Markets need progress in Copenhagen, says Norway's SWF

OSLO Mon Dec 7, 2009 10:08am EST

Delegates are pictured during the opening session of the United Nations Climate Change Conference 2009, also known as COP15, at the Bella center in Copenhagen December 7, 2009. REUTERS/Bob Strong

Delegates are pictured during the opening session of the United Nations Climate Change Conference 2009, also known as COP15, at the Bella center in Copenhagen December 7, 2009.

Credit: Reuters/Bob Strong

OSLO (Reuters) - Financial markets need global climate talks getting underway in Copenhagen to iron out a plan to price emissions more effectively and seal the switch to a low carbon economy, Europe's biggest investor told Reuters on Monday.

Norway's oil revenue-fueled $440 billion sovereign wealth fund says climate change poses risks for its long-term investment and has lobbied along with other international investors for a strong agreement in Copenhagen.

The December 7-19 summit aims to agree cuts in greenhouse gas emissions and raise billions of dollars in aid to help the world curb its addiction to fossil fuels and seek low carbon alternatives.

"The financial markets need a strong commitment... and a strong price signal that the transition to a low carbon economy has started," Anne Kvam, head of corporate governance at the Norwegian central bank-ran fund, said in an interview. But she said the prospects for a strong global agreement were hindered by problems with passing legislation in the United States, which along with China is the world's top carbon dioxide emitter and remains outside the current Kyoto emission scheme.

"The price signal is weak right now and... (it seems) the transition to a low carbon structure will take more time than science recommends," she said, referring to U.N warnings of fast rising seas and droughts if CO2 levels continue quickly rising.

In past years, the fund has focused on dialogue with U.S. energy companies to try to influence their eco-strategies and lobbying of U.S. climate legislation initiatives, said Kvam.

GREEN INVESTOR

Norway's oil fund owns 1.8 percent of Europe's stocks and about 1 percent of all listed companies worldwide, giving weight to its calls for tougher emission curbs and greater environmental accountability by the companies it owns.

In August, the fund released a more thorough blueprint for how it wants the thousands of companies in which it holds stocks to tackle the issue of climate change. [ID:nLD26718]

"We intend to contact approximately 450 companies in sectors such as cement, oil and gas, utilities," Kvam said. "This project is planned to run and evolve for a few years."

Norway's Government Pension Fund -- Global, commonly known as the oil fund, invests the country's oil and gas revenues in foreign stocks and bonds to save for future generations.

It is the biggest wealth fund outside the Gulf and a pioneer among normally passive purely financial investors in advancing governance issues, with recent statements pushing for more minority shareholders' rights at German car maker Volkswagen and clearer management structures in U.S. companies.

The fund believes environmental factors may sooner or later hit the earnings of the companies it owns and sees its green ambitions as part of a wider push to achieve its overriding objective -- securing long-term returns.

Asked if chief executives understood the long-term revenue and profit implications of climate change, Kvam said: "We are stuck with a global financial system that doesn't internalize the externalities, such as setting an effective price on greenhouse gases. CEO's either adapt to change, or get changed."

(Editing by Patrick Graham)

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