Norwegian GPFG to join Net Zero Asset Owner Alliance
For the world to succeed in mitigating climate change, decisive action by governments and the private sector is essential. Large institutional investors, such as pension funds, insurance companies and sovereign wealth funds, will need to reduce their portfolios’ total carbon emissions to net zero by 2050 or sooner.
By joining the Net Zero Asset Owner Alliance organized by the United Nations, 42 institutional investors, representing $ 6.6 billion in assets under management, have committed to do so, with the first intermediate targets being set for 2025. During this period Time, 128 asset managers, representing $ 43 billion in assets under management, have joined the Net Zero Asset Managers Initiative, to support investments aligned with net zero emissions by 2050 or earlier.
The total assets held by the Norwegian Government Pension Fund Global are roughly three times the gross domestic product of Norway. Carbon footprint of the GPFG equity portfolio of 107.6 million tonnes of CO2 equivalents (MtCO2e, 2019) is more than double the amount of Norway‘s total annual emissions, and triples when excluding Norway’s emissions from oil and gas extraction. Despite this, the GPFG does not have specific emissions targets and has focused primarily on climate risk rather than climate impact. Measuring greenhouse gas emissions at the national level, which is the norm under international agreements, significantly underestimates Norway‘s climate impact.
The Norwegian economy, due to its concentration in the oil and gas sector, is highly exposed to the risk of climate transition. A portion of GPFG’s portfolio assets are emissions-intensive and therefore highly exposed, increasing the overall transition risk for Norwegian productive and financial assets.
GPFG, which represents $ 1.3 billion in assets under management, holds an average of 1.4% of listed companies worldwide. This makes GPFG one of the largest investors in the world, and its membership in the Net Zero Asset Owner Alliance would be an important step towards achieving the goals of the Paris Agreement. The GPFG is also a very influential investor, and its membership would set an important precedent for other SWFs.
As leading economists and experts from around the world, we have come together to urge the Norwegian government and parliament to register GPFG with Net Zero. Guided by sound economic principles, we are united in the following policy recommendations.
- For Norway to be consistent in its climate ambitions, GPFG investments must be in line with Norway’s climate goals. This would require setting concrete and ambitious emissions targets for the GPFG.
- GPFG exists to protect the oil fortunes extracted from Norway for future generations. Its investments should help to conserve the climate in which these generations will live.
- Norway can provide GPFG with a climate-aligned mandate, while maintaining independence as a commercial investor.
- Norway can reduce its overall exposure to climate transition risk by reducing the greenhouse gas emissions intensity of the GPFG portfolio.
- In line with the Paris Aligned Investment Initiative, Norges Bank Investment Management, which manages the GPFG, is expected to prioritize engagement and stewardship as the primary mechanism to drive climate alignment, with building portfolio and selective divestment as complementary tools.
- As one of the world’s most influential investors, NBIM is expected to align its global voting guidelines with the goal of reducing total portfolio carbon emissions to net zero by 2050 or earlier.
We urge the Norwegian government and the Storting (parliament) to take the opportunity of COP26 to announce the GPFG’s membership in the Net Zero Asset Owner Alliance.
Signatories
Christiana Figueres, founding partner, Global Optimism; Former Executive Secretary of the United Nations Framework Convention on Climate Change
Pierre-Richard Agénor, Hallsworth Professor of International Macroeconomics and Development Economics, University of Manchester
Jørgen Juel Andersen, Associate Professor, Department of Economics, BI Norwegian Business School
Arild angelsen, professor, School of Economics and Business, Norwegian University of Life Sciences (NMBU)
Geir B Asheim, professor, Department of Economics, University of Oslo
Olivier Blanchard, Robert M Solow Professor of Economics, Massachusetts Institute of Technology; former Chief Economist, International Monetary Fund
Patrick bolton, Barbara and David Zalaznick Professor of Corporate Finance, Columbia University
Francois Bourguignon, professor emeritus, Paris School of Economics; former Chief Economist, World Bank
Ben caldecott, Director, Oxford Sustainable Finance Program; Lombard Odier Associate Professor, University of Oxford
Otaviano canuto, former vice president and executive director of the World Bank; former executive director of the IMF
Gordon l clark, Associate Professor, St Edmund Hall, University of Oxford
Diane coyle, Bennett Professor of Public Policy, University of Cambridge
Adam dixon, associate professor of globalization and development, Maastricht University
Francis Fukuyama, Olivier Nomellini Senior Fellow, Freeman Spogli Institute for International Studies; Mosbacher Director, Center on Democracy, Development and the Rule of Law, Stanford University
Mads Greaker, professor, Oslo Business School, OsloMet
Kirk hamilton, visiting professor, London School of Economics
Bård Harstad, professor, Department of Economics, University of Oslo
Cameron Hepburn, Director and Professor, Environmental Economics, University of Oxford
Justin yifu lin, Dean, Institute for New Structural Economics and Institute for South-South Cooperation and Development, Peking University; former Chief Economist, World Bank
Diderik Lund, Professor Emeritus, Department of Economics, University of Oslo
Monk Ashby, Executive Director, Stanford Global Projects Center, Stanford University
Knut Anton Mork, professor emeritus, Department of Economics, BI
Stele Navrud, professor, School of Economics and Business, NMBU
Karine Nyborg, professor, Department of Economics, University of Oslo
Rick van der ploeg, Professor, Department of Economics, University of Oxford
Steven poelhekke, professor and head of department, economics, University of Auckland
Jørgen Randers, professor emeritus of climate strategy, BI
Knut Einar Rosendahl, professor, School of Economics and Business, NMBU
Jeffrey D Sachs, university professor and director, Center for Sustainable Development, Columbia University; President, United Nations Sustainable Development Solutions Network
Lord Nicolas Stern, IG Patel Chair of Economics and Government, Professor, Department of Economics, LSE; former Chief Economist, World Bank
Per Espen Stoknes, associate professor, Department of Law and Governance, BI
Tony venables, Principal Investigator, University of Oxford; Professor of Economics and Research Director, The Productivity Institute, University of Manchester
Louis wells, Herbert F Johnson Professor of International Management, Harvard Business School
Håvard Halland, author and organizer of this statement
This article originally appeared in Global Public Investor 2021.