Focus area: climate change risk management

We expect these companies to evaluate how such change may impact their operations and supply chains and to develop strategies to manage potential risks. Failure to do so may hurt the companies’ operations and performance, putting the fund’s investments at risk.

Our expectations are outlined in the document NBIM Investor Expectations for Climate Change Risk Management. We have assessed how the companies we invest in fulfilled these expectations in 2009, publishing the results in the first of a planned series of annual compliance reports on climate change risk management. We will use our findings as a basis for dialogue with companies to try to improve their management of risk from climate change.

We expect companies to:

Strategy for optimised investment in climate change risk mitigation

Companies should plan for the effective and efficient allocation of resources to mitigate risk. Climate change should be integrated into a regular and comprehensive risk assessment process, particularly for investments in major projects. A clear strategy should be developed addressing significant threats and opportunities.

Specific action to implement climate change strategy

Companies should take concrete steps to minimise threats and capture opportunities. This includes considering initiatives in direct operations, supply chain management and research and development.

Effective and efficient governance for risk management

Companies should have a governance structure that facilitates an effective response to climate change risk. Boards need to fully integrate climate change into their wider risk management responsibilities. They should also ensure there is a clear delegation of responsibility in the management structure, appropriate monitoring and reporting, and incentives linked to key performance indicators.

Transparency and disclosure

Companies should disclose information on their climate change strategy, actions and governance, as well as report on greenhouse gas emissions and emission intensity reduction targets. They should also disclose their positions on climate change regulation and the nature of and resources allocated to interactions with policy makers.