Norway’s $800 billion wealth fund to double investments in renewables and energy efficiency
By Sophie Yeo
Norway has proposed to double investment in environmental companies to US$ 8.4 billion as part of its plans to restructure its sovereign wealth fund.
Announcing an overhaul of the fund today, the Ministry of Finance said that the amount of money invested into environmental stocks would increase from 20-30bn Norwegian kroner to ($3.34bn-$5bn) to NKr 30-50bn ($5bn-$8.4bn).
The increased finance represents a tiny portion of the fund’s total worth. Valued at around US$ 868bn, Norway’s sovereign wealth fund is the largest in the world. It is made up of income from the country’s lucrative oil industry.
“Even those nations that made their fortune on oil are starting to see it’s not the future – the race to the exits is starting,” said 350.org co-founder Bill McKibben.
Campaigners have long highlighted the fund’s capacity to challenge the fossil fuels and promote renewable energy through its investment decisions.
Despite the increase, today’s announcement was seen as a disappointment to some, who had hoped the government would earmark up to 5% of the fund for renewable energy investments, which they would invest directly in projects, rather than through stocks.
“This is a sovereign wealth fund that has invested in real estate in London and in Formula One,” Samantha Smith, head of climate and energy at WWF, told RTCC.
“Our view was that the mandate for investment in renewables should be like the mandate for real estate. It should be 5% of the fund’s assets, and they should be able to invest in hard assets, not just in the stock market, so directly into solar and wind projects.”
She added that Norway’s new centre-right government had “failed to deliver” on hints it delivered last month that renewable energy would receive a boost from the overhaul of its wealth fund.
Reason #Norway should divest from fossil investment is *diversification*. If you live off pig farms, don’t put your pension into sausages.
— Michael Liebreich (@MLiebreich) March 10, 2014
Christa Clapp, a senior adviser on finance at the Centre for International Climate and Environmental Research Oslo, told RTCC: “It’s a very positive move to start thinking about climate impacts and the renewable energy increase is an important first step but it needs to be more broadly incorporated.”
The Ministry of Finance said today that it would continue to review further increases to the fund’s investment in renewable energy, as this could potential reduce returns on the fund.
The fund “is not a tool to boost government investments in emerging markets of renewables,” Minister of Finance Siv Jensen said at a press conference in Oslo.
The government is also under pressure to stop investing in oil and coal. The finance ministry announced today that they would set up an expert panel to review these investments, which would present their findings in November this year.
“It’s great that the world’s biggest investment fund is moving more money into renewables but there is little point if they’re spending huge sums of money digging up more fossil fuels at the same time,” said 350.org European divestment coordinator Tim Ratcliffe.
At the same time, it disbanded the fund’s independent council of ethics, which takes decisions on whether to stop investing in certain companies on moral grounds. It is to be replaced by a watchdog operated by the fund itself – a move that some believe could undermine the transparency of the process.
Oeystein Doerum, chief economist at Oslo-based bank DNB Markets, told Reuters in November last year that “the more independent the council on ethics is, the better.”