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The world’s largest owner of publicly traded shares, the Norwegian sovereign wealth fund, is about to get the political green light to insist that all companies in its portfolio have clear CO2 reduction targets .

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The Norwegian Labor Party, which won an election this month focused on the country’s dependence on fossil fuels, has made it clear that it wants to adopt more aggressive environmental policies. This includes providing a stricter framework for Norges Bank Investment Management. The $ 1.4 trillion fund is now expected to commit to net zero carbon dioxide emissions by 2050, Labor climate spokesperson Barth Eide, Espen, told Bloomberg.

This is a goal that was enshrined in the 2015 Paris Agreement as an essential step towards preventing catastrophic temperature rises. Norway’s reluctance to join its heritage fund so far, which holds around 1.5% of global equities, has been condemned by climate activists. But as scientists warn temperatures are rising at a much more dangerous rate than previously feared, the mood – even in oil-dependent states like Norway – is changing.

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“We want the fund to use active ownership strategies to achieve net zero across all companies in the portfolio,” Eide said in an interview.

Oil majors and their emissions

For now, the Norwegian heritage fund still owns stakes in some of the biggest greenhouse gas emitters on the planet, including ExxonMobil Corp. and Chevron Corp., according to the latest regulatory documents compiled by Bloomberg. The fund itself has already asked the Norwegian parliament for permission to pull out of all oil stocks for diversification purposes. But he was only allowed to make a partial cession.

Eide said he didn’t expect to ask the fund to dump fossil fuel stocks overnight. But he said oil companies without an ambitious net zero target would be in the crosshairs. They will need to have “credible and responsible plans,” he said.

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Major oil emissions ambitions

Labor’s plan for the wealth fund to target net zero follows a government-commissioned report that provided a list of recommendations on climate risk. He advised to introduce carbon emission reduction targets for the fund in accordance with the Paris agreement. Labor is still in talks with potential coalition partners and has yet to form a government. But he’s likely to find his way to the net-zero goal, given his dominance in Parliament.

Martin Skancke, lead author of the climate risk report, said that for large emitters, net zero should encompass so-called Scope 3 targets, which include end-user emissions.

“If Scope 3 is important – for example, if you’re an oil company – then clearly Scope 3 shows are definitely the most important for your shows, because they’re huge,” Skancke said in an interview.

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Eide says companies that “want access to the capital of the world’s largest sovereign wealth fund will need to take note.”

Climate talks

Shortly after winning the September 13 election, Labor representatives met with Christiana Figueres, the former executive secretary of the United Nations Framework Convention on Climate Change and the person who inaugurated the Paris Agreement there. has half a decade. She sharply criticized wealth funds – most of which are built on petro-state money – for failing to sign on to the net zero emissions targets.

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Figueres argued that if Norway pushes its sovereign investment vehicle carbon neutral, others in the world of $ 10 trillion wealth funds will follow, representing a dramatic shift in the flow of funds. capital that would help reduce carbon emissions. In a recent interview, Figueres said that “Norway’s example would be noted around the world”.

Skancke suggested that the Norwegian wealth fund’s efforts might have limited effect if it acts in isolation. “It is impractical to go into something that is not coordinated with others,” he said. “The biggest gains come from coordinated action, when investors team up. “

Bloomberg.com