The in-house manager of the world's largest sovereign wealth fund wants companies to show their business models can survive in a low-carbon economy.
Norges Bank Investment Management, which runs the assets of the 10.3 trillion Norwegian kroner ($1.14 trillion) Government Pension Fund Global, wants to understand how companies will address the transition to a low-carbon society and will engage with them on the topic, a spokesman said.
"We want scenario analysis, including a 2-degree scenario analysis, and we want the company to be open about the assumptions for the analysis," he said in an email.
The 2015 Paris Agreement on climate change saw almost 200 countries pledge to limit global warming to 2 degrees Celsius by 2100, but aiming to keep it below 1.5 degrees Celsius. This will be done be controlling greenhouse-gas emissions.
The manager will contribute to the strengthening and further alignment of corporate sustainability reporting standards across markets and also supports the development of standardized reporting metrics where they are not yet available, he added.
Separately, NBIM announced the exclusion of three companies from the GPFG — Formosa Chemicals & Fibre Corp., Formosa Taffeta Co. and Page Industries — "because of unacceptable risk for violation of human rights."
Investigations into working conditions at Formosa Chemicals & Fibre Corp. and its Vietnamese subsidiary, Formosa Taffeta Co., showed numerous labor rights violations, including the illegal and involuntary use of overtime, underpayment of employees and violations of occupational health and safety requirements, the decision said. The council submitted a recommendation on May 23, 2019. Norges Bank published its decision to exclude the companies on Aug. 31.
According to the fund's holdings as of Dec. 31, it had a 1.3 billion kroner ($148 million) investment in Formosa Chemicals & Fibre Corp. and 108 million kroner in Formosa Taffeta Co.
Indian textiles company Page Industries was excluded following investigations that found verbal and physical harassment of employees and occupational health and safety hazards. The council submitted the recommendation to exclude the firm on Feb. 19. Norges Bank published the exclusion decision on Aug. 31.
Holdings in Page Industries were 135 million kroner as of Dec. 31.
The executive board also decided to follow Chinese oil and gas firm PetroChina's work on anti-corruption as part of its active ownership efforts over three years. These efforts include proxy voting, according to Norges Bank's website.
The council on ethics recommended on Feb. 28 that the company be excluded. It previously recommended an exclusion in December 2016. PetroChina has been under observation since May 2017, "but has shown little willingness to communicate" with the council.
Under Norges Bank's guidelines, it will consider whether measures including "the exercising of ownership rights, may be more suited to reduce the risk of continued norm violations, or whether such alternative measures may be more appropriate for other reasons," a news release by the manager said.
As of Dec. 31, GPFG had a 1.4 billion kroner investment in PetroChina.
The spokesman declined to comment on how the fund has reinvested assets.