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Norwegian Government Pension Fund Norway (Norwegian Ministry of Finance and Folketrygdfondet)

PRI reporting framework 2020

You are in Strategy and Governance » ESG issues in asset allocation

ESG issues in asset allocation

SG 13. ESG issues in strategic asset allocation

13.1. Indicate whether the organisation carries out scenario analysis and/or modelling, and if it does, provide a description of the scenario analysis (by asset class, sector, strategic asset allocation, etc.).

Describe Folketrygdfondet began carrying out qualitative scenario analysis internally on a sector-level based on insight gleaned from our dialogue with companies in several of the industries named in the TCFD supplemental guidance.

13.2. Indicate if your organisation considers ESG issues in strategic asset allocation and/or allocation of assets between sectors or geographic markets.

We do the following

13.3. Additional information. [OPTIONAL]


SG 13 CC.

13.4 CC. Describe how your organisation is using scenario analysis to manage climate-related risks and opportunities, including how the analysis has been interpreted, its results, and any future plans.

Describe

The sector-level analyses were presented to Folketrygdfondet's investment committee as a means of monitoring and assessing portfolio risk.

13.5 CC. Indicate who uses this analysis.

13.6 CC. Indicate whether your organisation has evaluated the potential impact of climate-related risks, beyond the investment time horizon, on its investment strategy.

Describe

To clarify, we understand the question to ask whether Folketrygdfondet has evaluated the potential impact of climate-related risks from events that can occur beyond the investment time horizon (e.g. migration due to the physical effects of climate change). 

Folketrygdfondet’s mandate provides the starting point for the assessment of portfolio risk, including climate risk. As a long-term, active investor, Folketrygdfondet measures excess return relative to its benchmark index. As an active manager, Folketrygdfondet has the opportunity to adapt portfolio weightings in response to changes in the financial risk profile. For events that occur beyond our investment time horizon, these can be factored into our investment strategy only insofar as we are able to assess whether current market prices accurately reflect future climate risk. An example would be our assessment of companies within an industry with an uncertain decarbonization pathway, e.g. in which the technology required in 2050 is not yet available. Folketrygdfondet's role as an active manager in this case is to analyze (where possible) the extent to which our expectations about individual companies' ability to navigate this type of technological uncertainty are accurately reflected in current asset prices. 

13.7 CC. Indicate whether a range of climate scenarios is used.

13.8 CC. Indicate the climate scenarios your organisation uses.

Provider
Scenario used
IEA
IEA
IEA
IEA
IEA
IRENA
Greenpeace
Institute for Sustainable Development
Bloomberg
IPCC
IPCC
IPCC
IPCC
Other

Other (1) please specify:

          2-3 stylized scenarios
        
Other
Other

SG 14. Long term investment risks and opportunity

14.1. Some investment risks and opportunities arise as a result of long term trends. Indicate which of the following are considered.

14.2. Indicate which of the following activities you have undertaken to respond to climate change risk and opportunity

other description

          Engaged in dialogue with companies in sectors more likely to be exposed to climate risk, to learn which threats and opportunities they have identified.
        

14.3. Indicate which of the following tools the organisation uses to manage climate-related risks and opportunities.

14.4. If you selected disclosure on emissions risks, list any specific climate related disclosure tools or frameworks that you used.

Folketrygdfondet's annual and ownership report includes a TCFD index, which lists where the reader can find our responses to the recommended disclosures.

14.5. Additional information [Optional]


SG 14 CC.

14.6 CC. Provide further details on the key metric(s) used to assess climate-related risks and opportunities.

Metric Type
Coverage
Purpose
Metric Unit
Metric Methodology
Weighted average carbon intensity
          TCFD-recommended disclosure
        
          20.70
        
          weighted average tonne CO2e/million NOK
        
Carbon footprint (scope 1 and 2)
          TCFD-recommended disclosure
        
          18.23
        
          tonne CO2e/million NOK invested
        
Portfolio carbon footprint
          TCFD-recommended disclosure
        
          18.23
        
          tonne CO2e/million NOK invested
        
Total carbon emissions
          TCFD-recommended disclosure
        
          3,819,713
        
          tonne CO2e
        
Carbon intensity
          TCFD-recommended disclosure
        
          35.30
        
          tonne/million NOK revenue
        

14.8 CC. Indicate whether climate-related risks are integrated into overall risk management and explain the risk management processes used for identifying, assessing and managing climate-related risks.

Please describe

Folketrygdfondet's investment strategy and unique characteristics argue in favor of beginning an assessment of climate risk in the portfolio through a "bottom-up" perspective. To that end, in 2019 we engaged in collaborative active ownership with several Norwegian investors with companies in industries the TCFD identifies as particularly exposed to climate risk. Climate risk is also a topic of discussion in Folketrygdfondet's ongoing dialogue with management in portfolio companies. We use insight from the dialogue with portfolio companies in our continuing work to assess climate risk in the portfolio under various scenarios.

14.9 CC. Indicate whether your organisation, and/or external investment manager or service providers acting on your behalf, undertake active ownership activities to encourage TCFD adoption.

Please describe

See answer to 14.8 CC. In 2019, Folketrygdfondet engaged in dialogue with portfolio companies both as a means of better understanding climate risk in the portfolio, and to communicate our expectation that companies assess and manage climate risks.

 


SG 15. Allocation of assets to environmental and social themed areas

15.1. Indicate if your organisation allocates assets to, or manages, funds based on specific environmental and social themed areas.

15.4. Please attach any supporting information you wish to include. [OPTIONAL]



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