Norway’s oil fund drops coal-related investments

Apr 21, 2016
<p>Norges Bank to withdraw from 52 companies citing reliance on coal power</p>

Norway’s sovereign wealth fund (SWF) will withdraw its investments from 52 companies for being too reliant on coal as part of the bank’s continuing attempts to fight climate change through its investment decisions.

A number of high-profile energy companies, including the UK’s Drax, FirstEnergy in the US and Tata Power in India, are to be excluded from Norges’ Government Pension Fund Global, estimated to be worth $860 bn. Another exclusion is US coal miner Peabody Energy, which earlier this week filed for bankruptcy protection.

The exclusions are based on new rules brought in by the Norwegian government in February, which affect companies that base at least 30 percent of their activities or revenues on coal.

Norges Bank says it gave each of the 52 companies identified as being too reliant on coal an opportunity to reply to the news before divesting. Of those companies, only five responded, the bank says in a statement, adding that this round of exclusions is based only on the first wave of assessments for Norges’ current holdings.

‘Further exclusions will follow in 2016,’ notes the bank’s website, though it also confirms that companies that drop below the 30 percent coal-use figure will remain viable parts of Norges’ portfolio.

Speaking to Reuters this week, Martin Norman, climate and energy adviser at environmental group Greenpeace, welcomed the exclusions and described the move as probably the largest-ever single divestment from coal. ‘They are setting a new standard when it comes to transparency,’ he said, adding that Greenpeace data suggests Norges will have to drop roughly NOK80 bn ($9.7 bn) of coal stocks.

The announcement comes alongside the news the Norwegian oil fund’s similar decision to drop tobacco companies has cost it $1.9 bn in lost profits over the past decade. According to data on the Norges Bank website, a tobacco divestment policy that saw it remove all money held in the industry in 2010 dented its returns from 2006 to 2015 by 0.68 percent. Over that period, the SWF made total accumulated returns of $288 bn.

Similar moves to divest from tobacco were also made by large institutions in the US and Europe around the same time. Calstrs, the teachers’ public pension fund, has estimated that it underperformed standard indices by 1.53 percent following a move away from tobacco in 2010 and away from firearms in 2013. PFZW, one of Europe’s largest pension funds with $185 bn of assets, also dropped tobacco producers in 2013.

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