Norges Bank Investment Management (NBIM), the investment manager for Norway’s $2.1 trillion oil fund announced the release of its Nature Expectations, setting out its expectations for portfolio companies to assess, disclose and manage risks from the degradation of land, freshwater and ocean ecosystems.
The new guidance forms the first set of consolidated nature expectations for NBIM, bringing together its previously separate expectations for companies in areas including water management, ocean sustainability, and biodiversity and ecosystems. NBIM said that the expectations form the basis of its engagement activities, including company dialogues, filing and voting on shareholder proposals, and voting for or against the re-election of board members, and noting that in cases in which companies do not respond to engagement, they may be candidates for assessment under risk-based divestment criteria for nature-related risks.
NBIM was established to manage revenues from Norway’s oil and gas resources. The fund has grown to become the world’s largest sovereign wealth fund, owning approximately 1.5% of all shares in the world’s listed companies, with holdings in around 7,200 companies globally.
According to NBIM, the new expectations come as nature degradation poses material risks to its portfolio, with potential impacts including inflationary impact on food production, supply chain disruptions caused by water shortages, and liability risks from environmental pollution. In its own company surveys, NBIM said that 48% of companies said that they view nature risks as financially material today.
NBIM’s guidance includes a set of 8 core expectations that apply to all companies, ranging from board oversight, strategy integration and disclosure to target setting and responsible engagement.
Key board expectations include having ensuring that nature-related risks and opportunities are identified and integrated into corporate strategy and risk management, and that companies have policies on the management of critical land, water and ocean habitats that they materially impact or depend on.
Assessment and disclosure expectations include ensuring that companies assess how their activities, products and services materially impact and depend on nature, alongside associated risks and opportunities, with reporting on these factors to be made using recognized methods and metrics, such as those recommended by the TNFD and ISSB. Additionally, companies are expected to transparently demonstrate how their supply chains materially impact and depend on nature.
Additionally, companies are expected to set targets to address material nature impacts and dependencies and time-bound action plans to deliver on the targets. Companies are also expected to engage with local communities and other stakeholders on the impact and dependency of their business practices on nature, and to be transparent about advocacy and policy engagement on nature-related issues.
In addition to the core expectations, NBIM also published ecosystem-specific expectations for companies with operational or value chain exposure to Land, Water, and Ocean ecosystems.
In its Nature Expectations publication, NBIM said:
“The degradation of land, freshwater systems, and marine environments all affect the long-term value of companies in our portfolio. Companies face risks when natural resources they depend on become scarce or degraded, and when their environmental impacts lead to regulatory action, legal liability, operational restrictions or reputational risks. Evolving trends in consumer demands and availability of natural resources will also present opportunities as new markets are created.”
Click here to access NBIM’s Nature Expectations of companies.
