Having built its wealth by pumping hydrocarbons out of the seabed, Norway has an obligation to leverage the power of its massive sovereign wealth fund in the fight against climate change. With COP26 fast approaching, it should focus on building a new coalition of sovereign funds committed to net-zero emissions targets.
BRUSSELS – Recent developments in Norway could have momentous implications for climate-related commitments at the UN climate-change conference (COP26) in Glasgow this November.
In August, a government-appointed committee recommended that Norway put its sovereign wealth fund (SWF) on track for net-zero greenhouse-gas (GHG) emissions by 2050, and that the fund’s activities be made consistent with Norway’s commitments under international climate agreements. Soon thereafter, the Norwegian Labour Party’s candidate for prime minister, Jonas Gahr Støre, confirmed that, if elected, he would introduce a net-zero target for the fund. Now that Støre has emerged victorious in this month’s parliamentary elections, his challenge is to form a coalition that will allow him to follow through on his conviction.
Norway’s $1.4 trillion Government Pension Fund Global is the world’s largest SWF. But the country has been hesitant to put the weight of its fund behind its own international climate commitments. It is not alone.
Under existing international agreements, climate commitments are based on emissions originating within each country’s physical borders. Emissions resulting from countries’ foreign asset holdings are not counted in the domestic inventory. Thus, while governments have scrutinized their economies for emissions cuts, they have tended to leave their countries’ SWFs on the sideline. As a result, only one sovereign fund, Germany’s KENFO, has signed on to the United Nations-convened Net-Zero Asset Owner Alliance, which represents some $6.7 trillion in assets under management, and counts 46 pension funds and insurance companies among its members.
Given that Norway’s massive SWF owns 1.4% of all the world’s listed companies, on average, the country’s apparent change of heart is important both symbolically and as a practical matter. The new Norwegian government is backed up by the recent recommendation from Olivier Blanchard, a former chief economist at the International Monetary Fund, and others recommending it to sign up its SWF for the Net-Zero Alliance at COP26.
But Norway should not stop there. All told, sovereign funds represent some $10 trillion in assets under management, or about seven times that of Norway’s SWF alone. As the country with the world’s largest SWF, Norway should spearhead a diplomatic effort for a global movement of sovereign funds toward net-zero commitments at COP26.
Secure your copy of PS Quarterly: The Year Ahead 2025
Our annual flagship magazine, PS Quarterly: The Year Ahead 2025, has arrived. To gain digital access to all of the magazine’s content, and receive your print copy, subscribe to PS Digital Plus now.
Subscribe Now
Norway has a proud history of activist international diplomacy. Its highly capable foreign service has played a central role in mediating an end to armed conflicts around the world. Moreover, its sovereign-fund manager, Norges Bank Investment Management, is a sophisticated and globally respected investor. Together, these attributes place Norway in a strong position to mobilize others within a sovereign-fund coalition toward net-zero targets.
Fortunately, some SWFs have already demonstrated burgeoning climate ambitions. Norway can look to countries like France, Ireland, New Zealand, Singapore, and the United Arab Emirates for potential partners. These countries’ sovereign funds have sophisticated investment teams that would be perfectly capable of implementing net-zero targets. And one hopes that when they do, SWFs at an earlier stage of their climate commitments, or that have more limited resources, will join the new global consensus.
As the most recent report from the Intergovernmental Panel on Climate Change reminds us, the window for averting catastrophic climate change is closing quickly. And yet, many countries remain unable or unwilling to make the necessary emissions cuts within their own borders.
Under these fraught conditions, governments with large foreign asset holdings should look for ways to mitigate climate change not only within their borders but across all assets that they own and are able to influence. For Norway and several Gulf countries whose SWFs’ asset holdings amount to multiples of their domestic economy’s GDP, the largest potential climate gains can be found in SWF portfolios.
Countries with SWFs should recognize that accounting for climate risk and climate-related investment opportunities is no longer sufficient. In fact, countries doing only that with their SWFs are essentially taking advantage of the climate crisis without doing anything to prevent it.
Norway, a star of international peace negotiations, should seize the opportunity to lead a global sovereign-fund movement. Doing so would establish it as a champion of international climate diplomacy and leadership. For a country that built its wealth by pumping hydrocarbons out of the seabed and exporting them along with their inherent GHG emissions, it is the right thing to do.
The views expressed in this article do not necessarily represent those of the OECD.
To have unlimited access to our content including in-depth commentaries, book reviews, exclusive interviews, PS OnPoint and PS The Big Picture, please subscribe
No country wants external developments to drive up its borrowing costs and weaken its currency, which is what the UK is facing today, together with serious cyclical and structural challenges. But if the British government responds appropriately, recent market volatility might turn out to have a silver lining.
urges the government to communicate better what it is doing to boost resilient growth – and to do more.
