The biggest sovereign wealth fund’s decision to ask top mining companies about the possibility of spinning off coal assets underscores increasing pressure on producers of the fossil fuel to prepare for a low-carbon future.
Norges Bank Investment Management, managing Norway’s $900 billion fund, wrote to the biggest miners and “raised the question of spinning off coal mining,” Chief Executive Officer Yngve Slyngstad told Norway’s parliament Monday. It “requested plans for transition to low-carbon energy systems,” he said.
The fund is a top-ten shareholder of some of the biggest mining companies including BHP Billiton Ltd., Glencore Plc and Anglo American Plc. In the letter the wealth fund asked miners, which it didn’t name, to identify costs involved in separating coal from other operations and the “timeline for any such separation,” according to the presentation to parliament.
Slyngstad told reporters in Oslo after the parliamentary hearing that he believed most major companies in the industry were speaking with several investors who had similar questions.
Glencore’s billionaire CEO Ivan Glasenberg acknowledged growing concern among its stakeholders last week, while adding he expects efforts to curb climate change by keeping fossil-fuel reserves in the ground to fail because of world energy demand.
Some “are concerned about the future of our fossil fuel reserves; in particular that they may become stranded assets,” he wrote in the Swiss company’s annual sustainability report. “We do not believe that the global energy reality will economically support carbon measures that would prevent us from fully utilizing our fossil fuel reserves.”
His comments were a snub to a growing campaign that wants investors to shun fossil fuels that cause climate change. The world can’t safely extract all of its oil and coal reserves, meaning some will end up as worthless stranded assets, campaigners say. Investors from Stanford University to the British Medical Association plan to cut fossil-fuel holdings.
Norway’s wealth fund is the sixth-largest owner of Glencore with 1.9 percent of the top exporter of coal used in power stations. It’s the fifth-biggest holder of London-traded shares of the world’s largest mining company BHP and has 2.8 percent of Anglo American, according to data compiled by Bloomberg.
The fund is among institutions in Norway, controlling a combined $1.3 trillion of investments, that have also been curbing support for U.S. fossil-fuel companies led by oil producer EOG Resources Inc. and coal miner Peabody Energy Corp. Since 2011, Norges Bank Investment has reduced holdings in coal producers to just eight companies by last quarter from 62.
The fund’s investment in the industry has plummeted to about $65 million from $650 million, according to the presentation to parliament. Coal producers represent 0.01 percent of its equity portfolio. It’s still invested in companies focused on production of metallurgical coal used in steel.
“The scientific basis for climate change is now widely accepted,” the oil fund wrote in the letter to mining companies dated Feb. 4, according to its presentation to parliament.
“We believe the identification of future scenarios for climate regulation, carbon pricing, and environmental conditions is a useful tool to support strategic decision-making for companies and to stress-test the sustainability of operations under different market environments.”
Norway’s minority Conservative-led government said last month it didn’t favor banning the fund from investing in producers of coal or other fossil fuels, opting instead for new criteria allowing it to divest from companies contributing to “unacceptable” levels of greenhouse-gas emissions.
Norway’s opposition including the biggest party, Labor, is still seeking to build a majority in parliament for curbs on investments in companies that produce or use coal for a significant part of their operations.
The Church of England last week joined about 200 groups around the world that have pledged to scale back investments in polluting industries. The Rockefeller Brothers Fund, built with profit from Standard Oil Co., said last year it would sell coal and Canadian tar-sand investments.
Anglo American, BHP and Glencore declined to comment.