The fund’s ethics watchdog will look at more firms in the energy, steel and concrete industries and add shipping firms.

The ethics watchdog for Norway’s $1-trillion sovereign wealth may blacklist more companies that produce too much greenhouse gas by scrutinising more industry sectors, including shipping and power.

Carbon emissions became a criteria for exclusion from the fund in 2016 and last year the watchdog recommended that “a small handful” of firms be excluded from the fund for producing too much greenhouse gas emissions in either the oil, cement and steel industries.

Those recommendations are currently under review with the board of the central bank, which oversees the fund, and a public announcement is expected soon, the bank’s governor told Reuters on 27 February.

Johan Andresen, chair of the fund’s publicly appointed Council on Ethics, said the watchdog would look at more firms in the energy, steel and concrete industries and add more sectors, including shipping and power producers.

Speaking in an interview ahead of publication of the council’s annual report on Thursday, he said: “I expect there will be more companies recommended for exclusions based on the climate criteria.”

“Shipping and power producers are among the sectors we may be looking at.”

The world’s largest sovereign wealth fund was created from the proceeds of Norway’s oil industry and operates under ethical guidelines set by parliament.

It owns shares in 9,100 companies, 1.4 per cent of the world’s listed equity, so its decisions to drop or reinstate companies from its investments carry considerable weight among investors.

Mr Andresen said a company that is a big emitter of climate gases must show what plans it has to cut emissions by 2030 to remain in the fund’s portfolio, revealing for the first time what factors the watchdog takes into account.

“If they are very big emitters of greenhouse gas on an aggregate level and they are ‘worst in class’, they will really have to move,” said the 56-year-old Norwegian, who also owns private investment vehicle Ferd.

“They will need to have very credible plans to reduce emissions, that they have said they are going to do, not only to us, but to their shareholders.”

The fund itself has proposed dropping oil and gas stocks from its benchmark index which, if accepted, would mean the fund would cut stakes in oil and gas companies over time.

The proposal is currently under review at Norway’s finance ministry and will be voted on by parliament at a later date. Even if it goes ahead, the ethics watchdog will still have plenty of high polluters to examine.

“It would reduce the number of suspects we are looking at, but I don’t think we will be out of work,” said Mr Andresen. He declined to name specific companies.

CORRUPTION WATCH LIST

The fund has also been looking at blacklisting companies because of corruption risks. One is Brazil’s Petroleo Brasileiro which is on a watch list for possible exclusion in the future if the ethics watchdog deems there is a risk of corruption.

In January, state-controlled Petrobras agreed to pay $2.95bn to settle a US class action corruption lawsuit.

The fund held a 0.68 per cent stake in Petrobras worth $436m at end-2017, according to fund data.

Andresen said that while there were parts of Petrobras that were trying to change their practice to a more sustainable one, an “inherent challenge” was the practice of changing

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