What’s Going On Here?If oil companies can’t stand the heat of climate change, Norwegian mega investor Storebrand wants them to GTFO of its portfolio. What Does This Mean?Like most insurers, Storebrand invests the premiums it collects from its, erm, insurees. And at the moment, that’s about $91 billion worth – which means the company is worth paying attention to when it does something big. Like, say, when it sells off its investments in US oil giants Exxon and Chevron, in German chemicals firm BASF, and in mining titan Rio Tinto.
One reason Storebrand gave is that those companies – along with plenty of others – have lobbied against the Paris Agreement, as well as climate change-related regulation more broadly. And while Exxon and Chevron have said they support the agreement’s goals and that they're investing in emission-reduction technology, their detractors might argue it’s nothing but hot air: neither company has set official emissions targets, even as European rivals like BP do just that. Why Should I Care?For markets: Go green, make green.
Storebrand’s newfangled investment philosophy shows how investors are adapting to rising environmental, social, and governance concerns, and in turn putting pressure on fossil fuel producers. They aren’t necessarily doing it out of the goodness of their hearts, mind you: according to a recent report by Morningstar, 60% of sustainable investment funds reported higher returns than equivalent “normal” funds in the last decade.
The bigger picture: Moving the coalposts.
Storebrand’s updated policy also bans investing in companies that generate more than 5% of their revenues from another pollutant, coal. BHP, the world’s biggest miner, is ahead of the game there: it announced last week that it’d adapt to a low-carbon future by shrinking its coal businesses. That should help keep its environmentally-conscious investors happy, including Norway’s $1 trillion sovereign wealth fund. | 