Dividends and Norway’s wealth fund tells firms to set net zero emission goals by 2050

In late September, the CEOs of the 6 largest banks in the US went before a Senate committee and because they see and are at the top of the biggest credit giving companies or banking giants, what they say is important. We often believe that CEOs will tend not to details at what happens at the branch level, because they are concerned with the macro picture and allocation of resources. For example, the CEOs were asked lending to areas of the country where redlining occurred in the past, most of them used, we allocated hundreds of millions of dollars for banking products. The Senators asked non macro questions and the answer as expected was we will get back to you. However, it was good to hear what the bankers said.

A Republican Senator asked given owning a stock gives voting rights, and many people have indirect holdings (ie through a mutual fund or elf, institutions vote for the shareholders). Some of the institutions have been asking for companies’ desire to work for climate change. The Republican Senator asked if this was “woke” and if something some should be done against it? Similar to most CEOs they like to have many options on the table and half agreed.

In an article by Victoria Klesty of Reuters, the largest wealth fund in the world, Norway’s $1.2 trillion fund or it owns roughly 1.3% of the world’s stocks particularly large capitalization ones. The fund said it would push companies it invests it to cut their greenhouse emissions to net zero by 2050 in line with the Paris Agreement.

The Norway wealth fund invests money from the oil and gas reserves in the North Sea, under the new plan, the fund will prioritize dialogue with the 174 companies that are the biggest emitters of greenhouse gases and account for 70% of the fund’s emissions via its shareholdings.

According to fund CEO Nicolai Tangen, the fund owns holdings in 9.300 companies and the fund will be doing frequent follow-ups to ensure the companies are doing what they said they will do. The easiest way to deal with the problems is to sell the shares, but the fund wishes to work with the list and would not release the list. (one can expect that from a fund that invests in revenues from oil and gas, some of the companies are in similar industries).

As of mid-September, 10% of the companies in fund’s portfolio had credible plans representing 38% of the value of the fund. (Some of those companies are big tech).

Linking to dividend paying stocks, most investors vote with management when they vote their shares, it is relatively easy to do (the proxy vote is easy to use) and as shareholders as long as the company is making profits which translates to dividends, they are fulfilling their prime objective. It is good to ask questions of management for management does prepare for the meetings and they hope a few will be asked. When stockholders demand companies do something, they do it by the ballot box and when management does not receive over 90% of the votes (sometimes closer to 100%) they need to pay attention.

There are more questions than answers, till the next time – to raising questions.


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