Norges Bank releases corporate climate change expectations document

Influential investment giant publishes brief position paper

Norges Bank Investment Management (NBIM), which manages the NOK6.8trn (€791bn) Norwegian Government Pension Fund, has released a position paper on how it expects companies to approach climate change, with a discussion around executive remuneration incentives and regular reporting on emissions.

The five-page paper, released today, says NBIM believes that climate change creates risks and opportunities for companies and an effective response may drive long-term returns for NBIM as a shareholder.

Norges lays out four expectations it has for companies it invests in to approach climate change: integrating relevant climate change challenges and opportunities in investment planning; integrating material climate change risk in risk management; reporting material climate change risks and greenhouse gas emissions; and transparency on interaction with policy makers and regulators, and positions on climate change legislation and regulation.

NBIM suggests that when investment planning, companies consider putting in place a mechanism for third-party evaluation of company climate strategy. It also suggests companies should “regularly consider” whether their remuneration and incentive systems promote sustainable business practices.The influential investor wants companies with large greenhouse gas emissions to have a “strategy addressing a transition to a low-emissions energy system”, including include specific attention to the sensitivity to climate impacts, both physical and regulatory, of major investments.

On reporting and transparency, NBIM says companies should report on greenhouse gas emissions in annual reports and on websites, and have a policy or guidelines for engaging with policymakers and regulators on climate change.

NBIM also focuses specifically on companies engaged in activities that lead to “significant clearing of tropical forests”, urging them to have a strategy responding to stricter future regulation and be transparent about their “tropical forest footprint”.

NBIM has also released a paper on “proxy access” that supports New York Comptroller Scott Stringer’s campaign to allow shareholders to nominate directors if they hold 3% of stock for 3 years.

Weighing up the arguments for and against proxy access, NBIM says that ultimately it supports a statutory basis for proxy access shaped by its long-term investment horizon and status as a minority investor. It says: “We will not be supportive of directors who seek to undermine shareholder efforts to introduce proxy access rights.”