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Norway’s oil fund wants companies to be able to water down their climate goals, arguing the alternative was for a major net zero initiative to fall apart.
The $2tn oil fund told the FT that it feared companies could back away from the idea of science-backed climate targets unless they were allowed to emit more greenhouse gases while still claiming to be working towards those goals.
The fund last month pushed the global corporate climate standard-setting body, the Science Based Targets initiative, to relax its guardrails.
Norges Bank Investment Management owns stakes of almost 1.5 per cent in all listed companies and has been a loud voice on fighting climate change, as its mandate explicitly references the Paris Agreement.
Its intervention shows how some investors are growing wary of building portfolios meant to reflect the energy transition, which has been slower to materialise than some expected.
The fund said companies should be given leeway to target net zero by 2050 based on emission cuts equating to up to 2C of warming on a global scale, rather than 1.5C. This translates to shallower or slower cuts to greenhouse gases in key industries, from grids to transport, in coming years.
The lobbying effort by the world’s largest sovereign wealth fund could have major ramifications for efforts to avoid breaching the 1.5C threshold, which scientists say would have drastic or irreversible consequences, including on food systems.
The fund acknowledges the risk to its own holdings from fire, floods and heat has increased since Donald Trump began his second term as US president.
“Physical climate risk has increased, so the risk to the portfolio has increased, and that’s over the past year, clearly it has,” said its head of governance and compliance, Carine Smith Ihenacho.
The fund had already disclosed in December 2024 that physical risks from climate change could wipe out 19 per cent of the value of its US equity investments.
Its room for manoeuvre has since become more constrained after its independent ethics council was suspended in November under pressure from the US. Although the fund still receives advice from the body, it cannot sell out of large companies for climate-related risk reasons, Ihenacho said.
The accelerated pace of global warming and scientists’ expectations that the 1.5C threshold will be breached in coming years meant some corporate climate targets now reflected an “unrealistic” level of ambition, Ihenacho added.
Amy Owens, a financial policy analyst at the think-tank Carbon Tracker, said the oil fund’s push to water down rules was at odds with growing climate risks to its own holdings. The change risked triggering a “domino effect” on other climate standards.
The rules proposed by the fund would allow it to claim that significantly more portfolio company emissions were due to shrink in line with “science-based” net zero targets.
The change could mitigate the “risk” of companies quitting the Science Based Targets initiative’s oversight, Ihenacho said: “Keep the integrity of the framework, but capture more of the emissions, we think.”
SBTi said that feedback was “essential” ahead of its publication of a final net zero standard for companies later this year.
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