Ricardo Hausmann
urges the US to issue more H1-B visas, argues that Europe must become a military superpower in its own right, applies the “growth diagnostics” framework to Venezuela, and more.
Now that Donald Trump is returning to the White House, he believes that it is an “absolute necessity” for the United States to have “ownership and control” of Greenland. But as an autonomous Danish territory where the US military already operates, Greenland has no reason to abandon its current political arrangement.
explains why the US president-elect's threats to seize the Danish territory are so dangerous.
BRUSSELS – Recent developments in Norway could have momentous implications for climate-related commitments at the UN climate-change conference (COP26) in Glasgow this November.
In August, a government-appointed committee recommended that Norway put its sovereign wealth fund (SWF) on track for net-zero greenhouse-gas (GHG) emissions by 2050, and that the fund’s activities be made consistent with Norway’s commitments under international climate agreements. Soon thereafter, the Norwegian Labour Party’s candidate for prime minister, Jonas Gahr Støre, confirmed that, if elected, he would introduce a net-zero target for the fund. Now that Støre has emerged victorious in this month’s parliamentary elections, his challenge is to form a coalition that will allow him to follow through on his conviction.
Norway’s $1.4 trillion Government Pension Fund Global is the world’s largest SWF. But the country has been hesitant to put the weight of its fund behind its own international climate commitments. It is not alone.
Under existing international agreements, climate commitments are based on emissions originating within each country’s physical borders. Emissions resulting from countries’ foreign asset holdings are not counted in the domestic inventory. Thus, while governments have scrutinized their economies for emissions cuts, they have tended to leave their countries’ SWFs on the sideline. As a result, only one sovereign fund, Germany’s KENFO, has signed on to the United Nations-convened Net-Zero Asset Owner Alliance, which represents some $6.7 trillion in assets under management, and counts 46 pension funds and insurance companies among its members.
Given that Norway’s massive SWF owns 1.4% of all the world’s listed companies, on average, the country’s apparent change of heart is important both symbolically and as a practical matter. The new Norwegian government is backed up by the recent recommendation from Olivier Blanchard, a former chief economist at the International Monetary Fund, and others recommending it to sign up its SWF for the Net-Zero Alliance at COP26.
But Norway should not stop there. All told, sovereign funds represent some $10 trillion in assets under management, or about seven times that of Norway’s SWF alone. As the country with the world’s largest SWF, Norway should spearhead a diplomatic effort for a global movement of sovereign funds toward net-zero commitments at COP26.
Secure your copy of PS Quarterly: The Year Ahead 2025
Our annual flagship magazine, PS Quarterly: The Year Ahead 2025, has arrived. To gain digital access to all of the magazine’s content, and receive your print copy, subscribe to PS Digital Plus now.
Subscribe Now
Norway has a proud history of activist international diplomacy. Its highly capable foreign service has played a central role in mediating an end to armed conflicts around the world. Moreover, its sovereign-fund manager, Norges Bank Investment Management, is a sophisticated and globally respected investor. Together, these attributes place Norway in a strong position to mobilize others within a sovereign-fund coalition toward net-zero targets.
Fortunately, some SWFs have already demonstrated burgeoning climate ambitions. Norway can look to countries like France, Ireland, New Zealand, Singapore, and the United Arab Emirates for potential partners. These countries’ sovereign funds have sophisticated investment teams that would be perfectly capable of implementing net-zero targets. And one hopes that when they do, SWFs at an earlier stage of their climate commitments, or that have more limited resources, will join the new global consensus.
As the most recent report from the Intergovernmental Panel on Climate Change reminds us, the window for averting catastrophic climate change is closing quickly. And yet, many countries remain unable or unwilling to make the necessary emissions cuts within their own borders.
Under these fraught conditions, governments with large foreign asset holdings should look for ways to mitigate climate change not only within their borders but across all assets that they own and are able to influence. For Norway and several Gulf countries whose SWFs’ asset holdings amount to multiples of their domestic economy’s GDP, the largest potential climate gains can be found in SWF portfolios.
Countries with SWFs should recognize that accounting for climate risk and climate-related investment opportunities is no longer sufficient. In fact, countries doing only that with their SWFs are essentially taking advantage of the climate crisis without doing anything to prevent it.
Norway, a star of international peace negotiations, should seize the opportunity to lead a global sovereign-fund movement. Doing so would establish it as a champion of international climate diplomacy and leadership. For a country that built its wealth by pumping hydrocarbons out of the seabed and exporting them along with their inherent GHG emissions, it is the right thing to do.
The views expressed in this article do not necessarily represent those of the OECD.