The manager of Norway’s sovereign wealth fund has played down links between the ESG backlash in the US and the way companies are actually behaving regarding their decarbonisation efforts at a news conference this morning, and said markets punished stocks for abandoning climate goals.
Publishing its 2024 responsible investment report today, Norges Bank Investment Management (NBIM) told journalists in Oslo that company transition plans were being mentioned less in earnings calls, which it has analysed systematically using AI models.
According to a graph shown by the manager of the NOK20.2trn (€1.7trn) Government Pension Fund Global (GPFG), the frequency of these mentions dropped to 20% in 2024 from a peak of around 30% in 2021.
Asked to comment on this observation as well as the political reaction in the US against ESG issues, NBIM’s chief governance and compliance officer Carine Smith Ihenacho said: “We are in the middle of an ESG backlash. It impacts the markets, it impacts companies, it impacts investors.
“ESG is complicated, but for us it’s always been about financial materiality, it’s always been about long-term value creation. That’s the dialogue we have with the companies, that’s the dialogue we will continue to have,” she said.
The Oslo-based central bank department’s global head of active ownership, Wilhelm Mohn, said: “You’re seeing maybe the investor rhetoric change a little bit globally to counter the anti-ESG pressures that are out there, but I think at the company level you’re seeing less of it.”
He added: “But we are definitely having a more nuanced discussion about what makes economic sense and what does not, so there is a clearer focus about the financial underpinnings of E and S, and that’s probably positive.”
He said he thought it was quite natural when talking about long-term targets for companies, that the topic could recede somewhat while other things moved to the foreground.
“In those data, we are not capturing any ESG backlash at the company level, so I think it’s a bit early to say,” Mohn commented.
“We had both the targets being set in 2021-22, we’ve had the energy crisis. Companies are asking how do we decarbonise most efficiently, which investments make sense now – and this focus on concrete short-term action is good,” he said.
“But we would also like to remind companies that they need a long-term focus too,” he added.
Emphasising the importance of investment performance of corporate climate action, Mohn said that according to NBIM’s analysis, there had been a 2% fall in share prices when companies removed their climate targets.
“Credible climate target and execution matter for value creation,” he noted.
Separately, campaign group Reclaim Finance, the Nordic Center for Sustainable Finance and other organisations released a statement today saying the GPFG held $6.15bn (€5.9bn) of bonds in 39 oil and gas companies which were actively pursuing expansion projects incompatible with global climate goals – despite the fund’s claim to be a climate leader.
Fanny Schoen, analyst at Reclaim Finance, said: “To show true leadership, the Oil Fund must shift its investments away from oil and gas, and that means introducing robust policies to restrict its support for oil and gas developers, including through bonds.”
Meanwhile, Norwegian state oil company Equinor said yesterday it was scaling back its plans to develop renewable energy capacity by 2030 – which follows recent announcements in a similar direction by BP and Shell as renewables markets have weakened.
Academic projects
NBIM is continuing to turn its attention to the financial risks posed by nature, with three new grants.
Each year, NBIM finances academic projects that it believes will help it gain a better understanding of the “financial economics of climate change”.
This year, it has announced that one of its grants will support a partnership between the University of Cambridge and Imperial College to produce a dedicated “biodiversity finance” issue in the well-known academic journal, the Review of Finance.
It will also fund research on nature risks and their pricing in financial markets, which will be undertaken by three academics at New York University.
NBIM’s interest in nature and biodiversity has been growing in recent years.
In 2021, it said “biodiversity will become an area of priority for our ownership work going forward” and published expectations on the topic for its portfolio companies.
It became a founding member of the Taskforce on Nature-related Financial Disclosures the same year.
When it put out its call for applications for this year’s climate grants, last summer, it said the “interdependencies between the climate transition and other global developments, such as changing trade policies and nature risks are not yet well understood”.
The third grant is being awarded to the National Bureau of Economic Research, to enable three annual climate and financial risk conferences. Their focus will be on climate, nature risks, transition and geopolitics.
Speaking on LinkedIn, Alexis Wegerich, NBIM’s head of ESG analytics, said the latest round of funding “will help strengthen the scientific foundation of our investment approach”.
“These projects will deepen our understanding of how climate change and nature risks impact investment returns and risk management,” he continued, adding that NBIM would share the insights generated by all three initiatives.NBIM received 25 applications for this year’s grants.
Additional reporting by Sophie Robinson‑Tillett
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Rachel is IPE's Nordic correspondent.
She has long been a freelance writer, and over the years, has written for The Telegraph, The Independent, The Observer, AMWatch and elsewhere.
In 2001, Rachel's personal finance book Kickstart Your Money was published by John Wiley & Sons.View full Profile
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