Many investors will have been waiting for the expert panel review of the Norwegian Government Pension Fund Global (GPFG) to be released as they consider how their own investment institution deals with the issues of unburnable carbon and stranded assets.
The thoughtful piece by the experts exploring the issues indicates where they see the stranded assets thesis being applied, and what reasons there are to sell certain assets. However it does not constitute a rejection of stranded assets, and proposes that the fund may need a mechanism to exclude the most extreme high carbon companies. Carbon Tracker identifies the following key points from the analysis:
1. Investors have to act on this issue
2. GPFG has already recognised the financial case
3. GPFG can’t currently recognise the ethical case, but should in their exclusions policy
4. Stranded assets are financially material but not the basis for portfolio management
5. GPFG may be too reliant upon the efficient markets hypothesis
6. Active management in the form of engagement can deal with the issue
7. Engaging with regulators and ratings agencies needed as well
