Norges Bank Investment Management, the arm of the central bank which runs the NOK3trn (€381bn) Norwegian Government Pension Fund, says its investee companies are not meeting its published expectations on managing climate change risk.
Climate change risk management is one of six strategic focus areas for the fund. The others are: equal treatment of shareholders; shareholder influence and board accountability; well-functioning, legitimate and efficient markets; children’s rights and water management.
Norges had previously outlined how it expected firms to evaluate the impact of climate change on their operations and supply chains. “Failure to do so may hurt the companies’ operations and performance, putting the fund’s investments at risk,” it said.
Now it has issued a report, based on publicly available information, which assesses 499 investee companies in six sectors: Basic Resources, Building Materials, Chemicals, Transport, Oil & Gas and Power Generation.
“The average level of compliance was low, with variations between sectors,” it states. The power sectorwas best with transport and basic resources worst. “We found little to suggest an overall improvement between this report and the first assessment in 2009,” NBIM stated.
But it did find greater compliance with its expectations in terms of integrating climate change risk with core strategy. And companies were increasingly disclosing action plans for specific risks and opportunities.
But, crucially, the report states: “No sector showed any sign of increasing disclosure on quantitative forward targets for greenhouse gas emissions.”
Norges says the assessments provide both NBIM and companies with a tool to help improve companies’ climate change performance “and serve as a basis for constructive dialogue”.
A separate NBIM report on 432 water-related companies found “great variation” among sectors on the level of compliance with its demands.
And similarly, its report on children’s rights found that despite greater compliance, the “information provided by most companies on child labour issues or children’s rights continues to be limited”.