Norway’s sovereign wealth fund has warned of a potential unintended consequence of ESG stress testing by European Union financial watchdogs – it could chase capital away from sectors needing financing to deal with climate change. In a letter accompanying its consultation response, published on Friday, NBIM said supervisors should consider how they incorporated ESG stress test results into supervisory processes and policies. Instead, stress tests should encourage financial institutions to engage proactively with counterparties on credible transition and adaptation planning, the pair wrote. The Oslo-based central bank department said this was the approach it adopted itself in its climate action plan. The draft ESG stress test guidelines have been proposed by the European Banking Authority, the European Insurance and Occupational Pensions Authority and European Securities and Markets Authority as part of the EU’s Capital Requirements Directive and its Solvency II Directive.