Norway’s oil fund urges looser climate targets to keep companies engaged

Norway’s $2 trillion sovereign wealth fund has urged global climate standard-setters to allow companies more flexibility in meeting net zero goals, warning that stricter rules could drive businesses away from science-based climate commitments altogether.

Norges Bank Investment Management (NBIM), which manages the world’s largest sovereign wealth fund, told the Financial Times it feared that companies might abandon science-backed targets unless they were permitted to emit more greenhouse gases while still claiming progress toward net zero.

The fund last month pressed the Science Based Targets initiative (SBTi), the leading global body that validates corporate climate targets, to relax its guardrails. NBIM owns stakes of almost 1.5 per cent in all listed companies worldwide and has long been a vocal advocate for climate action, with its mandate explicitly referencing the Paris Agreement.

However, its intervention highlights growing unease among some investors about the pace of the energy transition, which has been slower than many expected.

Under the fund’s proposal, companies would be allowed to aim for net zero by 2050 based on emissions cuts consistent with up to 2C of global warming, rather than the more stringent 1.5C pathway. This would allow shallower or slower reductions in greenhouse gas emissions across sectors such as power grids and transport in the near term.

Climate scientists warn that breaching the 1.5C threshold could lead to drastic or irreversible consequences, including severe impacts on food systems. Critics say the lobbying effort by the world’s largest sovereign wealth fund could therefore have far-reaching implications for global climate ambitions.

The fund has also acknowledged rising physical risks from climate change to its own investments. These risks have intensified since Donald Trump began his second term as US president, according to NBIM.

“Physical climate risk has increased, so the risk to the portfolio has increased, and that’s over the past year, clearly it has,” said Carine Smith Ihenacho, the fund’s head of governance and compliance.

In December 2024, the fund disclosed that physical climate risks could wipe out 19 per cent of the value of its US equity investments. Its ability to respond has since been constrained after its independent ethics council was suspended in November under pressure from the US. While the fund still receives advice from the body, it can no longer divest from large companies for climate-related risk reasons, Ihenacho said.

She added that faster-than-expected global warming and scientists’ expectations that the 1.5C threshold will be breached in coming years meant some corporate climate targets now reflected an “unrealistic” level of ambition.

Amy Owens, a financial policy analyst at the think-tank Carbon Tracker, said the fund’s push to water down climate rules conflicted with the growing risks to its own holdings and could set off a broader rollback of standards.

The proposed changes would allow the fund to classify a significantly larger share of portfolio company emissions as shrinking in line with “science-based” net zero targets.

According to Ihenacho, the move could reduce the likelihood of companies walking away from SBTi oversight.

“Keep the integrity of the framework, but capture more of the emissions, we think,” she said.

SBTi said feedback from investors and companies was “essential” as it works toward publishing its final net zero standard for companies later this year.

By Sabina Mammadli