Norway and ESG

Norway's sovereign wealth fund, the largest in the world, announced its decision to divest in eleven large companies, meeting ESG criteria, which are increasingly weighing in the allocation of portfolios worldwide.

Norway's sovereign wealth fund, the largest in the world, announced its decision to divest in 11 large companies, meeting ESG criteria. The acronym ESG refers to “Environmental, Social and Governance”, that is, environmental, social and governance factors that can be taken into account in the investment decision processes.

Most of these divestments were due to environmental concerns, with companies such as Germany's RWE and others linked to the extraction of minerals or oil such as Glencore, Anglo American, Brazilian Vale and several Canadian companies having been neglected. There is a specific case, that of Eletrobras, whose divestment is related to the alleged repeated violation of human rights in the Belo Monte dam project.

Companies linked to the energy sector criticize Norway's decision because they consider that the processes of decarbonization and mitigation of the environmental impact in the extractive and electricity production processes are being ignored. There are also those who accuse Norway of hypocrisy, given that the origin of its sovereign wealth fund is precisely the exploitation of hydrocarbons.

For Norway, investing in areas outside the energy complex makes sense in terms of diversification, but there is some inconsistency between the country applying ESG criteria to the sovereign wealth fund and not doing so in its productive activities.

In any case, this decision shows the growing impact of ESG criteria on the allocation of portfolios worldwide and could lead other investors to do the same.

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