Lankan firms with foreign capital likely to be nudged towards upping game on climate goals

• Joining other large asset managers, Norges Bank wants companies in its portfolio to cut their carbon to net-zero by 2050

Sri Lankan companies with foreign funds in their capital are in for a accelerated transition towards the net-zero carbon goal as most foreign funds and investors are campaigning harder to nudge companies in their portfolio towards ESG goals – a shorter term used for Environment, Social and Governance standards, one of which is to cut carbon emission to zero.  

Norges Bank Investment Management, which has investments in a few listed Sri Lankan entities this week announced it wanted its over 9,000 portfolio companies to reach the net-zero goal by 2050. 

Norges Bank, the world’s second largest sovereign wealth fund with assets under management of US$ 1.2 trillion said it plans to engage with the companies it has stakes to nudge them towards the net-zero carbon emission goal and those who don’t comply could be dropped from the fund. 

The campaign towards the net-zero goal by 2050 gained rapid momentum since November last year when global leaders from both the public and private sectors gathered at Glasgow, Scotland for the 2021 United Nations Climate Change Conference, most commonly referred to as COP26, where many countries pledged for carbon neutrality by 2050. Sri Lanka also became a signatory to the pledge although it struggles so hard to provide even the basic food, jobs, electricity and energy and decent living conditions to a large swath of its population. 

In Sri Lanka, Norges Bank has investments in several listed companies including John Keells Holdings PLC (JKH), Cargills Ceylon PLC and Teejay Lanka PLC.While many of these companies and other large players are already taking steps to stay in line with the goals, the pressure on companies to do more on their ESG commitments will only grow in the short to medium term from not just their investors but also from other stakeholders such as customers who use their products, governments and particularly environmental activists. 

Companies are also increasingly reporting on the progress they made on cutting their carbon emissions and their broader ESG criteria as part of their integrated annual reports and quarterly earnings releases. 

For instance, JKH in July said the group cut its carbon footprint per million rupees of revenue by 38 percent in the April – June quarter to 0.37 metric tonnes while its water withdrawal per million rupees of revenue was brought down by 44 percent to 6.71 cubic meters.