Norway’s $1.1 Trillion Wealth Fund to Deepen Climate Risk Work

(Bloomberg) --

Norway’s $1.1 trillion sovereign wealth fund plans to expand its work on assessing climate risk, from pushing for better company reporting to expanding flood analysis for its real estate assets.

The Norwegian fund, the biggest of its kind, already has a variety of instruments to measure how climate change may affect demand, spur regulation or physically damage assets. It has cut a large part of its exposure to coal production and also follows ethical guidelines for its investments that incorporate climate and environmental standards.

The fund, which owns close to 1.5% of all listed stocks and is managed by the central bank, will continue to support initiatives to develop global standards for companies’ reporting on climate risk, it said in a letter to the Norwegian Finance Ministry published on Thursday.

“Climate change will eventually impact on most industries and markets,” Governor Oystein Olsen and the fund’s deputy chief executive officer Trond Grande said in the letter. “We encourage companies to move from words to numbers so that we can better evaluate their operations and the financial risks and opportunities associated with their environmental and social conduct.”

More than a third of the companies it had contacted in 2017 had already begun to improve their climate-change reporting the following year after dialogue with the fund, it said. It plans to analyze almost 4,000 company reports this year.

On real estate, which makes up less than 3% of its portfolio, the fund said “assessing physical risks will remain crucial” and plans to expand its flood-risk analysis with forward-looking scenarios.

In addition to excluding 70 companies based on its coal criterion, the fund has divested 142 companies between 2012 and 2018 based on its own assessment of climate risk, it said. The fund invests according to a benchmark index, but has some leeway to stray from it. The so-called risk-based divestments are made within that margin for deviation.

To contact the reporter on this story: Mikael Holter in Oslo at mholter2@bloomberg.net

To contact the editors responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net, Stephen Treloar

©2019 Bloomberg L.P.