IEEFA calculates ‘mega-polluters’ could cost Norwegian government pension fund $4.1bn

‘Universal owners’ risk having their asset wealth eroded by carbon pollution, says the Institute for Energy Economics and Financial Analysis

Asset owners with broad economic exposure and long-term investment horizons, so-called “universal owners”, which include pension, mutual and sovereign wealth funds, risk having their asset wealth eroded by carbon pollution, concludes analysis by the Institute for Energy Economics and Financial Affairs think-tank.

In its report, the IEEFA examined Norway’s Government Pension Fund Global, which is worth $1.6tn and has investments spread across 72 countries. 

The IEEFA calculated that the emissions from the fund’s holdings in five “mega-polluters” — ExxonMobil, Shell, BP, Rio Tinto and BHP Group — which it describes as the “five largest developed market polluters” would generate an implied annual loss in shareholder income of 0.27 per cent, equivalent to $4.1bn. These are earnings that would otherwise have been paid out via dividends and other forms of shareholder reward.

According to the IEEFA, the biggest drag on the GFPG portfolio is ExxonMobil, with emissions causing implied lost income of $1bn.

The think-tank calls on universal owners to change the way they value assets and to consider the impact of assets on their wider portfolio to better inform company stewardship.

“Although it remains a challenge to accurately price carbon, this uncertainty should not delay the necessary evolution of investment processes,” the report says.

GPFG declined to comment.

You can find the full report here.