The journey to net zero is one of the
biggest challenges humanity has ever faced.
As temperatures keep rising, the devastating effects of climate change
are becoming more severe. In this new series of leaders with
Laquelle goes green. We go beyond the headlines and speak to
the people who are confronting the climate crisis through their work.
To learn how they're positioning for the future.
I begin with the man in charge of the world's largest sovereign wealth fund
valued at almost $1.6 trillion. Norges Bank Investment Management is the
biggest owner of stocks globally, with stakes in almost 9000 companies.
It was established to invest Norway's vast fossil fuel riches.
But as the energy transition gains momentum, it's sought to reduce exposure
to oil and gas instead of divesting. Its strategy is to apply pressure from
within. Nicolay Tangen has been at the top of
finance for over three decades, but his toughest test may lie ahead.
Thank you so much for joining us on leaders with like what goes green so
what does it take to be leader in 2024? I think what it takes is more emphasis
on empathy. And in a in a world which is leading
more where there is more machines, more AI, we need to lean more towards.
What is it that makes us human? So that whole thing is more important
than ever before, but the world is so complex at the moment.
How do you distinguish the noise from the facts?
Well, that is also more important than ever before.
It's to make that distinction and to just establish the facts, talk to
people, and just exclude all the noise, all the social media, all these kind of
things. I mean, you're a leader almost like no
other because you lead the largest sovereign wealth fund of the world.
You want to explain to everyone that's interested in what the fund does, and
you also have a podcast. You do investments.
Like what kind of leader do you think you are?
I think I am a very including leader. And the good thing by leading the people
in the fund is that they are just so smart and so clever and so they don't
need much leadership, they just need a bit of direction and then they then they
figure it out themselves. But you've done quite a lot since since
joining the fund, and that was during the pandemic.
How do you see the fund changing? It's interesting, but in some ways it's
easier to make changes during a period like the pandemic because people are at
home and they are spread out. And so when you suggest some things,
it's perhaps easier to get them to to to do the new thing.
I don't believe that for one second. It's always hard.
I mean, if it's hard to change culture, it's hard to change people.
Well, you have to explain why you do it. And and I think make even more sure than
before that that people have a true purpose.
And so you have to distill down what is the purpose of what you do, what is the
purpose of your of your company, and make that very clear and repeated and
repeated and repeated. And it's very clear what all purpose is,
is to make money for the Norwegian population.
So what do you accept the job you have? You had a great life.
I mean, you had a hedge fund that was doing very well.
You were earning lots of money. Well, I had a great love and a great
life, but I still have a great life and very, you know, really good luck.
Now, I was very keen on that job because, one, I think it's one of the
most important positions in asset management, right?
I love asset management in terms of the opportunity to develop that organisation
further. That was a great opportunities and I
love organisational development. And then to do something nice for the
country, I mean these three things came came together in the same job.
Why did you love asset management? Because you can influence and change the
future. Or is it being cleverer than anyone
else? Asset management is the most interesting
job in the world, perhaps after being a journalist.
Why is that? Well, everything you eat, drink, drive,
all these kind of things is made by a company you have.
You need to understand psychology in terms of the companies.
You need to understand the the corporate culture of companies.
And then these things change all the time, right?
You have the macro economy is changing, interest rates are changing, currencies
are changing. And digital the data points that you
changing all, all the time. You just couldn't invent a more
fascinating game even if you try it. But it's harder now.
I think I feel it feels like things are changing faster, right?
Inflation forecast rate forecasts are changing.
It's changing very fast. So on the one hand, that means that you
need to be very observant and agile. At the same time, I think there is even
more scope if you manage to be contrarian in what you do and if you
manage to be long term, I think that's where the money is.
The big arbitrage now is to be contrarian and long term.
What do you think markets are getting wrong right now?
Well, it's a bit too kind of arrogant to say that the market is wrong because
what is the market? The market is the total IQ of all the
people in the world. Right.
So. So that's a tough one.
I do I do think that inflation will be tough to get done.
There is more near shoring. We are seeing some well, we have
recently seen some some more pressure on on raw materials.
Wage increases are quite high. So I suspect that we won't see the type
of rate cuts that many people expect. What do you see?
I mean, there's this US exceptionalism, which is what we're seeing in the US
economy, the inflation data, what the Fed does.
What have we gotten wrong on the US economy?
Well, the U.S. economy is actually pretty good,
certainly relative to Europe. Right.
And we see it as well when I'm when I have when I see US CEOs, they are just
seeing the the backdrop for doing business in America so much better than
than doing business in Europe. So
a lot of things are going right in America.
