Opinion: Significant new climate recommendations for Norwegian Oil Fund

A Norwegian government-commissioned expert group have published their recommendations for handling climate risk in the Norwegian Oil Fund (GFPG), one of the world’s largest investment funds. The changes proposed are significant and align to long-standing recommendations of Fair Finance Norway lead, Framtiden i våre hender. 

Embla Husby Jørgensen, policy advisor with Framtiden i våre hender outlines the investment and political implications of the report.

In line with Framtiden’s demands

There was an electric atmosphere in our office last Friday morning. Not only was there an opportunity to be alongside colleagues again, but the Framtiden i våre hender leading oil fund experts had gathered to hear the presentation of report from the expert group tasked to assess the climate risks in the Norwegian Oil Fund.

As the Chair of the expert group, Martin Skancke, started his presentation of the report, we could hardly believe what we were hearing. The committee emphasized many of the arguments we have long tried to get across in Parliament. The committee recommends that the Oil Fund should base its mandate on contributing to achieving the goals of the Paris Agreement, and that the transition to a zero-emission society should take place in an orderly manner.

Nothing short of a huge breakthrough

We have long held that the Oil Fund should be climate-adjusted in line with the 1.5 degree target in the Paris Agreement. This should be done by using sector-based reduction pathways so that all companies in the portfolio cut their emissions in line with what is necessary to limit global warming to 1.5 degrees.

The government-appointed expert group supports our recommendations by proposing that the fund should expect binding plans for transition from companies. It also recommends divesting from companies that do not have credible plans for how they will be profitable in a world that is limiting global warming.

The expert group is also completely in line with Framtiden’s recommendations when they clearly advise that the fund should set a goal of a climate-neutral portfolio by 2050. A long-term goal of net zero greenhouse gas emissions from companies in the portfolio will spotlight the consistency between the actions of the Norwegian Oil Fund and Norway’s commitments under the Paris Agreement, they write. They also highlight the need for investors to join efforts in active ownership and push companies in the right direction.

Paris alignment overdue

This summer's many floods, fires and extreme weather events, and the recent alarming IPCC report provide a bleak backdrop to the release of this report. It is clear that the climate management of the Norwegian Oil Fund is nowhere near good enough, and that these changes are urgently needed. The Oil Fund is still investing in notorious climate wrecking companies such as Exxon, Chevron and Shell.

The expert group's comprehensive assessment and recommendations provide a solid professional basis for the necessary political changes. Which is why we celebrated this report, toasting it’s release with long-awaited office coffees.

The stark reality is that we have to limit global warming, for the sake of humans, animals and nature but also to secure economic returns. Climate change impacts have affected large parts of the financial industry, and it is impossible to understand why Norwegian politicians are delaying taking the necessary action.

It is now obvious that Paris alignment of the Oil Fund is not only the right thing to do, it is also the only economically sensible thing to do. Both the Ministry of Finance and the Parliament must ensure the necessary changes.

We expect zero-emission targets and a Paris alignment of the Oil Fund asap - it is already past due.