The manager of Norway’s NOK10.3tn (€1tn) sovereign wealth fund says data on companies’ carbon emissions and climate risks are “critical” for its portfolio analysis, but the quality of corporate reporting remains inconsistent.
In a letter to the Norwegian Finance Ministry giving an account of their organisation’s work on climate risk relating to the Government Pension Fund Global (GPFG), the leaders of Norges Bank Investment Management (NBIM) said: “There are numerous useful initiatives currently underway to improve and standardise company reporting, but there are still variations in the frequency and quality of corporate disclosure.”
The letter – signed by Øystein Olsen, chair of the central bank Norges Bank, and Trond Grande, NBIM’s deputy chief executive officer – was in response to a request from the ministry made at the end of June to review and describe its work on climate risk.
Access to relevant, high-quality information on companies’ carbon emissions and how their operations might be affected by climate risk – both physical and transition risks – was critical for NBIM’s analysis of climate risk in the portfolio, they wrote.
“As an investor in more than 9,000 companies in more than 70 countries, we need to be able to quantify and analyse the risks facing the fund,” they stated, adding that they would continue to support initiatives to develop global standards for this reporting.
NBIM would also continue working to develop analytical tools for climate scenarios, and expand and improve its internal analytical models for different climate outcomes by integrating more detailed company-specific data, they said.
This included financial data, emissions data, concrete targets for carbon reductions, and exposure to regional carbon-pricing mechanisms, Olsen and Grande wrote.
NBIM would also look at how it could develop ways of analysing physical climate risks facing companies in the equity portfolio, they said.
Regarding real estate, they said work on assessing physical risks would remain crucial.
“We plan to expand our flood risk analyses based on historical data with forward-looking scenario analyses,” they said, adding that NBIM would also continue supporting a joint initiative to develop methods of analysing the expected decarbonisation of the real estate market.
“The results of this work will be relevant for assessing transition risks for the fund’s real estate portfolio,” the two leaders wrote.
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