It invests in 174 businesses, totaling $4.5bn; Vale, Eletrobras have been excluded from portfolio
09/21/2022
Norway’s sovereign wealth fund — the world’s largest, with $1.2 trillion in assets — announced on Tuesday a new action plan for all companies in which it invests to achieve net-zero greenhouse gas emissions by 2050, in line with the Paris Agreement.
The plan will have an impact in Brazil, where the Norwegian fund invests in 174 companies, totaling $4.5 billion, or 0.3% of all its assets. It has stakes in companies like Petrobras (1%), Suzano (2.1%), Cosan (2.2%), and Aliansce Sonae Shopping Centers (3.6%). In total, its investments in Brazil in 2021 reached about $6 billion, including fixed-income securities, equivalent to 0.4% of all its investments, compared to 0.9% in 2019. But the number of companies it invests in the country increased to 174 last year from 139 in 2019.
As Valor reported in March, last year Norges Bank, which manages the sovereign wealth fund, excluded 12 companies globally from the portfolio and placed three others under observation. One of these three is Brazil’s Marfrig Global Foods, which was set aside due to environmental issues. The fund had only $2 million invested in the company (0.08% of the shares).
The fund at the time also started talks with 11 companies that are among the biggest contributors to the equity portfolio’s carbon footprint, to understand their plans to reduce their greenhouse gas emissions. One is Petrobras.
In 2019, the fund had already excluded from the portfolio two Brazilian companies among 15 globally: Vale, for “severe environmental damage,” in the collapse of dams which have caused hundreds of deaths; and Eletrobras for “human rights violations” involving certain hydroelectric projects, such as the Belo Monte dam.
Globally, the fund invests in more than 9,000 companies in 70 countries. With the new plan, it wants to accelerate the decarbonization of its portfolio to avoid financial risks arising from delays in the environmental transition. “We will ask companies to undertake appropriate short-term actions to help mitigate global warming and reduce exposure to climate risk,” the fund says. “For selected industries, this might include significantly reducing methane emissions or eliminating deforestation impacts from their business activities and/or value chains.”
For the Norwegian fund, climate change is one of the biggest challenges of the century. “In addition to serious consequences for the world’s climate and living conditions for human beings, the changes will result in considerable risk for the global economy,” it says in a statement.
Analyses by the fund indicate that a delay in the climate transition is what constitutes the greatest financial risk to its investments. “Our goal is to be the world’s leading investor in terms of how climate risk is managed. Our long-term return will depend on how the companies in our portfolio manage the transition to a zero emissions society,” said Nicolai Tangen, CEO of Norges Bank Investment Management, in the statement.
The fund has been working on the climate issue for more than 15 years. But it says it will now do more. It will charge companies to develop transition plans, define their timelines and milestones, and report on their progress annually. Net emissions will be examined, meaning that any additional carbon emissions need to be fully offset by emissions taken out of the atmosphere, for example.
“We will examine the robustness of these plans, including governance structures, capital allocation frameworks, carbon price assumptions, and use of carbon offsets and their quality,” the institution says.
*By Assis Moreira — Geneva
Source: Valor International