How much time do you spend looking at what the Fed does or what the economy
does? And how much time do you spend
understanding your companies and and thinking about what themes you need to
be invested in? No, I think they go they kind of go
together. I think you understand the economy
through the companies. So my my job in a way, is to speak to
companies and try to create this kind of mosaic of information.
What do you see as the biggest change for our economy?
Is it AI, which is being. Christ in or is it geopolitics?
I don't think you can differentiate from geopolitics anymore.
They are so deeply intertwined because air is now an important part of weapon
systems, of healthcare research, of car technology, heavy technology.
So they just go together. So it's a new thing now.
Microchips is also an important part of of the geopolitics.
It wasn't to the same extent before. So all these things are just much more
complicated than they have been. You're tantalized right by by this
exciting change when many people actually really worry about what's
coming. Well, I think the world has never been
more has never been more exciting. Right.
What's happening in AI is leading to some tremendous change.
The energies, some huge progress. For instance, in in the way we do
research in R&D and in the pharma industry, it's improving all the, you
know, the weather forecast. It's improving a lot of things, right?
There's just a tremendous increase in compute power.
So so generally it's a positive thing or mainly positive.
Or do you also worry about you know, I think it's I think it's mainly positive.
And then the question, of course, is how do you regulate this?
I think it's going to be very tough to regulate because it's so embedded into
kind of the competitive landscape between the superpowers.
What does it mean for your investments in you?
Of course, you don't choose 100% where you invest because you have, you know, a
framework. Yeah, but by the government.
But how do you see the adoption of AI going forward?
We are seeing the adoption with we see fast adoption and is also
interesting. What are the implications for
productivity. So on the podcast we have our Sam
Altman. You know, what kind of productivity
growth should we see in our company over the next 12 months?
And he thought we should see 20%, right? So I walk around the office and say,
Hey, how are you going to become 20% more efficient?
What exactly are you doing? And I think we all need to ask ourselves
about that. How are you going to how are you doing?
I was just asking you first. So for me, maybe I can have multiple
language skills. Exactly.
Which is something that actually you were mentioning.
You have this podcast, which I know you enjoy doing.
Yeah. Why did you enjoy it so much?
Oh, my. I mean, so we started the podcast in
order to give the Norwegian population insight into the type of companies they
own, Right? And it's basically we just learned a
lot. We learn a lot, which is relevant for
students. Listen to the podcast business leaders,
we ourselves, it's it's important. And you have the ability to talk to the
to the people who actually kind of lead the world.
It's fascinating. Right?
And also, I need to read up on on all these industries.
So that's what I do during the weekends. Many of them have written books.
I have to read the books. You know, you have to gain insight into
various industries. It's it's fantastic for learning.
Is the toughest interview that you've done?
Well, we had a pretty tough on with with Elon Musk because we had some technical
issues and of course, that you need to kind of keep concentration whilst you
have some technical issues. That's not so that's not so easy.
But I think they are all they're all very good.
I mean, these are great people and it's fascinating to talk to talk to them.
You're a big investor in Tesla. Do you get into the nitty gritty of
actually what a company does, what they're promising to see, whether your
investment, you know, continues? Well, we don't we don't really I don't
really do that kind of nitty gritty. Like, how many cars are you going to
sell? How many of them are red hot, Many of
them are blue and all that kind of stuff.
I just don't think that's necessarily important for the long term success of
the company. But so why what I where I spend time is
on the business model and try to understand where where they make money
and why they should continue to do well in the future.
I spend a lot of time on corporate culture leadership.
I think corporate culture is is completely underrated.
You know, it's it's just underestimated because you can have two companies which
do exactly the same, or at least that's what it looks like on the surface.
One is hugely successful. One is a complete failure.
What is it? Know there is just something in the in
the company and the way they conduct business, which is so important.
Coming up, Nikolai Tangen on why the world has stumbled on the path to a
greener future. The commitment of oil and gas companies
is crucial to achieving net zero. The industry supplies more than half of
the world's energy and is one of the planet's biggest polluters.
Oil majors have vowed to cut production and slash emissions.
But recently, after record breaking profits, some have walked back on those
pledges despite pressure from institutional investors like Norway's
sovereign wealth fund. I continue the conversation with Nikolai
Tangen. You've been one of the most committed to
climate change and to ESG matters. Are we taking a back step as a world?
Yes, we have done unfortunately, very unfortunate.
But yes, the world has taken a step back.
And I guess we are one of the few big investors out there now who continue to
be consistent and who continue to talk about these things the way we we have
done all the time. But many people have kind of turned on
the volume on on that messaging. Why have we taken a step back?
Well, I think on the back of higher energy prices, the
the energy sector got more confidence. There was more focus on energy security.
And and that's kind of what started it. Right.
