The world's largest wealth fund says it can benefit from the ESG response

Nicolai Tangen, CEO of Norges Bank Investment Management, during a press conference in Oslo, Norway, on Tuesday, January 30, 2024. Norway's $1.6 trillion wealth fund increased its bets in the biggest technology companies last year after taking an interest in artificial intelligence. intelligence fueled a surge in the sector.

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Norway's $1.6 trillion sovereign wealth fund says it will continue to advocate for investments based on environmental, social and governance (ESG) factors, eliminating the impact of a green political backlash.

It comes at a time when environmentally conscious investments have become a politically polarized issue in the Western world, especially in the United States.

Republican lawmakers have labeled ESG as a form of 'has shaken up capitalism“who wants to give liberal objectives priority over investment returns.

Democratic lawmakers have tried to push back against this view, to describe attacking a range of ethical business practices as “an attempt to create a culture war and protect corporate special interests.”

Analysts to expect the outcome of this year's US presidential election will determine whether the backlash against ESG investing strategies will have a profound and lasting effect.

Nicolai Tangen, CEO of Norges Bank Investment Management (NBIM), told CNBC that the country's wealth fund continued to advocate for the ESG agenda.

“We think it is part of long-term investing. You have to really care [about] the impact that companies have on the environment, otherwise you cannot make good long-term investments. So that's important,” Tangen told CNBC's “Squawk Box Europe” on April 23.

“And we think the fact that some other people are pulling out gives us a better opportunity to phase in. So really interesting times.”

The headquarters of Norges Bank, Norway's central bank, in Oslo, Norway, on Tuesday, January 30, 2024.

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BlackRock, the world's largest money manager, is estimated to more than triple its security spending on CEO Larry Fink by 2023 after criticism of the company's stance on ESG investing, according to the Financial Times reported on April 21, citing a filing by the company.

NBIM manages the so-called Norwegian Government Pension Fund Global. The world's largest sovereign wealth fund was established in the 1990s to invest excess revenue from Norway's oil and gas sector.

To date, the fund has invested money in more than 8,800 companies in more than 70 countries around the world, making it one of the largest investors in the world.

Green investments

The resulting controversy over ESG has prompted some Wall Street firms to do so step back of environmentally conscious commitments, while global sustainable funds witnessed a net outflow on a quarterly basis for the first time in the fourth quarter of last year.

However, the global universe of sustainable funds recovered slightly in the first quarter. Data released Thursday via Morningstar shows sustainable funds attracted nearly $900 million in net new money in the first quarter, compared with a revised outflow of $88 million in the final three months of 2023.

When asked about the current state of green investment, NBIM's Tangen said the situation has improved slightly in recent years.

“I think this area is more attractive than it was because you go back a few years to the time when the boards were really made up of the investment managers; you need to make more green investments,” Tangen said.

“There was huge competition for very few projects, prices were high, yields were low – and we think that has improved somewhat over the last year,” he added.

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