Norway’s sovereign wealth fund has written to energy companies, asking them to outline their plans to deal with the transition to a low-carbon economy.
In a letter to the Ministry of Finance accompanying its inaugural responsible investment (RI) report, Norges Bank Investment Management (NBIM) noted a recent decision not to use the Government Pension Fund Global as a tool for enacting climate policy by mandating a blanket divestment of fossil fuel holdings.
NBIM contrasted the blanket exclusion of one or more sectors with its ability to monitor companies actively and potentially not invest in them, noting that sector-wide bans would directly conflict with the “basic premise” of its approach to management.
“Use of the fund as a climate policy tool beyond what is consistent with the fund’s role as a financial investor would be very unfortunate for the management of the fund,” it said.
It added that, despite the decision not to divest fossil fuels, NBIM had long sought to address matters of climate change, and had been assisting CDP in drawing up metrics for carbon disclosure.
However, it noted that measuring a company’s greenhouse gas emissions was not enough to assess the risk of climate change properly, and that a company’s business plan and operation should therefore be examined as well.
As part of the initiative, NBIM said it had in 2015 written to a number of undisclosed energy firms asking them to outline their plans for dealing with a future low-carbon economy.
The disclosure of the letters comes shortly after both Shell and BP endorsed a shareholder resolution backed by 50 institutions worth more than £160bn (€214bn) to report on the resilience of its business in a future low-carbon economy.
The resolution asked them to disclose their low-carbon research and development plans, with Shell noting its work in the area of biofuels and carbon capture.
Throughout the letter, NBIM emphasised the importance of an evidence-led approach to RI, in line with the view of chief executive Yngve Slyngstad, who last year called for more rationality in the sustainable investment debate.
Read more about carbon risk in IPE’s recent in-depth report on the topic
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