Norway oil fund: ‘We divested from 43 companies this year’

Dec 16, 2021
New pre-screening sees world’s biggest SWF also decide against investing in nine companies

A new pre-screening assessment introduced by Norges Bank Investment Management (NBIM), which manages Norway’s sovereign wealth fund (SWF), has resulted in the fund refraining from investment in nine companies.

The fund also reveals that in 2021 it divested from 43 companies that it considered ‘not to have sustainable business models,’ including for issues where companies are ‘exposed to significant risks related to climate change, water management and corruption.’ Since 2012, it says it has divested from 366 companies that it considers not to have sustainable business models.

NBIM’s announcement comes shortly after a survey by investment manager Ninety One found that 36 percent of investors say they support divestment as a tool against climate change – up from 30 percent before COP26.

Earlier this year NBIM said it would begin to ‘systematically assess the sustainability risk of companies that will enter the fund’s equity index.’ That new system came into place in June with 442 companies assessed to date.

Although specifics about the companies or sustainability issues have not been given, NBIM says in a statement that it ‘uncovered risks related to inadequate management of environmental pollution and human rights, and we concluded that these nine companies could add financial risk to the fund in the long term.’ It adds that an additional 65 companies with high sustainability risk were also identified but says it will ‘consider following up through our investment processes and in our ownership work.’

Describing the process as ‘important, but challenging,’ Dag Huse, chief risk officer for the fund, says in a statement: ‘This work has illustrated that the quality and availability of sustainability data for companies that are added to the index is generally low. Most of these companies are small, and many have only recently been listed.’

‘Our pre-screening builds on and strengthens our long-standing work with risk-based divestments,’ says Nicolai Tangen, CEO of NBIM. ‘It’s about weeding out companies we do not want to be invested in. In addition, pre-screening gives us a better overview of the sustainability risk in the companies we choose to invest in at an earlier stage.’

The fund, often termed Norway’s oil fund, manages around $1.4 tn and saw a 9.4 percent return on its equity investments in the second quarter of this year, fueled by strong growth in the energy sector despite having proposed selling out of such stocks for financial reasons four years ago. Norway’s SWF was created in 1990 to invest revenues from the huge reserves of oil and gas that were being drilled. This – and the fund’s continued investment in fossil fuel companies among the 9,000 firms it is invested in – prompted criticism against Norway at the recent COP26 meeting.

Tangen recently told BBC News’ Hardtalk program that divesting from fossil fuels was not the answer. It is ‘much more powerful to be an active owner and have a constructive dialogue with these companies,’ he said.

Sign up to get stories direct to your inbox
Stay informed on the latest trends and developments in the fast-moving world of corporate governance by signing up for our popular newsletters. Our weekly and monthly updates will provide you with expert analysis, timely updates and comprehensive coverage of regulatory updates, governance trends and best practices, careers and much more.
Cs logo Cs logo