The Norwegian sovereign wealth fund, valued at $1.4 trillion and considered the world’s largest, has recently intensified its demands on companies it invests in regarding climate risk management, Reuters reports. The fund is now urging boards to transition from merely setting targets to developing comprehensive plans for the transition to a low-carbon economy.
The new criteria include establishing key performance indicators (KPIs) to measure the delivery of each company’s climate transition plan and an annual report on the company’s progress on the delivery of its net-zero strategy.
Furthermore, the fund requests that companies showcase the alignment between executive compensation and the achievement of short-term objectives and transition plans.
As a result of accumulating revenues generated from Norway’s oil and gas production, the fund has become an important factor in addressing environmental, social, and corporate governance (ESG) concerns.
Having a portfolio that includes stakes in around 9,200 companies globally, the Norwegian fund possesses substantial sway in the global market. Its holdings represent approximately 1.5% of all listed stocks worldwide, giving it a significant voice in influencing corporate behavior and practices.
To address climate change and promote emission reduction by companies, the fund has also introduced new criteria concerning the utilization of carbon credits.
Its new policy on the use of voluntary carbon credits states that carbon credits should not be used to count towards science-based interim emission reduction targets. Additionally, companies are required to be transparent about the details of the credits they use.
While rolling out the new carbon credits guidelines, the Norwegian fund used the opportunity to highlight the significance of companies prioritizing the reduction of their harmful emissions and considering carbon credits as supplementary measures to their climate-conscious efforts.