And then you have had some political movements as well, which have moved in
the same direction. Nick, when you look on on some of your
investments, how difficult is it to take a company, a big company, an oil major,
and change it from within as an investor?
And therefore, how difficult is it to decide to stay invested in that company?
Well, it's an important question because you can do two things.
If a company doesn't quite do what you think they should be doing, you can sell
it or you can continue to have a dialogue with them and try to get them
to change tack. Right now, what do you achieve if you
sell it? You basically end up with a company
which is owned by investors who don't care.
That doesn't make a lot of sense. So therefore we continue to have a
dialogue with these companies, show understanding and remain invested whilst
they are in that transition period. Where do you feel you've made a
difference and where have you been disappointed?
I think we've made a difference many places now.
I wouldn't say we have revolutionised the oil and gas industry, but we have
been. I think you've been supportive and
helpful in many cases and that's also what we hear back from the companies.
When you look at I think you have a commitment to make all your portfolio
net zero by 2050. Is that achievable?
It's certainly a goal we have. Yeah.
Why are you so committed to talk to climate change in 2024?
Because there are there is there are two things which is important.
One is to not let small problems become big,
but is also important not to let big problems become small.
Now, the climate situation we are in is clearly a very, very big problem.
We have the hottest year on record last year.
It started to have impact in many, many different ways.
You see it in the reinsurance prices. You see it in a lot of, you know, worse
harvests. It's leading in some cases to increased
immigration, immigration. So it's impacting the world in very many
different ways. Now, at the end of the day, this is
actually a financial risk because it's a risk to the value of the fund.
And if you're invested across the world and one company pollutes, you can high
it, right, because you capture that pollution in all the other companies you
own. So it's very, very important that the
main shareholders engage in this. Do you worry that actually, you know,
investors don't engage with some of these companies?
And I know you also have an ethics basically committee, the Ethics Council.
Yeah. It went on from an investor which is
independent, but gives you advice or actually forces you to either sell
investments or not invest in companies that are not ethical.
How does that relationship work? No, it works really well.
So this is a separate council of ethics. They have various criteria.
They look at, for instance, human nature, human rights criteria, cold
criteria, nuclear war, nuclear weapon criteria.
And then they would go into deep research with various companies to see
what are they, what the breach secretariat.
If they do, they would advise us to to exit.
And has that happened? Yeah, sure.
On climate change. On climate change, we do exclude some
companies ourselves now, and it can be various parts of that.
They can be that can be, for instance, how people use water resources and so
on. I think you're also invested in like
physical assets, like not wind shore, but but renewables.
What makes more sense for an investor like yourselves, being a shareholder,
actually owning the parks? I think you can do both.
You know, we do. We do both.
We own some of the companies who are involved in these projects, but we also
own particular projects, not that many because it recently came into our
mandate. So we have we've done it.
And then also in the beginning, the returns weren't that attractive.
We think the returns are better now. And so we have accelerated that activity
and this is better or the returns better in Europe because there is more
regulation to push towards green energy or actually does.
The Inflation Reduction and Production Act means that there's going to be more
onshore and more appeal for green technology in the UK?
I think what we're seeing is that the the Inflation Reduction Act has made the
many of the investments in the US more attractive than what's what the score is
in in Europe. Yeah.
And will that change with with the change in China's also doing a lot of
lives. So when you look at all of all of this
competition across the energy sectors, where do you think you'll be invested in
five, six years from now? Well, it's difficult to say.
I don't know. We don't know whether the inflation
reduction will remain or whether it's going to be renewed or whether it's
going to be, you know, changed. So I don't think we I don't think we
really know that. But for the time being, the US looks
looks pretty good. How do you see the US political cycle
and the rest of the world? So we we have no view on that.
We are a very long term investor and we we remain invested throughout political
cycles. But does this year, I think four and a
half billion people go to vote? Yeah.
Does that test or does that test your investment strategy?
I don't think it test our investment strategy because we generally are
invested over these type of cycles. I don't think you can kind of change
your portfolio according to where the election is.
And also, markets are pretty sophisticated, right?
So they are they are a calendar. They are basically discounting, you
know, the current probability of the of the various elections.
We are saying it is questioning the use of AI in in social media for sure.
We are seeing that in many cases. Does it matter to you know, to you being
the largest sovereign wealth fund in the world, does it gives you more access,
for example, and political clout to invest in places?
No, we would not have political clout. We it's very important that the fund
remains not political. And so we are very, very careful
steering that balance. But do you see it as a force for good?
I wouldn't say the fund is a force for good, but we are trying to care about
the important things when it comes to future returns for the fund.
Coming up, Nikolai Tangen on his love for learning and why combining knowledge
is key to innovation. Nikolai Tangen has been in charge of
Norway's sovereign wealth fund since 2020.
