Norway pension fund to cut coal investment

OREANDA-NEWS. Norway's government pension fund will divest from all coal-related assets after political parties agreed last night that coal–based power generators and mining firms should be excluded from the fund.

The fund's new investment criteria were today formally recommended by parliament's standing committee on finance. The full parliament is set to adopt the proposal on 5 June.

Under the proposal, power producers and mining companies of which 30pc or more of their activities are coal-based or 30pc of their revenue is coal-generated will be excluded from the fund.

The move will prompt the fund to sell its holdings in 60-70 companies, most of which are coal-burning utilities, representing a divestment of around 40-50bn Norwegian kroner (\$5bn-6.4bn) in total.

The \$900bn fund — one of the largest sovereign funds in the world — has gradually sold all its shares in pure play coal companies over the past two years. Since 2012, it has divested from at least 49 coal companies.

Today's decision sends a strong signal before a new, global climate deal that is to be agreed at the UN climate summit in Paris, France, in December.

The labour party-led proposal adopted today was initially opposed by the minority conservative government, but supported by smaller parties, the Christian democrats and the liberals. It secured cross-party support yesterday, the Labour party member responsible for steering the white paper through parliament, Torstein Solberg, said.

The parliamentary committee expects the government to propose a concrete, new product-based criterion in the national budget for 2016 this autumn and for this to be put in place by 1 January 2016, the finance ministry said.

"The government will follow up the Storting's [parliament's] deliberations, and will as part of its work ask Norges Bank and the council on ethics for advice," finance minister Siv Jensen said.

Fund manager Norges Bank and the Norwegian council are to assess how the new criterion might "most appropriately be defined and operationalised". Norges Bank is also to undertake a risk-based review of portfolio companies whose involvement in coal extraction, coal-fired power generation or coal-based energy conversion represents a significant part of their business.

"There is broad political consensus regarding the fund's investments — that good long-term returns are dependent on sustainable development in economic, environmental and social terms," the committee text said. "The purpose of the ethically motivated criteria should still be to reduce the risk of the fund investing in companies that are contributing to or are responsible for gross violations of ethical norms."

A new behaviour-based criterion will also be included whereby companies that emit unacceptable levels of greenhouse gas (GHG) emissions will be excluded from the fund. "This could pave the way for cases against any large company — including oil companies — which arguably contributes unacceptably to climate change, even if they fall outside the 30pc criterion," Greenpeace Norway's chief, Truls Gulowsen, said.

The ethics council will firstly be tasked with working out the practical implementation of this behaviour-based criterion. "It is an important tool to keep up the pressure on the fossil industry, but it needs to be tested," Gulowsen said.

It was the climate that provided the strongest argument in securing the parliamentary majority in support of the divestment decision, Solberg said. Different tools are needed to keep the global rise in temperatures to a target of 2°C, including a financial instrument, he said.

"I hope it echoes through the world that one of the world's biggest pension funds has taken this step," Solberg said. He expressed hope that it could used by other pension funds to join the divestment movement.