November 27, 2019 / 4:38 PM / 10 days ago

Norway wealth fund says climate change key to risk-based divestments

OSLO (Reuters) - Norway’s $1.1 trillion wealth fund, the world’s largest, said climate change dominated discussions about whether it should sell stakes in companies because they are considered too risky.

FILE PHOTO: Emissions from a power plant chimney rise over Ulaanbaatar, Mongolia January 13, 2017. REUTERS/B. Rentsendorj/File Photo

The fund, which invests revenues from Norway’s oil and gas production, has stakes in some 9,000 companies across 72 countries, equivalent to 1.4% of all globally listed shares.

As well as being one of the world’s largest investors, it is at the forefront of a push to get companies to disclosure non-financial data, particularly related to the climate.

Since 2012, the fund has made 240 risk-based divestments, including 140 related to climate-risk, Patrick du Plessis, the fund’s global head of risk monitoring, told a central bank conference on financial stability and climate change on Wednesday.

“Climate very much dominates our discussions around risk-based divestment,” he said.

The fund has also made 156 divestments because of ethical concerns — which can include human rights abuses, use of child labor or companies which derive more than 30% of their revenues from coal.

Du Plessis said the fund’s aim was not just to minimize or eliminate climate risk, but to price it correctly in relation to an asset’s value.

However, only 17% of the companies in the fund’s portfolio, or 43% by net asset value, had disclosed their carbon emissions by the end of 2018, a survey by the fund showed.

Du Plessis told Reuters on the sidelines of the conference that the fund was pushing companies to be more transparent.

He said the fund’s corporate governance team was working on assessing how good companies were at disclosing their carbon emissions, and whether or not their disclosure was improving over time.

“That’s what we call laggards and leaders,” Du Plessis said.

“For the laggards, this year or next year, (the team is) planning to have discussions with these companies to see if they can improve their disclosure.”

The fund is looking at the location of assets to assess physical climate risk, for example by studying at 100-year flood maps of areas where they are considering investing in real estate.  

“If we know where the companies’ assets are, we would be able to understand to a granular level what the physical risks are to those companies,” Du Plessis said.

Editing by Gwladys Fouche; Editing by Kirsten Donovan

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