Norway’s sovereign wealth fund was established in the 1990s to invest excess revenue from the country’s oil and gas sector.
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Norway’s $1.4 trillion sovereign wealth fund says it is ready to start sacking companies from next year for mismanaging climate risks, adding to the decarbonisation pressure already being piled on companies by activist shareholders.
It comes shortly after the world’s largest investment fund said it would vote in favor of shareholder proposals on Chevron and ExxonMobilrespective annual meeting on Wednesday.
The resolution seeks to get US oil companies to align their climate goals with the milestone The Paris Agreement and commit to an absolute reduction in carbon emissions by 2030.
Norway’s oil fund has refused to support similar shareholder proposals submitted to European oil companies in recent weeks, such as BP and TotalEnergies.
The fund says it assesses each shareholder proposal individually, noting that there are differences between how European and US oil majors deal with Scope 3 emissions generated by customers who use their oil and gas.
“We are a particularly active owner when it comes to climate,” Carine Smith Ihenacho, director of governance and compliance at Norges Bank Investment Management, told CNBC by phone.
The fund, which was set up in the 1990s to invest surplus revenue from Norway’s oil and gas sector, said last year it would take a tougher stance on companies that failed to adopt credible climate plans.
There can be a point where we feel like the company is absolutely not listening to us, not reporting anything, not seeing any changes, then we can sell out.
Carine Smith Ihenacho
Director of Governance and Compliance at Norges Bank Investment Management
“We have clearly said that it is in our long-term interest that the companies in our portfolio get to net zero by 2050 because we think it will be beneficial to our financial return in the long term,” Ihenacho said in reference to climate action fund plan for 2025.
“As an active owner, we want to really influence and push companies to set zero targets for 2050 and also push them to have credible transition plans. By that we mean science-based transition plans,” she added.
Palpable frustration
The Norwegian Petroleum Fund has invested in more than 9,000 companies in 70 countries around the world and recognizes that “companies care about how we vote at general meetings”.
Ihenacho said dialogue and voting are the main tools the fund is trying to use to engage with company directors on environmental, social and governance issues, but added that the fund may soon be forced to consider selling climate laggards.
“It’s something we have to balance all the time,” Ihenacho said. “I think our starting point is very much that we want to be owners and we want to influence society. Selling is not going to solve the climate crisis at all. You’re just selling to someone else who may be less interested in the climate as an owner than we are.”
“Having said that, it may come to a point where we feel like the company is absolutely not listening to us, they are not reporting anything, we are not seeing any changes, then we can sell out. We can decide to sell,” Ihenacho said. .
“First, there will be some companies on the watch list or excluded next year or maybe the year after. We will try to use our ownership tools first,” she added.
Protesters outside the Salle Pleyel in Paris were heard chanting “all we want is to bring down Total” and “one, two, three degrees, we have Total to thank”.
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It comes amid a sense of palpable frustration among climate campaigners during the proxy voting period, with demonstrations taking place inside and outside the oil giants’ AGM venues.
The burning of fossil fuels such as oil, gas and coal is a major driver of the climate emergency.
Dutch group Follow This, a small activist investor and campaign group, has submitted a resolution to several major oil companies in recent weeks calling for a faster green transition.
Rebellion 30% voted for resolution in TotalEnergies’ AGM last weekwhich reflects a significant rebuke by the typical standards of annual general meetings of shareholders.
In comparison, support for a similar resolution in BP AGM last month reached just 17%, up from 15% last year, supporting the climate resolution tabled at Shell‘with annual meeting last week reached 20%, the same level as in 2022.
Chevron and Exxon Mobil urged shareholders to reject the shareholder proposals put forward by Follow This at their respective annual meetings.