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Global institutions will follow Norway's SWF example, says ESG expert

Global institutions will follow Norway's SWF example, says ESG expert

Global institutional investors will increasingly behave like Norway’s sovereign wealth fund, which yesterday announced its intention to sue Volkswagen over the car maker's emissions scandal.

This is according to Christine Farquhar, director of European public investments manager research at consultancy firm Cambridge Associates.

'We expect more of this kind of activism to come through as pensions funds, SWFs and other clients are not just paying a lip service to ESG issues anymore. Five years ago there was a lot of box ticking, but now we see asset owners taking this more seriously,’ she said to Modern Investor.

'Suing somebody is always quite a negative thing, but on the positive side we see people being more willing to push asset managers to develop strictly controlled and impactful products,’ she added.

‘We're seeing a drive for carbon neutrality and fossil fuels as well as investors wanting to bring the market forward and genuinely make a difference.’

Yesterday, Norway’s sovereign wealth fund told the Financial Times that it would take legal action against VW in German courts by seeking to join one of the class-action suits being prepared there amid allegations the car maker rigged emissions tests in the US.

The SWF has a 1.64% stake in Volkswagen worth more than €663 million, making it the company’s fourth-largest shareholder. It is expected to file the lawsuit against the car maker in the coming weeks.

The fund's move coincides with its recent stronger stance on environmental, social and governance (ESG) issues. In April, Norges Bank said that it excluded 52 companies from the fund's investment universe based on a new coal criterion.

Previously, in March 2016, the bank excluded San Leon Energy and the Chinese telecommunications giant ZTE Corporation, as well as putting under observation Brazilian firm Petrobras after the multinational's management was accused of corruption.

Norway’s sovereign wealth fund had a market value of €808 billion as at 31 December 2015, of which 61.2% is invested in equities, 35.7% in fixed income and 3.1% in real estate.

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