globally and 2.4 per cent of each European business on the stock market — its pronouncements are followed closely by many investors, with a smaller subset aping its actions.

The fund has not been able to shy away from controversy or charges of hypocrisy. Some of the most charged debates have revolved around what the fund should do with investments in fossil fuels. After years of political debate, Norway’s parliament decided in 2015 to force the fund to sell out of any mining company or power producer that derived more than 30 per cent of its revenues or operations from coal.

The biggest problem has been finding proper information as many companies do not disclose the share of coal in their revenue or energy production mix. The fund has been forced to try to find out much of the information itself. “The work is in many ways ongoing,” says Ms. Ihenacho, with the fund having barred more than 70 companies from its portfolio. Nonetheless, many environmentalists are annoyed with how the fund interprets the criteria, with several pressure groups recently urging it to sell out of German utility RWE, which runs several coal-fired power plants.

To help it secure more information on climate risk and other topics, the fund has developed its own proprietary tool, called Angle. This gives portfolio managers not just information on financial and governance issues but also non-financial measures, such as carbon emissions. Ms. Ihenacho says the fund, with other investors, is pushing companies for better disclosure of such non-financial measures as well as greater standardisation to enable shareholders to compare businesses more easily.

More ($): Sustainable investment key to Norway sovereign wealth oil fund strategy

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