"Norges Bank Reverses Decisions on Disinvestment: A Shift in Policy"
Norges Bank Investment Management (NBIM), the asset management arm of Norway’s Government Pension Fund Global, has been a prominent example of a large asset owner applying ethical investment policies. These policies include divestment, but evidence of the effectiveness of these strategies through reversals of divestment decisions is not clear-cut.
Since 2012, NBIM has announced 575 divestments, of which 195 are related to climate change. These decisions have been driven by ethical considerations, such as excluding companies involved in tobacco, coal, and controversial surveillance technology. However, the question of whether divestment works remains a topic of debate, as the reversals of these decisions occurred in tandem with improved corporate behavior but do not necessarily reflect causal links.
NBIM's divestment decisions can be financially motivated (risk-based divestments) or ethically motivated (exclusions). In 2024, the organisation reversed the divestment of 16 companies, as they showed improvement in climate risk management. These companies had started disclosing their emissions and had committed to net zero targets.
Wilhelm Mohn, NBIM's global head of active ownership, stated that companies without net zero targets reduce emissions less than those with. This suggests that divestment by large asset owners could incentivize companies to improve, given the possibility of reassessment.
NBIM manages $1.8 trillion in assets and holds investments in nearly 9000 companies across 70 economies. The asset manager covers 74% of its portfolio emissions with net zero targets.
In 2024, there were 49 risk-based divestments by NBIM, motivated by factors including unsatisfactory climate risk management, high GHG emissions, coal mining, coal-based electricity generation, biodiversity, water management, and significant sustainability risks.
NBIM's latest responsible investment report reveals details of its divestment decisions and reasons for reversing them. The report also shows that NBIM increased its allocation to renewable energy amid rising capital costs.
Publicly, NBIM managers have criticized other financial institutions over inaccurate emissions reporting, indicating active stewardship efforts but not evidence of reversing divestments as a measure of effectiveness. Recent news shows NBIM continuing to divest or adjust holdings linked to emissions or conflict zones, but no specific instance highlights a reversal of previously taken divestments with clear evidence on outcomes.
In summary, while NBIM is a prominent example of a large asset owner applying ethical investment policies that include divestment, current public information does not provide concrete evidence that NBIM’s reversal of divestment decisions has demonstrated the effectiveness of divestment strategies. Instead, NBIM appears to emphasize a combination of divestment, corporate engagement, and active monitoring, adapting decisions according to updated ethical guidelines and market conditions.
- NBIM's divestment strategy, often motivated by ethical concerns such as environmental science, has led to the exclusion of companies not committing to net zero targets or engaging in activities like coal mining, as they are deemed risky in terms of climate change.
- The finance sector, including businesses like NBIM, is increasingly allocating resources to environmental-science ventures, such as renewable energy, as capital costs rise, demonstrating a shift towards sustainable and responsible investments.
