Norway’s oil fund warns of ‘danger’ as environmental agenda slides down

The head of the world’s largest sovereign wealth fund has urged investors to focus on environmental, social and governance issues, warning of a “real danger” that economic turmoil and a political backlash in the US put them on the agenda. takes it down.

Rise in inflation, sparked by a renaissance in fossil fuels war in ukraine And growing resistance from Republican states in the US has cast doubt on the seemingly unstoppable growth of ESG investing, which asset managers have been quick to embrace in recent years.

Nikolai TangenThe head of Norway’s 1.2 tonne oil fund told the Financial Times that “we are seeing backlash against ESG in some places in the US. Despite the increasingly volatile financial markets and the economy, we believe these extremely important matters.” It’s more important than ever to focus on it.”

Norwegian oil fundwhich manages the petroleum revenue of the government, has repeatedly stated that while addressing ESG issues This is one of the biggest levers in attempting to generate above-average returns. The fund is one of the largest shareholders in the world, owning approximately 1.5 percent of every listed company in the world.

The oil fund held a seminar on decarbonization and net zero targeting last week, attended by 17 business leaders including Shell and Nestle, as well as portfolio managers from Fidelity Investments, T Rowe Price and Wellington Management.

β€œIt is very clear that there is no way to avoid these problems if you are a large investor with a diversified portfolio,” he said. tango, “If you have one part of the portfolio that is polluting and destroying the environment, you are going to have a hit in the other part of the portfolio.”

Tangen acknowledged that investors are facing a more punitive background this year than expected. The European Central Bank and the Bank of England are both raising interest rates to combat inflation, even as economic growth slows, while American consumers are being squeezed by higher prices.

“Last year if you asked us, what’s the worst-case on inflation, we’re well beyond what we think of as the worst-case scenario. If you said what’s the worst-case scenario on energy, we’re beyond that. Geopolitically we are beyond what we would have considered worst case. So we are in a very bad place,” he said.

The recession in the stock markets pushed the fund towards itself Biggest dollar loss ever in the first halfBecause it fell 14.4 percent.

Nonetheless, he insisted: “We must not forget decarbonization in this environment.”

With intense inflation and geopolitical pressures, ESG investing has come under fire from Republican lawmakers who say the agenda has gone too far and puts jobs linked to the fossil-fuel industry at risk.

Several Republican-controlled states have sought to bar asset managers from ESG investments and have threatened to pull money over some fund managers’ perceived hostility to the fossil fuel industry.

Norway’s Oil Fund will unveil its new climate action plan on Tuesday after the government approved a proposal that its responsible investments would be based on the long-term goal of pushing companies toward net zero emissions.

According to Carine Smith Ihenacho, Chief Governance and Compliance Officer of the Oil Fund, the Oil Fund has begun voting against across the board in companies that fail to properly manage climate risk.

She said: “What we want to convey is how important it is for investors like us to really think long term and keep companies moving in the right direction.”

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