Key Takeaways
- • Norway's parliament passed legislation for the Government Pension Fund Global, the world's largest sovereign wealth fund managing about $1tn, to divest more than $13bn of fossil fuel holdings, the largest fossil fuel divestment to date according to The Guardian.
- • The divestment covers an estimated $6bn in coal investments across eight coal companies, which could include shares in Anglo American, Glencore and RWE, and about $7bn in oil exploration and production stakes across an estimated 150 oil producers.
- • The fund will gain a legal mandate to invest directly in renewable energy projects, with authority to deploy up to $20bn, beginning with wind and solar projects in developed markets.
- • The fund will retain stakes in companies such as BP and Shell that are shifting toward clean energy, while excluding London-listed North Sea producers Premier Oil and Tullow Oil.
- • The fund has not yet named the companies it will drop; it is expected to disclose divestments in its official reporting early next year.
Summary
Norway's parliament voted on Wednesday to put into law a plan for the Government Pension Fund Global, which manages $1tn (£786bn) of Norway's assets and is built on the country's legacy oil earnings, to dump more than $13bn of investments in fossil fuels. According to The Guardian, the move is the largest fossil fuel divestment to date. The plan requires the fund to exit investments in eight coal companies and an estimated 150 oil producers. Coal holdings worth an estimated $6bn could include shares in the mining companies Anglo American and Glencore and the German energy firm RWE. The fund will also scrap oil exploration and production investments worth $7bn.
The fund will retain stakes in oil companies that are limiting their fossil fuel exposure by investing in clean energy technologies, including BP and Shell, but will rule out London-listed North Sea companies including Premier Oil and Tullow Oil. It will also step back from any company that generates more than 10GW of electricity from coal or mines more than 20m tonnes of thermal coal a year. The fund has not named the companies it will drop and is expected to reveal its divestments in official reporting early next year.
The legislation also gives the fund, for the first time, a legal mandate to invest directly in renewable energy projects rather than only listed energy companies, with authority to invest up to $20bn, beginning with wind and solar projects in developed markets. Mark Lewis, head of sustainability research at BNP Paribas, said the laws would allow Norway to "join the vanguard of giant solar and wind power investors." Norway's finance ministry estimates the global renewable energy infrastructure market will grow almost 50% to $4.2tn by 2030.
Stephanie Pfeifer, head of the Institutional Investors Group on Climate Change, whose members hold assets worth $26tn, said the move "sends a clear signal to the rest of the market." She noted that institutions with $8tn in assets had already divested from coal, and investors with $11tn under management were calling for companies to end coal use by 2030 at the latest. The fund's oil position has long been flagged by its own managers as a risk: it has warned the government that failing to sever ties with high-carbon companies could erode the pension fund if those holdings lose value in a lower-carbon world. Bank of England governor Mark Carney and Banque de France governor François Villeroy de Galhau have also raised the financial risks facing fossil fuel investors.
The fund will retain stakes in oil companies that are limiting their fossil fuel exposure by investing in clean energy technologies, including BP and Shell, but will rule out London-listed North Sea companies including Premier Oil and Tullow Oil. It will also step back from any company that generates more than 10GW of electricity from coal or mines more than 20m tonnes of thermal coal a year. The fund has not named the companies it will drop and is expected to reveal its divestments in official reporting early next year.
The legislation also gives the fund, for the first time, a legal mandate to invest directly in renewable energy projects rather than only listed energy companies, with authority to invest up to $20bn, beginning with wind and solar projects in developed markets. Mark Lewis, head of sustainability research at BNP Paribas, said the laws would allow Norway to "join the vanguard of giant solar and wind power investors." Norway's finance ministry estimates the global renewable energy infrastructure market will grow almost 50% to $4.2tn by 2030.
Stephanie Pfeifer, head of the Institutional Investors Group on Climate Change, whose members hold assets worth $26tn, said the move "sends a clear signal to the rest of the market." She noted that institutions with $8tn in assets had already divested from coal, and investors with $11tn under management were calling for companies to end coal use by 2030 at the latest. The fund's oil position has long been flagged by its own managers as a risk: it has warned the government that failing to sever ties with high-carbon companies could erode the pension fund if those holdings lose value in a lower-carbon world. Bank of England governor Mark Carney and Banque de France governor François Villeroy de Galhau have also raised the financial risks facing fossil fuel investors.
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