Norway Wealth Fund Ratchets Up Divestments Based on ESG Risk
Norway’s Wealth Fund Cut 300 Firms in a Decade on ESG Risk
(Bloomberg) -- Norway’s $1.4 trillion wealth fund has exited hundreds of companies over the past decade to avoid the environmental, social and governance risk it says they represented.
Since 2012, Norges Bank Investment Management has offloaded almost 370 stocks as a result of ESG screening, according to new figures released by the fund on Tuesday. The ultimate goal is to protect the wealth fund from risks that will lead to financial losses, Chief Corporate Governance Officer Carine Smith Ihenacho said in an interview before the latest update on divestments.
The fund has made sustainable investing a more explicit strategy since Nicolai Tangen took over as chief executive late last year. With a portfolio of about 9,000 stocks, the world’s biggest owner of publicly traded companies intends to base future investment decisions on the results of a new ESG pre-screening process.
Based on that model, the fund said it’s already blacklisted nine companies that would otherwise have automatically been added to its portfolio based on the benchmarks it follows. A further 65 firms have been identified as posing similar sustainability risks, it said, without naming the companies.
Tangen said in a recent interview that the degree to which ESG dictates a company’s prospects is “starting to hit now.”
Risk-based divestments mainly affect smaller companies where efforts to engage don’t pay off, Ihenacho said. The fund screens for a range of ESG risks including climate change, ocean sustainability, children’s rights, human rights, tax and transparency, anti-corruption, water management and lately also biodiversity.
Built from Norway’s North Sea oil and gas riches, the fund exited over 30 companies last year, based on an assessment of their sustainability risks. It doesn’t publish the names of the companies from which it divests. The ESG filter is different from divestment recommendations made by Norway’s ethics council, which are made irrespective of financial considerations.
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