MILAN (Reuters Breakingviews) - The global fight against sea pollution just got a powerful ally. Norway’s $1 trillion sovereign investment fund said on Wednesday it wanted companies it invests in to explain how they plan to save the ocean from threats of massive plastic littering and overfishing. Unlike a recent spat over the fund’s intended disposal of oil and gas stocks, these good intentions should make headway.
The Government Pension Fund Global, which manages proceeds from Norway’s immense oil and gas reserves and invests in 9,000 companies, is not new to pushing business to act on sustainability issues. Starting in 2012 with palm oil, the fund has regularly published so-called expectations papers for companies on issues ranging from water management to human rights and tax transparency. The carrot is that the best in class will be named in the fund’s annual responsible investment report. There’s also a stick – the worst offenders can be ditched from the fund’s investment list. Given its size, the fund can also make its voice heard at annual shareholder meetings: in 2015 it held on average 3 percent of voting rights in 268 big companies.
Although not as stringent as regulation, the approach can be a powerful incentive for companies to comply. The fund reckons its ocean guidelines would affect $56 billion euros of investments in sectors like packaging and fishing, or 8 percent of its equity portfolio. This is more than the $37 billion invested in oil and gas. Also, anti-plastic regulation proposed by the European Commission in May might take years to become national laws. And developing countries are far behind in the debate.
There is a catch. The fund is far from having a free hand. It needs to closely track a basket of investments set out by Norway’s finance ministry, which constrains returns. Political considerations could stymie the fund’s equally well-intentioned proposal to shed its oil and gas equities – last month a state-appointed committee argued against the idea.
That shouldn’t be such an issue this time around. The executive seems to be on board. Norway is a key United Nations partner in its plan to combat sea pollution, and has pledged $33 million this year to combat plastic. If the fund and the government interests stay aligned, Oslo’s contribution should be helpful action rather than mixed messages.
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