Norway oil fund warns of ‘risk’ that environment is on the agenda

The head of the world’s largest sovereign wealth fund urged investors to stay focused on environmental, social and governance issues, warning of a “real danger” that economic turmoil and political backlash in the United States were pushing them off the agenda.

Soaring inflation, a renaissance in fossil fuels ignited The war in Ukraine And growing resistance from Republican states in the US has already cast doubt on the seemingly unstoppable rise of investment in ESG, which asset managers have been quick to embrace in recent years.

Nikolai TanginThe head of Norway’s $1.2 trillion oil fund told the Financial Times, “We are noticing the backlash against ESG in some places in America. Despite the increasingly volatile financial markets and the economy, we believe it is more important than ever to keep the focus on these The very important things.”

norwegian oil fundwhich manages oil revenues for the government, has repeatedly stated that the title Environmental, Social and Institutional Governance Issues It is one of the biggest leverages it has in trying to generate above average returns. The fund is one of the world’s largest shareholders, owning the equivalent of 1.5 percent of every listed company in the world.

The oil fund last week held a seminar on decarbonization and net-zero targets that brought together 17 business leaders, including from Shell and Nestle, as well as portfolio managers from Fidelity Investments, T Rowe Price and Wellington Management.

“What is very clear is that if you are a big investor and you have a diversified portfolio, there is no way you can escape these issues,” he said. Tangen. “If you have one part of the portfolio that pollutes and destroys the environment, you will be hit by another part of the wallet.”

Tangin acknowledged that investors face a much more punitive backlash this year than they had expected. The European Central Bank and the Bank of England are raising interest rates to combat inflation even as economic growth slows, while US consumers are being pressured by higher prices.

“Last year if you ask us, what’s the worst cast on inflation, we’re beyond what we used to consider the worst case. If you say what’s the worst case on energy, we’re beyond that. Geopolitically we’re beyond what we used to consider the worst case. So we’re in Very bad situation.”

The downturn in stock markets pushed the fund into position The biggest ever loss for the dollar in the first halfIt decreased by 14.4 percent.

However, he emphasized: “We must not forget the decarbonization of this environment.”

Combined with severe inflationary and geopolitical pressures, investing in environmental, social and institutional governance has come under fire from Republican lawmakers who say the agenda has gone too far and risks jobs associated with the fossil fuel industry.

Several Republican-controlled countries have sought to ban asset managers from investing in ESG and threatened to withdraw funds due to the perceived hostility of some fund managers toward the fossil fuel industry.

Norway’s oil fund will unveil its new climate action plan on Tuesday after the government approved a proposal that its responsible investment be based on a long-term goal of pushing companies toward net zero emissions.

The oil fund has started voting against the entire board of directors on companies that fail to properly manage climate risk, according to Karen Smith Iheanacho, the oil fund’s chief governance and compliance officer.

“What we want to convey is how important it is for investors like us to really think long-term and continue to push companies in the right direction,” she added.

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