Norway’s wealth fund challenges Big Oil on climate transition

Norway’s sovereign wealth fund, a major global investor, criticises Big Oil’s transition efforts as carbon emissions continue to rise. Carine Smith Ihenacho, the Chief Governance and Compliance Officer at Norges Bank Investment Management, states that the oil and gas industry is falling short in emissions reduction, and global emissions are still on the rise. This critique coincides with some major oil companies doubling down on their core businesses and oil prices nearing $100 a barrel. Oil executives at a recent petroleum summit also criticised the International Energy Agency’s call to halt new oil field development to limit global warming to 1.5°C, seeing it as politicising the climate debate.

For investors seeking alignment with the Paris climate agreement goals, these developments raise concerns about a shift in the wrong direction. Ms. Ihenacho emphasises the need for a systemic shift in the energy sector, with companies transitioning more rapidly from fossil fuels to renewable energy sources to achieve net-zero emissions by 2050.

Despite Wall Street leaders like Goldman Sachs Group’s CEO David Solomon defending support for fossil fuel companies, Ms. Ihenacho argues that the world’s largest investors should exert pressure on companies to ensure they have effective transition plans. This pressure applies not only to fossil fuel firms but also to high-carbon industries like cement, steel, chemicals, transportation, and construction.

However, only 23% of the companies in Norway’s $1.4 trillion wealth fund’s portfolio have credible net-zero targets. The fund, which holds stakes in major energy companies like Exxon Mobil, Chevron, Shell, and BP, opts for engagement rather than divestment, aiming to influence change from within. The fund backs about 35% of shareholder resolutions, exceeding industry rivals like BlackRock and Vanguard Group. It frequently engages with its portfolio’s major emitters, emphasising that solving the climate crisis requires not just business actions but also investor, consumer, and litigation pressures.

The wealth fund has recently outlined its expectations for portfolio companies to manage the climate transition, including disclosing climate risks, reporting greenhouse gas emissions, committing to net-zero goals, setting interim emission reduction targets, and producing quantifiable energy transition plans.

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