An expert group appointed by Norway’s Ministry of Finance to review how climate change may affect the Government Pension Fund Global (GPFG) has increased pressure on the government to set out a net-zero target for the sovereign wealth fund.

The report, Climate risk and the Oil Fund, was lead by asset management expert Martin Skancke, who was commissioned in February 2021 to review the GPFG’s risk management related to climate change and the green transition.

Earlier this month, a group of economists and academics called on the Norwegian government to sign the GPFG up to a net-zero goal.

Although the report said the fund was “relatively robust” to moderate climate change, any dramatic climate change or abrupt policy change would cause “greater challenges” for global financial markets.

“The most important way to reduce climate risk is through an effective and predictable climate policy, as well as strengthening one's resilience to meet unexpected outcomes…. We believe that Norway should have the ambition that the GPFG's work on climate risk should be world-leading,” the report noted.

Therefore, the expert group suggested that climate risk is anchored in the mandate given by the Ministry of Finance to give Norges Bank Investment Management (NBIM), which is responsible for the investments of the fund, a long-term goal of zero omissions for the GPFG, in line with the Paris Agreement.

“The fund is large, and the investments are spread over a large number of companies in various industries around the world. Climate risk can affect all sectors of the economy in different ways, and a large fund that is widely invested has nowhere to hide. The fund thus benefits from, and should, based on its mandate, contribute to the goals of the Paris Agreement being achieved.”

In addition, it has recommended the government develop a set of principles for managing the GPFG’s climate risk, which can stand the test of time. It also would like NBIM to further develop its work on influencing companies’ behaviour and strengthen the market’s functioning through better climate risk reporting. It also thinks the GPFG should have its own regulations on measurement, management and the reporting of climate risk.

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