Risk assessments already being made by Norway’s huge sovereign wealth fund known as the Oil Fund may now help reverse climate change. The fund’s chief, Yngve Slyngstad, and Nowegian Prime Minister Erna Solberg played key roles at French President Emmanuel Macron’s “One Planet Summit” in Paris this week, with Slyngstad talking about how investors can coax companies into cutting their climate risk, their own emissions and being more open about their climate strategies.
The Oil Fund Slyngstad runs, which was built up from Norway’s own oil revenues, is the world’s largest investor of them all. Given the basis for the fund’s financial power (offshore oil), it’s been somewhat ironically active in climate issues for years, dumping stock in coal companies and, most recently, planning to pull out of oil companies as well. Slyngstad isn’t suddenly getting sentimental about trying to save the planet: New climate initiatives formalized in Paris are fueled almost entirely by profit motives.
As newspaper Dagens Næringsliv (DN) reported this week, the Oil Fund and several other state-controlled investment funds are simply boosting their efforts to integrate the financial risk that climate-unfriendly operations represent into their investment decisions. For Norway’s Oil Fund, with its long-term goals of financing Norwegians’ pensions for generations to come, the long-term threats posed by climate change simply must become part of the fund’s management.
‘Follow the (climate) risk’
“We have to to follow various forms of risk,” Slyngstad said at the conference in Paris that celebrated the second anniversary of the UN climate agreement. “Climate risk is clearly one of them.”
He said it’s important, for example, for the Oil Fund to get companies to publicize numbers regarding their emissions. “We know that what’s measured can also be managed,” Slyngstad said.
It’s certainly not the first time Norway’s Oil Fund is flexing its financial muscle to prod the companies in which it invests to become more socially correct. It must adhere to ethical guidelines set by a commission set up by the Finance Ministry. In addition to promoting fair labour standards over the years and recently deciding to sell out of fossil fuels like the oil that built it up, the Oil Fund also now wants companies to pay taxes where they generate their profits, instead of transferring those profits to units set up in tax havens.
On Tuesday morning, the Oil Fund and a group of investment managers and public investment funds including those in Kuwait, Abu Dhabi and New Zealand launched a five-year plan to make new demands of the 100 companies in the world that contribute the most to carbon emissions. Norway’s own Statoil is among them.
Oil fund diversifying
There’s likely going to be a majority in the Norwegian Parliament, meanwhile, to back the Oil Fund’s move to sell off its oil company shares, including those in Statoil. The Oil Fund is also making more investments in real estate, most recently in Tokyo where its Real Estate Management unit bought 70 percent of five properties in partnership with Tokyu Land Corp for nearly NOK 7 billion. Newspaper Aftenposten reported recently that as the fund slowly diversifies, it has now bought real estate for nearly NOK 200 billion (USD 25 billion).
Slyngstad delivered returns on the fund of NOK 192 billion in its most recent quarterly report and Prime Minister Erna Solberg is benefiting from the political muscle the fund gives Norway. The French president specifically invited Solberg to play a major role herself at his climate conference, which is also meant to demonstrate that climate consciousness and work to reverse climate change will continue despite US President Donald Trump’s announcement he’d pull the US out of it.
Solberg told state broadcaster NRK that she was asked to participate “because the Norwegian (Oil Fund) is one of those that makes the clearest demands for reporting, and has standards and expectations for the companies in which it invests. It’s therefore a good role model in this work.” She’s convinced that the initiative for new climate standards for companies wouldn’t have happened if Norway’s Oil Fund wasn’t involved. Newspaper DN speculated on Wednesday that the group may even set the carbon price politicians have failed to do.
Solberg played down any role the fund may have of being a climate activist, though, claiming it first and foremost strives to secure the value built up in the fund. “It’s not a climate-activist fund,” she said, “it’s a fund intent on making sure we also see the risks tied to climate change that influence how we invest.”