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World's largest wealth fund says it could benefit from ESG backlash

by SuperiorInvest

Nicolai Tangen, CEO of Norges Bank Investment Management, during a news conference in Oslo, Norway, Tuesday, Jan. 30, 2024. The $1.6 trillion Norwegian wealth fund added to its bets on the biggest companies of technology last year after interest in artificial intelligence fueled a surge in the sector.

Bloomberg | Bloomberg | fake images

Norway's $1.6 trillion sovereign wealth fund says it will continue to advocate for investments based on environmental, social and governance (ESG) factors, ignoring the impact of a green political backlash.

It comes at a time when environmentally conscious investing has become a politically polarized issue in the Western world, particularly in the United States.

Republican lawmakers have denounced ESG criteria as a form of “woke capitalism” that seeks to prioritize liberal goals over investment returns.

Democratic lawmakers have sought to oppose that vision, describing attacks on a variety of ethically responsible business practices as “an attempt to manufacture a culture war and protect corporate special interests.”

Analysts expect the outcome of this year's US presidential election to determine whether the pushback against ESG investment strategies will have a profound and lasting effect.

Nicolai Tangen, CEO of Norges Bank Investment Management (NBIM), told CNBC that the country's wealth fund continued to advocate for the ESG agenda.

“We think it's part of long-term investment. You really have to worry [about] the impact that companies have on the environment, otherwise good long-term investments will not be made. So that's important,” Tangen told CNBC's “Squawk Box Europe” on April 23.

“And we think the fact that other people are stepping away gives us a better opportunity to phase in. So, it's really interesting times.”

The headquarters of Norges Bank, Norway's central bank, in Oslo, Norway, on Tuesday, January 30, 2024.

Bloomberg | Bloomberg | fake images

BlackRock, the world's largest money manager, is estimated to more than triple its security spending on CEO Larry Fink in 2023, following criticism of the company's stance on ESG investing, the Financial Times reported on the 21st. April, citing a company presentation.

NBIM manages the so-called Global Norwegian Government Pension Fund. The world's largest sovereign wealth fund was created in the 1990s to invest surplus revenue from Norway's oil and gas sector.

To date, the fund has invested money in more than 8,800 companies in more than 70 countries around the world, making it one of the largest investors in the world.

Green investments

The ensuing ESG controversy has led some Wall Street firms to backtrack on their environmentally conscious commitments, while global sustainable funds saw net quarterly outflows for the first time on record in the fourth quarter of last year.

However, the global universe of sustainable funds recovered slightly in the first quarter. Data released through Morningstar on Thursday showed that sustainable funds attracted nearly $900 million in net new money in the first quarter, compared with restated outflows of $88 million in the final three months of 2023.

When asked about the current situation of green investments, NBIM's Tangen said the situation had improved slightly in recent years.

“I think this area is more attractive than it was because, a couple of years ago, boards of directors were really into investment managers; you need to get into more green investments,” Tangen said.

“There was a lot of competition for very few projects, prices were high, returns were low, and we think that has improved a little over the last year,” he added.

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