NBIM investor expectations: Climate change management
Norges Bank Investment Management presents today “NBIM investor expectations: Climate change management”. The document sets out NBIM’s expectations as a long-term investor in relation to portfolio companies’ performance in the management of environmental and climate change issues.
- NBIM aims to promote environmental issues and highlight the importance of the consequences of climate change. Our portfolio is global and long-term and as such is vulnerable to climate change and environmental degradation. NBIM therefore works to raise corporate and investor awareness of environmental factors that may affect companies’ long-term earnings and profitability. In its dialogue with the companies in its portfolio, NBIM will be interested in how the companies tackle environmental issues in strategic as well as practical terms, says head of Corporate Governance Anne Kvam.
NBIM is now widening its focus to include a number of sectors and industries in addition to the energy sector, such as aluminium, cement, chemicals, oil and gas, power production and transport. The geographical focus area has also been extended – particularly to include Asia, as the sharpest increase in climatic influence is to be found in this region.
The document has been circulated for comment and environmental and other non-profit organisations have had the opportunity to submit their response .
Water management – a new priority area
Norges Bank has decided to expand its exercise of ownership rights in relation to environmental issues to include a new priority area: responsible water management.
- The global water shortage represents a financial risk to the fund. Water is important as a factor input and factor of production for 1100 companies in NBIM’s portfolio. The fund’s ownership interest in these companies has a total market value of NOK 265 billion (USD 43 billion). At NBIM, we believe that investors should receive sufficient information to be able to assess how risk related to water scarcity, regulations and higher water purification costs can affect a company’s profits and the likelihood of this occurring, says head of Corporate Governance Anne Kvam.
The fund has a broad spread of investments in sectors at risk from water scarcity and has identified seven high-risk sectors: the food industry, agriculture, pulp and paper, pharmaceuticals, mining, manufacturing and power production, and the water supply industry.
In the third quarter, NBIM will publish “NBIM Investor Expectations: Water Management”, which will contain the fund’s expectations with regard to companies’ management of water as a resource and the related risk. These expectations are directed towards companies with activities or supply chains in high-risk sectors and regions, and are based on international standards and best practices in water management.
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