Norway's $1 trillion fund sets stricter environmental guidelines

Wealth fund undertaking greater scrutiny of sustainability and ocean pollution impacts of corporates in which they invest


Norway’s $1 trillion sovereign wealth fund has said it wants companies in which it invests to follow stricter guidelines on global sustainability and strengthen efforts to combat plastic pollution of the oceans.

Negative externalities

The fund, the world’s largest, invests the revenues of Norway’s oil and gas production and is a global investor with stakes in some 9,000 companies across 72 countries. The fund signed up a long time ago to the United Nations’ goals of achieving sustainable economic, social and environmental development by 2030. As a global investor the fund wants to avoid investments in one sector to negatively impact another, so-called externalities, which would hurt the overall value of its portfolio. Carine Smith Ihenacho, the fund’s Chief Corporate Governance Officer, told Reuters ‘we are a universal investor compared with some investors that narrowly focus on one sector.’ She added externalities will affect them, and added ‘that is why we are looking at long-term sustainability’ and ‘we find the UN Sustainable Development Goals are a good framework to look at because they go across many indicators.’

Divestment threat

The UN’s goals include responsible consumption and production, affordable and clean energy and sustainable life below water. The fund wants companies’ boards to develop strategies to address these goals and it may sell out of companies if it is not satisfied. Ms Smith Ihenacho said,  ‘if we believe there isn’t a long term sustainable model for various reasons, we will divest from them, like we have done with palm oil and deforestation.’ The fund issued a separate document on ocean sustainability, which said this could affect companies with a combined value of $56.5 billion, representing about 8 percent of its global equities portfolio. The fund wants the boards of companies that depend, use or affect the oceans to work on reducing the pollution their businesses create, and may also divest from a company if it believes that its business model is not sustainable over the long-term.

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