How the Norwegian SWF Balances Ethics, ESG Risks, and Returns: Can this Approach Work for Other Institutional Investors?

As the largest sovereign wealth fund (SWF) in the world, the Norwegian SWF’s efforts to move in a more sustainable direction are often followed by other institutional investors. This chapter examines how the Norwegian SWF (officially, the Government Pension Fund – Global, or GPFG) has evolved into a responsible investor, balancing ethics, environment, social, and governance (ESG) risks with returns. The focus is mainly on its actions to address financial climate change risks. If the GPFG continues to evolve toward sustainable investment and acts on the latest International Energy Agency report that calls, among other things, for an end to all new fossil fuel production, it can serve as a good model for other institutional investors to deal with the challenge of climate change while remaining profitable.