But the former hedge fund manager turned podcast host and philanthropist has
other passions. Tangen owns the biggest private
collection of Nordic modernist art and even took a career break to study art
history. I continue the conversation.
You love also going back to school and, you know, learning about leadership.
What drives you? I just love learning, right?
I think we just need to learn. Otherwise,
what's the point? So you'd go back to school?
I've been back to school a few times. I did a degree when I was 36 in art
history. I did one in social psychology when I
was, you know, 50.
I'd love to go back to school. What would you study this time?
Well, there's so many cool things. I think anthropology would be quite fun.
Be fun to study music. So many things.
What do you worry about, though? I mean, you're.
You seem very optimistic by nature. Yeah.
You love your job, but it also feels like the world is being tested.
Yeah. What do people need to study today to
make sure that whatever comes our way, we take the right decision?
I think the more in my mind, the more different types of things, you know, the
better it is. I personally value I'd rather have
several master degrees than one Ph.D., for instance, because I think the way
you combine knowledge, that's how you create innovation, that's
how you create new solutions. I think that's really interesting.
It the more different type of these type of languages, you know, i.e.
the more you can communicate with various types of people in the
organization. And I think it's really valuable because
of what that makes you understand investment better because everything is
connected or it's just enriching your mind.
No, you just I think you understand the world much better.
Is there an investor you admire? There are many good investors out there.
There are many good investors out there. I think the more long term you are and
the more you are ability to take contrarian investments, the better you,
the better you are and the better returns you'll have.
Is it more difficult now to make long term investments just because of
everything that's been thrown at us? I mean, can you say with certainty that
you know what our world looks like in ten years?
No, of course not. I haven't got a clue.
I don't even know what the world is going to look like tomorrow.
So it is funny. So it is.
It is it is difficult to be a long term investor.
It's difficult because for two reasons. Everything moves faster, right?
So we we basically talk and walk 10% faster than we did 30 years ago is
incredible. Right?
So the whole everything we do is moving faster.
And sometimes the most difficult thing is not to do anything.
Okay. So to be long term, it means that there
are periods where you don't do anything. So you come home from work and it's just
like, Hey, what are you doing? I did nothing Tuesday, I did nothing.
Wednesday, I did nothing. You have to you know, your your partner
is going to start to wonder by Friday. What's the what do I should doing at
work? Right.
So it's very complicated not to do something.
And also incentive structures also is is they are also often encouraging people
to do something. So but the more you can, the more you
can live in your own world, do your and make your own decisions independent of
what other people think, the better they will.
Me, I think. I think everyone's talking about real
estate at the moment, how it's going to crash again.
How do you deal with, if not the hysteria?
Certainly a lot of, you know, market whispers about things going wrong.
Yeah, it's a complicated issue. You know, we have we have big real
estate holdings in many of the main cities in the world.
We got nearly a thousand, you know, investments
in places like New York and, you know, Washington and Boston and so on.
London, Paris. Now, we probably adjusted the values
down by a quarter at least. And
whether they will continue down is difficult to say.
It depends on interest rates. It depends on
it depends on various factors. So you get interest rates, right, longer
term. And and your portfolio, of course, is in
a much better place. Is that what you try and understand and
focus on every day? I think I think where rates are going is
it's it's very important in terms of
understanding where the returns will come.
I think one of the questions you probably get asked most is how do you
build a good team around you? Is that also the most difficult question
to answer? No, I think that's that's pretty
straightforward. You you hire the you hire the best
people, yet you hire people who are better than yourself.
You hire people who have integrity and who are long term thinkers, who don't
jump jobs, but who have shown that they are loyal and can stay in a job for, you
know, at least five years. And then you when you have clever
people, you don't need to particularly manage them.
You just figure out where you're going and you and you go there together and
you make sure you have fun. But so what's your.
If you don't have to manage them, what's what's your kind of raison d'etre?
You're there to to steer to the spot, to figure out you, to kind of figure out
what the direction you should go in. Right.
And encourage, encourage them,
give them praise when they do good things and make sure they thrive and
make sure they are in the right position.
I have seen people who have been miserable and then you you change their
their job and then they flourish and they thrive.
And they love it. And.
That's, in a way, one of the most fulfilling thing you can do is as a
manager, I think, look, where will you be in in three years
at all? At all?
Where would you like to be in three years?
So my my current job, you know, has a has a
time limit. And to extend beyond that, they would I
would do they would need to ask me right then and I saw that would need to be an
agreement that we we get to together. But you'd like to stay I have no
official view on this. Thank you so much for joining us.
I like that. It's very CIA.
I can never deny that. No, confirm.
Thank you. Thank you.
Thank you so much.
