A new report by Carbon Tracker has highlighted a growing gap between climate risk analysis and investment action at Norway’s sovereign wealth fund, Norges Bank Investment Management (NBIM). While the fund has developed one of the world’s most advanced frameworks for assessing climate and nature-related financial risks, the report argues that these insights have not yet translated into significant reductions in fossil fuel investments or broader strategic portfolio changes.
NBIM manages more than US$2.3 trillion in assets and holds stakes in approximately 1.5 percent of all publicly listed companies worldwide, making it the largest sovereign wealth fund and one of the most influential investors globally. According to Carbon Tracker, the fund’s own assessments show that nearly one-quarter of its equity portfolio is already exposed to severe physical climate risks, indicating that climate change is not only an environmental issue but also a significant financial concern.
Despite recognizing these risks, the fund continues to maintain substantial investments in fossil fuel-related companies. Environmental organizations have previously identified NBIM as one of Europe’s largest fossil fuel investors, with investments worth tens of billions of dollars in the sector. Although the fund has stated that it engages with companies to encourage alignment with the goals of the Paris Agreement, critics argue that these efforts have not resulted in sufficiently strong investment shifts.
The report attributes the gap between climate risk awareness and investment action to several factors. One of the most significant constraints is the fund’s mandate, which is established by the Norwegian Parliament and prioritizes maximizing long-term financial returns. This framework limits the extent to which the fund can divest from specific sectors solely on climate-related grounds. Political expectations, legal considerations, and market dynamics also influence the fund’s decision-making processes.
Carbon Tracker further notes that increasing uncertainty surrounding global climate policies has become a material financial risk for large institutional investors. Inconsistent policy signals, changing regulations, and varying political commitments across countries make it more difficult for investors to make long-term strategic decisions regarding climate-related investments. These conditions can discourage more aggressive portfolio adjustments despite growing evidence of climate-related financial risks.
The report also highlights the limitations of shareholder engagement as a tool for driving corporate climate action. While NBIM regularly engages with companies on environmental issues, its influence is constrained by legal responsibilities, ownership structures, and political contexts. The number of companies with which the fund engaged on climate issues reportedly declined in 2025, raising questions about the effectiveness of its stewardship approach.
Recent developments have further complicated the situation. A review of the fund’s ethical investment framework was initiated by the Norwegian government following public debates over certain investments. As part of that review process, NBIM’s authority to exclude or divest from companies on ethical grounds, including climate-related concerns, has been temporarily restricted until the committee completes its recommendations.
Experts cited in the report argue that responsibility for major investment shifts may ultimately rest with policymakers rather than fund managers alone. Since NBIM operates within a government-defined mandate, substantial changes in fossil fuel investment policies would likely require direction from Norway’s Parliament and regulatory authorities. This highlights the broader relationship between public policy and institutional investment behavior.
