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Oslo. Norway’s $380 billion oil fund is seeking more influence over how thousands of companies in which it holds stock tackle climate change, and to mould a blueprint for green activism by institutional investors.

The fund announced its expectations for company management of environmental issues in the hope of creating a platform for dialogue with corporations and, potentially, for shareholder action.

Norway’s wealth fund, the biggest owner of European stocks, believes that environmental factors may sooner or later hit earnings and profitability of the companies it owns, and sees its green ambitions as part its wider push for long-term profits.

“Our primary goal will always be to use our active ownership to improve the fund’s financial performance in the long-term — and that is well aligned with an environmental focus,” said Anne Kvam, head of corporate governance at the fund.

“This report makes it easier for companies to understand our concerns and it could serve as a reference for other investors who want to address similar issues,” she said.

Commonly known as the “oil fund”, the Government Pension Fund invests Norway’s oil and gas wealth in foreign stocks and bonds to save for when the black gold runs out.

It is the world’s second largest sovereign wealth fund after that of the United Arab Emirates, and held 1.3 percent of all listed European stocks at the end of 2008.

The document marks an expansion of the fund’s environmental activism, which Kvam said had been mainly focused on pushing United States energy companies towards greener targets — an area the fund had felt its efforts would have the biggest impact.

The new tack widens its focus to companies producing chemicals, metals, cement, oil and gas, power and transportation groups.

It extends the geographical reach to include Asia as the region of “the sharpest increase in climate influence,” mainly due to fast growing carbon emissions in China and India.

The fund, which is run by the Norwegian central bank under a strict mandate from the government, will screen “high risk sectors” and issue compliance reports every year.

Individual companies’ “green” grades will not be published but privately shared with the corporations. Kvam said continued poor performance may catch the eye of the fund’s ethics council, which has blacklisted companies on environmental grounds.

Another new priority for the fund is dealing with water management, said Kvam, because continued availability of water resources will have a “huge impact” on how the Norwegian fund will develop in the decades to come.

Kvam said water was an important input or production factor for about 1,100 companies in the fund’s current portfolio, whose combined market value is some $43 billion.

“The shortage of water and increased demand is going to create risks for huge amounts of companies going forward and we as investors need to know that the companies are managing these risks,” she said in an interview.

Kvam said that even though the credit and economic crises have rightly dominated the investment world for the past year, environmental issues were “still firmly on the agenda” for both shareholders and corporations.

In fact, she said the Norwegian fund has signed a declaration that will be put forward by a global group of investors calling on policy makers to iron out a climate change deal in Copenhagen later this year.

“It’s too early to say how far we can get by raising awareness of environmental issues among shareholders. In three to five years we can check where we are,” Kvam said.



Reuters