World’s biggest wealth fund sets net zero target for firms

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Norway’s finance ministry, which has overall responsibility for the fund’s management, said earlier this year that it wants the fund to push the more than 9300 companies it invests in to adopt net zero emissions targets.

The fund will change how it engages with the companies it owns by asking for science-based short-term, medium-term and 2050 net zero targets, credible transition plans, and improved disclosures on performance, it said on Tuesday.

“By 2025, we aim to have a comprehensive system in place for measuring our exposure to climate risks and opportunities and potential portfolio emission trajectories,” the fund said.

It is aiming for a “significantly higher” share of its portfolio companies to have set net zero targets by 2025, and in particular companies with high emissions. It is targeting that all companies in the portfolio have such targets by 2040.

The fund invests the petroleum revenues from Western Europe’s biggest oil and gas producer for future generations in stocks, bonds, property and renewable projects abroad. It owns on average 1.3 per cent of all listed global stocks and its size is equivalent to $US219,000 for every Norwegian man, woman and child.

“Our goal is to be the world’s leading investor in terms of how climate risk is managed,” Mr Tangen also said in a statement.

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“Our long-term return will completely depend on how the companies in our portfolio manage the transition to a zero-emissions society,” he said.

The fund published its first expectations on how companies should address climate change more than a decade ago. It tracks climate-related risks, defined as the impact climate change may have on the assets the fund invests in, but also the opportunities that could arise for individual firms successfully adapting to it.

In August, the fund posted its steepest-ever first half loss as big bets on tech backfired. The Oslo-based fund lost $US174 billion of its value in the six months ended June 30, its biggest on record in currency terms. It lost 17 per cent on stocks, which comprise the largest share of its investments, and 9.3 per cent on fixed-income assets such as bonds.

Returns on the fund dropped 14.4 per cent – or $US174 billion – in the first half, weighed down by a sell-off across all sectors except energy, the fund said. The fund gained 14.5 per cent over the course of 2021.

Bloomberg

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