Norway to Assess Sovereign Wealth Fund’s Investment in Fossil Fuel Companies

Norway has a massive Sovereign Wealth Fund name the Government Pension Fund – Global (GPFG).    The purpose of the fund is to invest the profits  generated by the Norwegian petroleum sector, derived  mainly from taxes of companies, but also payment for licenses to explore and dividends from partly state-owned Statoil.  As of December 31st 2013 its total value is NOK 5.038 trillion ($828.9 billion), holding one percent of global equity markets.  With 1.78 percent of European stocks, it is said to be the largest stock owner in Europe.

The objective of the GPFG is to support saving by the Norwegian State to fund the pension expenditure of the Norwegian national insurance scheme and to safeguard long-term interests relating to the use of the State’s petroleum revenue. The investment objective is to achieve the highest possible international purchasing power for the capital in the Fund, given a moderate level of risk. The overall aim is to ensure that the nation’s savings benefit both current and future generations.

In 2004, ethical guidelines were introduced for the management of the GPFG. These were revised in 2009, when the current guidelines for the observation and exclusion of companies were adopted. Among other things, the guidelines state that the Fund’s assets may not be invested in companies engaged in certain forms of production, and that companies may also be excluded from the investment universe of the Fund when there is an unacceptable risk that a company may participate in or be directly responsible for grossly unethical activities.

There is much debate in Norway about what types of industries the GPFG should invest in.  Many believe that the company should promote investment in renewable energy and divest itself of investments in coal and petroleum companies the way it did $2 billion of investments in tobacco companies in 2010.

Today the  Norwegian parliament announced that it has asked the government to establish an expert group, which will evaluate whether the exclusion of coal and petroleum companies is a more effective strategy for addressing climate issues in the management of the GPFG than the exercise of ownership and exertion of influence. In line with the parliamentary decision, the expert group will also be asked to advise on potential exclusion criteria for these types of companies.

In the management strategy for the GPFG, the Ministry of Finance has adopted several policy instruments for its work on responsible investments, including exclusion, observation and the exercise of ownership. Until now, the prevailing view has been that there is no need for “negative filtering” to exclude coal and petroleum companies from the Fund. The exercise of ownership and exertion of influence have been the preferred strategies for addressing climate-related issues in the management of the Fund.

The Ministry has now appointed an expert group to re-examine these issues. The group will be chaired by economist Martin Skancke, who will be joined by Professor Elroy Dimson, Professor Michael Hoel, Professor Laura Starks, Dr. Juris. Gro Nystuen and Research Director Magdalena Kettis.

Later today, the Ministry of Finance will present its White Paper to Parliament on the management of the Government Pension Fund in 2013. In the White Paper the results of the work on the recommendations made by the Strategy Council for the GPFG about the strengthening of the strategy for responsible investments, are presented. In in its deliberations of the White Paper, the Storting will have an opportunity to discuss the general strategy for responsible investments. The expert group’s work shall build on the conclusions reached in this process.

The group’s recommendations are to be presented by the end of November 2014. The Ministry intends to carry out a thorough and open discussion on the report following the submission.

 

Photo by Alexander Ottesen/ CC BY

 

 

 

 

 

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This post was prepared by Solar Thermal Magazine staff.