Biggest sovereign wealth fund puts oil stocks on notice

Norway’s wealth fund says there are oil companies in its portfolio that “absolutely” aren’t doing enough to cut emissions, as the guidelines it operates by are reviewed to give climate risk greater prominence.

Norges Bank Investment Management still holds stakes in a number of fossil-fuel giants, including Exxon Mobil, Chevronand BP, after failing to win political approval to dump its entire portfolio of oil stocks a few years back.

“These are companies we monitor very, very closely with a view to the climate and emissions,” Carine Smith Ihenacho, chief corporate governance officer at the Oslo-based fund, said in an interview. 

Norway is now taking another look at the mandate handed to its wealth fund, the world’s biggest. On Friday, a government-appointed expert group submitted its recommendations, amid increasingly disturbing evidence that the planet is heating up much faster than previously feared.

The expert group says the government should “change the mandate” under which the fund operates to “better handle climate risk.” Changes would include giving the fund more leeway to put pressure on greenhouse-gas emitters, using its global dominance as a stock owner to influence the outcome of shareholder votes. And if companies don’t improve, the fund should have more scope to divest. 

Martin Skancke, who led the expert group, said the fund already incorporates climate risks in its strategy. “But that’s because there have been people at the fund who are passionate about this, and who treat this as a serious issue,” he said in an interview. But it’s “not satisfactory” to just rely on good people, he said. “It needs to be in the mandate.”

The fund used the votes it had, which didn’t include weighing in on shareholder proposals on board seats, to demand that Exxon be transparent around political contributions, in an effort to stop the kind of lobbying that leads to dubious policies.