The enormous government fund that invests Norway’s oil earnings said that it was going to double the amount of effort it puts into trying to get businesses to reduce the amount of carbon dioxide emissions they produce by the year 2050.
It is the first time that the $1.2 trillion fund has established a deadline by which firms that it invests in should be at “net zero,” which means that they either do not emit any carbon or offset their emissions by extracting comparable quantities of carbon from the environment. The 2050 goal brings the fund, which now has holdings in over 9,000 firms located all over the globe, into line with BlackRock and a number of other significant asset managers.
In order to achieve the primary objective of the Paris climate agreement, which is to restrict the increase in temperature of the atmosphere to no more than 1.5 degrees Celsius (or 2.7 degrees Fahrenheit) compared with preindustrial levels, scientists have determined that emissions must reach net zero by the year 2050.
In an interview conducted prior to the dissemination of Norway’s climate plan, the chief executive of the country’s fund, Nicolai Tangen, was quoted as saying, “If you don’t have sufficient climate goals, you don’t have a business.” “Because of the way things are set up right now, you won’t be able to get loans from the bank, you won’t be covered by the insurance company, you won’t have any customers, and you won’t have any employees working for you,” the man said.
Along with other major investors, the fund in Norway is putting pressure on businesses to provide realistic strategies for cutting their emissions. A great number of major businesses have formulated net-zero strategies, yet these plans often lack substance and ambition. In situations like these, funders will often put pressure on management teams and board members to do more. On Tuesday, Norway’s sovereign wealth fund said that it would sell firms that it considered to be laggards. The fund stated that it will “divest from enterprises with unmitigated climate risks, particularly when engagement has failed or is unlikely to succeed.”
Even though investors are facing difficulties to their climate activism, Norway’s fund is bringing further pressure to the situation.
During the course of the last year, surging oil and natural gas prices have resurrected the profitability and stock prices of energy businesses. This highlights the fact that the extraction of fossil fuels can still be a financially profitable enterprise. Additionally, as a direct consequence of Russia’s activities and the ongoing conflict in Ukraine, there has been a rise in the number of requests for energy corporations to increase their production rather than decrease it.
And climate efforts by huge asset managers are now facing increased political pushback from Republicans, who believe that giant investment corporations are using their weight to push for progressive legislation.
Despite this, major investment funds may choose to maintain their holdings in the firms that produce the most carbon for a considerable amount of time. As shareholders, they have the ability to advocate for more aggressive climate strategies and contribute to the achievement of the greatest possible reductions in emissions. Large oil firms in principle also have enough money to invest in technology that can help cut emissions, such as the presently highly costly efforts to suck carbon out of the air. These technologies have the potential to help reduce emissions.
According to Mr. Tangen, “the major integrated energy businesses are truly the answer here.” The fund established in Norway has the intention of continuing to expand the amount of money it invests in renewable energy firms and projects. On the other hand, Mr. Tangen said that the fund was having trouble locating suitable investments in this sector. He characterised the level of competitiveness as being “very high.” Therefore, the profits that you earn are very, extremely little.