Norway’s $1.7 trillion oil fund, managed by Norges Bank Investment Management (NBIM), has called for Shell to provide more specifics regarding its mid-term climate strategy. While NBIM emphasizes the need for clearer transitional plans, it has decided to vote against a shareholder resolution demanding Shell set a goal to reduce emissions from their product usage. This action underscores the fund’s complex balancing act between supporting environmental sustainability and managing its significant investment portfolio effectively.
NBIM, founded in 1998, manages Norway’s oil and gas revenues, making it one of the world’s largest sovereign wealth funds. The fund holds nearly 1.5% of all global publicly listed shares and owns stakes in around 9,000 companies across 70 countries. It aims to reach net-zero emissions across its portfolio by 2050, setting stringent climate-related expectations for the companies it invests in.
Shell’s Revised Strategy
In its recent strategy update, Shell under new CEO Wael Sawan, introduced its first interim target to reduce emissions from the use of its oil products. However, the company also eliminated its 2035 emissions intensity goal and reduced its 2030 intensity reduction target from 20% to a range of 15%-20%. This has led to mixed reactions from stakeholders, including NBIM, which has urged Shell for more detailed disclosures to clarify its long-term climate strategy.
NBIM’s Expectations
NBIM has made it clear that it expects companies in its portfolio to set and achieve interim and net-zero targets. Despite encouraging Shell to provide more details about its future plans, NBIM has decided to vote against the shareholder resolution backed by a consortium of 27 institutional investors, which includes the activist group Follow This. This resolution calls for Shell to align its medium-term emissions reduction targets with the Paris Agreement’s goals.
Response from Stakeholders
Environmental and shareholder groups, particularly Follow This, have criticized NBIM’s decision, arguing that the wealth fund’s support for Shell’s current strategy undermines its climate credibility. Follow This has been actively pushing for stricter emission reduction targets and greater transparency from Shell. The group’s resolution last year garnered 20% support, indicating substantial but not majority backing for more aggressive climate action.
User-Usable Inferences
- Investment funds can influence corporate climate strategies significantly.
- Clear and detailed climate goals from companies are critical for investor support.
- Shareholder resolutions reflect growing pressures for companies to align with global climate agreements.
NBIM’s decision to vote against the shareholder resolution emphasizes the complexity of balancing investment returns and climate action commitments. While NBIM supports clearer and more detailed climate strategies from its investments, it believes Shell’s current strategy aligns sufficiently with the Paris Agreement. This situation highlights the challenges large investment funds face in driving corporate environmental responsibility while ensuring financial performance. The ongoing dialogue between NBIM, Shell, and other stakeholders demonstrates the dynamic tension in achieving both economic and environmental objectives. Companies must navigate these pressures by providing transparent and actionable climate strategies to satisfy investor demands and contribute to global sustainability goals.
