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Thursday, October 21, 2021

The Sovereign Wealth Fund Of Norway Commits To Climate Action

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The sovereign wealth fund of Norway has announced that it’s working on a strategy update to ensure its $30bn property portfolio lives up to the carbon neutrality goals of the Paris Agreement.

This has come after increasing pressure on asset managers and owners to cut their carbon footprint, following grave predictions for the earth’s climate in this century. As this threat becomes more apparent with abnormal weather patterns and disasters, large organisations are realigning their environmental, social and governance strategies (ESG) to enact positive change. From raging wild fires in Australia and California, to ice melting in the Arctic, climate catastrophe is at the forefront of the public’s minds.

“It’s time to walk the talk more,” said Mie Holstad, who oversees real assets at Norges Bank Investment Management. “What we’re working on now is a separate, improved sustainability strategy, which prepares us for net-zero” as well as new laws and regulations surrounding carbon emissions, she said.

Holstad added that the Oslo-based wealth fund has clear ESG policies: there’s confidence that the property portfolio and its investments are prepared for climate issues ahead. Before any acquisition, the fund screens potential targets for ESG risks, Holstad said. 

This has been a matter of urgency for the wealth fund. A recent review of the Norwegian wealth fund’s investment mandate pointed to real estate as an area that holds hidden climate risks. Other sectors in which climate risk is poorly understood include banking and insurance, the review found. 

Though Norway hasn’t formally signed its wealth fund up to net-zero goals, Carine Smith Ihenacho, its chief corporate governance officer, said last month that “as a fund, it’s clearly in our interest that the goals in the Paris Agreement are reached. And that includes net-zero emissions by 2050.”

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Nordic countries have a tradition of caring for the environment, with their pristine landscapes starkly contrasting with much of Europe. These countries have been early adopters of renewable energy with Iceland in particular having 77 per cent of its energy coming from renewable sources. This is unsurprising, with most Nordic countries set to face the consequences of climate change: melting snow is set to increase the rate of landslides, avalanches and flooding.

For some, this decision will be seen as better late than never. The sovereign wealth fund of Norway has been responsible for an immense amount of carbon emissions. The fund estimated its portfolio’s carbon footprint was 107.6 million tonnes of CO2 equivalent in 2019 – roughly twice what Norway emitted that year. Nevertheless, the news that such a prolific polluter is pivoting towards net zero is a welcome development.

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