The global economy is already experiencing weather-driven inflation that will contribute to stubbornly high price rises and a long period of low investment returns, according to the head of Norway’s $1.3tn oil fund.
“Inflation is going to be hard to bring down,” Nicolai Tangen, executive director of the World’s largest sovereign wealth fundhe said in an interview with the Financial Times on Tuesday.
Labor costs are already filtering into global price increases, but “we are seeing a climate impact,” he added, pointing to rising prices for olive oil, potatoes and coffee as anecdotal signs that the costs of foods could increase inflation in the coming years.
A steep price tag for the green energy transition and a reversal of globalization that has kept manufacturing costs low for decades are also part of the “patchwork,” he said.
tangenSpeaking ahead of the oil fund’s inaugural investment conference, he said the investor was “absolutely” seeing signs of the so-called avaricewhere firms raise prices beyond what their own pricing pressures would require.
Tangen’s views are closely watched in financial markets, as the oil fund owns an average of 1.5 percent of all listed shares in the world. The former hedge fund manager, who took over the fund in 2020, has long warned against persistent inflation and warned that investor returns could be low over the next decade as prices and interest rates remain high.
He highlighted in the interview that the wave of inflation that has already hit the financial system, and the aggressive rises in interest rates by central banks to try to tame it, have exposed cracks in the markets, particularly in the form of the implosion of Silicon Valley Bank and the liquidation of Credit Suisse last month.
He added that he thought “the worst of that is over,” but warned that with $30 trillion in losses in global stocks and bonds last year there were still more losers to be revealed in the financial system.
Tangen said it was “difficult to see from the outside” which financial companies were in worse shape, but the fund was working hard to remove “bad apple” companies from its portfolio. “We have increased efforts to remove these things,” he added.
The fund now employs four forensic accountants in that effort, along with the use of linguistic analysis and artificial intelligence, and that number is likely to grow.