Behind the Balance Sheet E3 Carine Smith Ihenacho of Norges Bank IM
May 26, 2024
Carine Smith Ihenacho, Chief Governance and Compliance Officer at Norges Bank IM, oversees ownership strategies for the world’s largest equity owner. She discusses linking sustainability with returns. She contrasts US and European approaches to the energy transition. She explains engagement versus divestment, transparency limits, and problems with ESG data and ratings.
AI Snips
Chapters
Transcript
Episode notes
Sustainability Is Risk Management And Value Creation
- Norges Bank IM treats sustainability as both risk mitigation and value creation tied to its multi-century horizon.
- An orderly net-zero transition limits potential fund loss to ~2%, while disorderly transitions create much larger systemic losses for a universal owner.
Europe Leads On Targets While US Leads On Innovation
- NBIM sees Europe ahead on corporate target-setting and transition planning, while the US leads in innovation for decarbonization technologies.
- Regional strengths differ: governance/targets in Europe, tech solutions emerging strongly in the US.
Ethical Exclusions Versus Risk Based Divestments
- NBIM distinguishes parliament-mandated ethical exclusions from internally decided risk-based divestments and reports both types separately.
- Ethical exclusions (e.g., certain weapons) cost returns but reflect democratic choices; risk divestments have generated ~$6bn since inception.