Norway’s Sovereign Wealth Fund warns Directors to Tackle Climate Change or be Voted out.
Norway’s $1.3 trillion sovereign wealth fund, the world’s largest investor, has warned company directors to take more specific action on climate change or risk being voted out. The head of governance and compliance of Norges Bank Investment Management, Carine Smith Ihenacho, said that the fund was getting ready to vote against 80 company boards due to their failure to set or hit environmental or social targets.
"We have for a long time focused on better company disclosures... Now we are focusing more on actions. So now you need to go from numbers to action, concrete steps that companies are taking to meet the expectations," - Carine Smith Ihenacho
Norway’s sovereign wealth fund was established in the 1990s to invest surplus profits from Norway’s oil and gas reserves, and has invested abroad in stocks, bonds, property, and unlisted renewable projects. The fund holds stakes in around 9,100 companies worldwide, owning 1.4% of all listed stocks and controls an average of 1.3% of 9,338 companies across 70 countries. Large holdings include Apple, Nestlé, Microsoft and Samsung.
“We all know, we live in a world with a climate crisis, and we have a role to play and then companies have a role to play… So we have stepped up our expectations towards the companies when it comes to setting targets to get to that net zero [emissions] by 2050 target. And we will push the companies more in setting targets and understanding how they’re going to get there.” - Carine Smith Ihenacho
This all comes after the prime minister of Norway, Jonas Gahr Støre, released more money from its oil profits to help support Ukraine. The country donated 10bn kroner in civilian and military aid last year. In combination to this, the fund this week recorded a loss of 1.64tn kroner for 2023. Smith Ihenacho said that they expected all large carbon emitters to set emissions targets now, and smaller companies to do so no later than 2040. However, currently only 17% of the more than 9000 companies that the fund invests in had set clear science-based net zero targets”, and the fund is actively “pushing” the remaining 83% to act fast to set their targets.
Essentially, she continued on to say that if these organizations do not set clear goals, have no reporting, and don’t take any measurable action the fund will actually vote against them in the next few months. Last year the fund already voted against the entire board of 18 companies. If there is still no improvement, the fund will sell its stake in these companies. Lastly, the fund is also going to take a more active approach on human rights, excessive executive pay, tax transparency and boardroom diversity.
According to Reuters in December of 2022, early in 2022 the fund had told the companies it invests in to boost the number of women on their boards and to consider setting targets if below 30% of their directors are female. It focused on applying pressure on large and mid-cap companies in the United States and Europe and just like we are seeing in climate conversations, the fund began voting against appointments to the nomination committees of companies that do not have at least two women on the board.
“We want to support and push the company through the transition to a low-carbon economy, we don’t see selling as going to solve the climate crisis,” she said. “But in the end, we may do that with some companies and we have already sold out to quite a few companies that we just believe have an unsustainable business model when it comes to climate.
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