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World's largest sovereign fund screening companies for sustainability risk

This year the fund has assessed sustainability risk of more than 400 companies that were added to the index, and chose to refrain from investing in nine companies

By Tsvetana Paraskova for Oilprice.com – The world's largest sovereign wealth fund, Norway's US$ 1.4 trillion Government Pension Fund Global (GPFG), is pre-screening companies for sustainability risk before deciding to invest in them and, within one decade, it has divested from 366 firms that it has assessed as lacking sustainable business models.

This year alone, the fund has assessed sustainability risk across more than 400 companies that were added to the fund's index, and chose to refrain from investing in nine companies that it believes will increase the fund's financial risk in the long term, Norges Bank Investment Management said in an update on its actions to protect from risks in the long term.

“In addition to the nine companies that we chose to refrain from investing in, we divested from 43 companies this year that we consider not to have sustainable business models. This includes companies exposed to significant risks related to climate change, water management, and corruption,” the fund said in a statement.

The ultimate goal of the fund's pre-screening process and decisions not to invest in certain companies or divest from others is to protect it from risks that could lead to financial losses, Chief Corporate Governance Officer Carine Smith Ihenacho said in an interview with Bloomberg.

A Norwegian government panel said in August that the fund should ask oil firms in its portfolio to cut their emissions more drastically. A report from an expert group recommended that the work on climate risk be anchored in the fund's mandate, under which Norges Bank's “responsible investment is based on an overall long-term goal of zero emissions from the companies in which the fund has invested, in line with the Paris Agreement.”

Norway is one of Europe's richest countries thanks to the decades of oil revenues amassed by the world's largest sovereign wealth fund with US$ 1.4 trillion in assets and stakes in oil majors Exxon, Chevron, Shell, and BP.