World’s biggest investment fund says firms mismanaging climate risk could face exclusion from next year

Norway’s $1.4 trillion sovereign wealth fund says it is prepared to start dropping companies for mismanaging climate risk starting next year, adding to the decarbonization pressure that activist shareholders are already piling on firms.

It comes shortly after the world’s the biggest investment fund said it would vote for shareholder proposals at Chevron and Exxon Mobil‘s respective annual meetings on Wednesday.

The resolutions seek to compel the U.S. oil majors to align their climate targets with the landmark Paris Agreement and commit to absolute carbon emission cuts by 2030.

Norway’s oil fund had refused to back similar shareholder proposals tabled in recent weeks at European oil majors, such as BP and TotalEnergies.

The fund says it assesses every shareholder proposal individually and notes there are differences between how European and U.S. oil majors tackle the Scope 3 emissions generated by customers’ use of their oil and gas.

“We are a particularly active owner when it comes to climate,” Carine Smith Ihenacho, chief governance and compliance officer at Norges Bank Investment Management, told CNBC via telephone.

Established in the 1990s to invest the surplus revenues of Norway’s oil and gas sector, the fund said last year that it would take a tougher line on companies that failed to adopt credible climate plans.

“We clearly said it is in our long-term interest that the companies in our portfolio will get to net zero by 2050 because, for our financial returns in the long term, we think that will be beneficial,” Ihenacho said, reflecting on the fund’s 2025 climate action plan.

“As an active owner, we really want to influence and push the companies towards setting net-zero 2050 targets and also push them towards having credible transition plans. By that, we mean science-based transition plans,” she added.

Norway’s oil fund has invested in more than 9,000 companies in 70 countries around the world and acknowledges that “companies care how we vote at AGMs.”

Ihenacho said that the main tools the fund seeks to use when engaging with corporate directors on environmental, social and governance factors are dialogue and voting, but added that the fund could soon be forced to consider selling out of climate laggards.

“It is something we have to balance the whole time,” Ihenacho said. “I think our starting point is very much that we want to be an owner and want to influence the companies. Selling out is not going to solve the climate crisis at all. You just sell to somebody else who may care less about climate as an owner than we do.”

“Having said that, it may come to a point where we feel the company is absolutely not listening to us, they are not reporting anything, we see no changes, we may then sell out. We may decide to sell out,” Ihenacho said.

“The earliest there will be any companies either on an observation list or excluded will be next year or maybe the year after that. We will try to use our ownership tools first,” she added.

It comes amid a sense of palpable frustration among climate activists during the proxy voting season, with demonstrations taking place both inside and outside the AGM venues of oil giants.

Burning fossil fuels, such as oil, gas and coal, is the chief driver of the climate emergency.

Dutch group Follow This, a small activist investor and campaign group, has tabled resolutions at several Big Oil companies in recent weeks calling for faster green transition plans.

A rebellion of 30% voted in favor of a resolution at TotalEnergies’ AGM last week, reflecting a significant rebuke by the typical standards of annual shareholder meetings.

By comparison, support for a similar resolution at BP’s AGM last month came in at just 17%, up from 15% last year, while backing for a climate resolution tabled at Shell‘s annual meeting last week came in at 20%, or the same level as in 2022.

Chevron and Exxon Mobil have urged shareholders to reject the shareholder proposals put forward by Follow This at their respective annual meetings.