Norway’s SWF: Stop Talking, Take Action on Climate Transition

Norges Bank Investment Management, which manages Norway’s $1.4 trillion sovereign wealth fund, is telling its more than 9,000 portfolio companies that the time for talking about climate transition is over, and the time for action has arrived.

“Many companies now need to move on from disclosures and target setting to the execution phase,” Tim Smith, NBIM’s lead investment stewardship manager, said in a release. “They need to show investors credible transition plans and explain how they will ensure delivery.”

The firm published its updated expectations to provide guidance as its portfolio companies manage climate-related risks and opportunities. It presented six main expectations, which apply to all portfolio companies and will directly inform the board’s voting decisions.

Board Oversight: Company boards are expected to ensure climate risks and opportunities are integrated into corporate strategy and risk management. They are also expected to be transparent on how they establish oversight and provide details of their governance structures, mechanisms and board activities.
Climate Risk Disclosures: Companies are expected to analyze and disclose how climate risk may impact their operations, value chains and demand for their products.
Greenhouse Gas Reporting: Companies should report scope 1, scope 2 and scope 3 greenhouse gas emissions in accordance with the Greenhouse Gas Protocol. They are expected to at least seek reasonable assurance of their scope 1 and scope 2 emissions.
Net Zero 2050: Companies are expected to commit to achieving net zero status by 2050 or sooner and align their activities with the objectives of the Paris Agreement.
Interim Targets: Companies are expected to set science-based interim emission reduction targets that cover scope 1, scope 2 and material scope 3 emissions, consistent with reaching net zero by 2050.
Transition Plans: Companies are expected to implement time-bound and quantified transition plans intended to deliver on their interim emission reduction targets.

“We expect companies to manage climate risks and opportunities in a manner that is meaningful to their business model and situational context,” NBIM’s published expectations stated. “They should set net zero and interim decarbonization targets, define strategies to achieve these, and be transparent about their approach.”

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NBIM also published its opinion on the corporate use of voluntary carbon credits, saying companies should prioritize reducing their own emissions and that carbon credits should not be counted toward science-based interim emission reduction targets.

The firm stated that “legitimate concerns have been raised” about the quality of offset projects and warned that companies buying low-quality carbon credits risk overstating their emission reductions to investors.

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Tags: climate transition, Greenhouse Gas Emissions, Net Zero Investment Framework, Norges Bank Investment Management, Norway, Paris agreement, Sovereign Wealth Fund, Tim Smith

Goldman Sachs will partner with the Ontario Municipal Employee Retirement System, one of Canada’s largest defined benefits pension plans to invest in private credit across the Asia pacific market.

The partnership will utilize a separately managed account in which OMERS will co-invest in private credit opportunities in APAC alongside Goldman Sachs Asset Management. The partnership will be managed by GSAMs Asia private credit business, a part of the global private credit business unit. OMERS declined to comment further. No specific commitment from OMERS was specified.

“We are incredibly excited to partner with OMERS and its Global Credit team on the Asia Credit focused Partnership. We see significant demand in the region by companies and sponsors alike, with this mandate we will continue to invest in new opportunities seeking bespoke credit solutions. We believe our differentiated approach through sourcing and our dedicated on-the-ground presence allows us to position ourselves to best identify investment opportunities that drive attractive risk-adjusted returns,” said James Reynolds, Goldman Sachs Asset Management global co-head of private credit, in a statement.

The partnership will deploy funds to companies and global and regional sponsors throughout the APAC region, investing primarily in the senior direct lending space. There is also flexibility for the partnership to invest in mezzanine financing and hybrid securities.

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“Private credit remains an attractive area within the credit space globally, and the expansion of our existing relationship with Goldman Sachs into Asia will position us well to further unlock these opportunities. Asia is a growth region for OMERS, and we look forward to working alongside Goldman Sachs to achieve our long-term targets as well as participate in the growth of the direct lending markets in Asia, “said Kal Patel, executive vice president and head of global credit at OMERS, in the statement.

OMERS managed C$127.4 billion ($94.39 billion) as of June 30. OMERS allocates 18% of its portfolio to the credit asset class.

Goldman Sachs Asset Management has $100 billion in private credit assets under management, with $55 billion allocated to senior direct lending, $26 billion to mezzanine debt, and $17 billion to hybrid capital as of March 31, 2023, the asset manager reports. In total, GSAM has invested more than $170 billion in private credit over the last 25 years. Goldman Sachs has invested in the APAC region, including Australia, New Zealand, India, Southeast Asia, China, Korea and Japan, since 1998. The partnership with OMERS will be the first external capital raised for an APAC focused partnership for Goldman Sachs Alternatives.

Tags: Goldman Sachs Asset Management, GSAM, James Reynolds, Kal Patel, OMERS, Ontario Municipal Employee Retirement System, Private Credit