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Norway’s $900bn sovereign fund to cut coal investments

Ukraine’s coal industry

Creative Commons: Greg Goebel, 2012

In a move sending shock waves through international energy markets, Norway is on the cusp of abandoning most of its coal investments, following an unanimous recommendation by a parliamentary committee on Thursday.

The bipartisan agreement reached by the Standing Committee on Finance and Economic Affairs calls for the country’s US$900 billion Sovereign Wealth Fund to divest its holdings in companies that generate more than 30% of their output or revenues from coal-related activities from the beginning of next year.

The move has been welcomed by campaigners as a sign that the country is “really taking a lead” on climate action.

Arild Hermstad from the Norwegian NGO ‘The Future in our Hands said:

Coal is bad for all aspects of our environment: it destroys landscapes, contaminates water resources, pollutes the air and is the number one threat for our climate. Such investments are not in line with the values of Norwegian society, and the unanimous vote of the Finance Committee means that this is now recognised across all party lines.

Campaigners estimate that the move could see as much as $5.5 billion divested – around half of the fund’s current US $11 billion of coal holdings – including investments in companies such as Germany’s RWE, China’s Shenhua, Duke Energy from the Unites States, Australia’s AGL Energy, and Poland’s PGE.

Norwegian MPs say the move represents a “great victory for our climate”, breaks “new ground for institutional investors” and sets a strong precedent for funds around the world to abandon “the world’s poorest performing sector” in the face of mounting climate risk.

Norway has been in the spotlight in recent weeks, with environmental campaigners putting the country’s massive fund in their sights.

Today’s decision marks one of the biggest wins for the global divestment campaign, which has recently secured commitments from the Church of England, the University of Edinburgh, and many more.

Bill McKibben, co-founder of 350.org said:

If you’d told any of us, three years ago, that the planet’s largest sovereign wealth fund would begin divesting, we would have laughed. The way this idea–that the world has far more fossil fuel than it can burn–has spread is an enormously hopeful sign. There’s much work to be done taking on coal, oil, and gas but the momentum is definitely on our side.

 

With Norway’s fund managers regarded as some of the best globally, this move should also send a chill down the spin of investors in dirty fossil fuels globally.

IEEFA director of finance, Tom Sanzillo said:

This is a financially defensive and prudent course of action to protect the Fund from further losses from its coal-mining and coal-burning power-generation investments. Coal markets globally are in the midst of a wrenching structural decline. No investment fund in the world—be it university, pension or institutional—can make a compelling financial case to hold these equities in their portfolio any longer.

 

Commentators warn the Norwegian Parliament’s decision, which will be finalised on June 5, will create a domino effect on the rest of the investments sector.

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