The world’s largest sovereign wealth fund will divest from a slew of coal companies and oil explorers and producers, after Norway’s parliament approved tighter investment rules.
Norwegian politicians voted in favour of excluding the $US1 trillion fund from investing in companies that mine more than 20 million tonnes of coal annually or generate more than 10 gigawatts of power from coal.
The country’s Government Pension Fund Global currently holds a $US1 billion stake in commodities giant Glencore, as well as investments in Australian companies BHP, South32 and AGL Energy.
Non-profit environmental group Urgewald said the new rules mean the fund will have to divest from those companies, as well as Anglo American, Italy’s Enel and Germany’s RWE and Uniper.
The new coal investment restrictions come on top of existing rules preventing the fund from investing in companies that derived more than 30 per cent of revenue from coal.
Urgewald estimates the divestments resulting from the new restrictions will total 5.1 billion euros ($8.3 billion), on top of the 4 billion euros the fund shed in 2015 when it adopted its first coal exclusion criteria.
“It is great to see Norway divesting some of the biggest enemies of the Paris Climate Agreement,” said Urgewald director Heffa Schuecking, while urging the fund to also exclude companies that are planning new coal plants, coal mines or other coal infrastructure.
‘Signal to the rest of the market’
Norway’s sovereign wealth fund will also offload stakes in oil and gas explorers and producers, but retain investments in integrated energy companies including Royal Dutch Shell and ExxonMobil.
When first proposing the move in March, Norway’s finance ministry said it was aimed at reducing the “aggregate oil price risk in the Norwegian economy”.
The Institutional Investors Group on Climate Change (IIGCC), a European group representing 170 members with a collective $US26 trillion in assets under management, has welcomed the decision by Norway’s parliament.
“The multi-billion-dollar move out of fossil fuels into renewables by the world’s largest sovereign wealth fund sends a clear signal to rest of the market,” said IIGCC chief executive Stephanie Pfeifer.
“Other investors will take note when a fund built on oil shows the future is in clean energy.”
Norway’s sovereign wealth fund was established to manage petroleum revenues from the North Sea oil fields.
Oil and gas companies represent 5.9 per cent of its equity investments, according to its 2018 annual report, and it currently invests more than 9,000 companies worldwide.