The world’s largest sovereign wealth fund will side with climate activists against ExxonMobil and Chevron in a bid to push through changes in emissions policy after the investor came under pressure for backing European oil and gas companies.
Norway’s $1.4 trillion oil fund will back shareholder proposals at Exxon and Chevron’s annual meetings next Wednesday for the U.S. oil and gas large companies to introduce targets to reduce greenhouse gas emissions from the use of their products.
This is in contrast to the fund’s refusal to back similar proposals – which aim to ensure the world limits warming to below 2C to meet the Paris climate agreement – by European majors such as BP, Shell and TotalEnergies, the French group , whose annual meeting is held on Friday.
Carine Smith Ihenacho, the fund’s director of governance, told the Financial Times that there was a difference between how European and US oil companies view so-called Scope 3 emissions targets, which occur when their products are burned or consumed.
“Exxon doesn’t really believe in the value of setting Scope 3 targets. We think the company should do that. Chevron, we don’t think they are being ambitious enough in their transition plans. . . Both BP and Shell have good scope 3 targets, they have good transition plans,” she said.
Norway’s oil fund is one of the most influential investors, owning an average of 1.5 percent of every company worldwide.
But his quest to take charge environmental, social and administrative Investing (ESG) has put it on a collision course with some of the world’s biggest companies, prompting criticism and cries of hypocrisy from environmental pressure groups.
Mark van Baal, founder of Follow This, a prominent activist group for shareholder proposals on the oil majors, he said he welcomed the oil fund’s support for Exxon and Chevron, but was “surprised” it did not do the same for BP, Shell and Total.
“The fund has a huge responsibility. This vote threatens their credibility as stewards of the global economy. They’re basically saying to Shell, BP and Total: you don’t have to cut your emissions this decade. We expect them to correct this oversight next year,” he added.
Ihenacho said the issue was not “black and white” and that one group was “hopeless” and the other “great”. However, she emphasized that the European oil majors have a head start on this issue.
Van Baal said BP and Shell had made “empty promises” for 2050 as European companies took “baby steps” on climate change. “It’s very easy to be a leader in a field of laggards,” he added.
The Norwegian fund has voted against some of its biggest equity holdings this year, including Apple and LVMH over executive pay, and JPMorgan and Goldman Sachs over combining the CEO and chairman roles.
It also began filing its own shareholder resolutions on climate change in American companies.
But the fund, whose inflow comes from Norway’s oil revenues, has faced accusations of hypocrisy for telling energy companies what to do when its home country is earning record sums from oil and gas.
Ihenacho responded that climate risk is a financial risk for the fund. “Our task at the fund is to create value for future generations, but in a responsible way.
“We have no opinion when it comes to Norwegian politics. When you look at how you can create long-term value from a financial perspective, it makes sense for the fund to have companies that can live in a net zero society.”
Exxon and Chevron both urged shareholders to decline to support the Follow This proposal, saying oil and gas companies will play an important role in the energy transition. “We believe setting Scope 3 targets could have significant unintended consequences for society,” Exxon added.
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