World’s Biggest Wealth Fund Faces Wider Ban on Coal Investments

  • Most Norwegian lawmakers back broader restrictions for fund
  • Greens see path open to weaning Norway off oil dependence

Norway’s sovereign wealth fund may be forced to step up divestments of coal companies and could face a wider ban on investments in other fossil fuels such as oil sands.

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A majority of parties in Norway’s parliament want to tighten guidelines that prevent the $850 billion fund from owning companies that base more than 30 percent of their activities or revenues on thermal coal, according to a group lawmakers including opposition Labor, Norway’s biggest party. Adjustments could come as soon as next year, said Torstein Tvedt Solberg, who represents Labor on the Finance Committee.

“We’re not finished, it’s not ‘job done,’” he said in an interview at his office in Oslo. “We see that there are weaknesses and a potential for improvement. Our ambition is to get the fund out of coal, which means we must close all loopholes.”

Tvedt Solberg’s party, as well as the Greens, the Socialist Left, the Liberals and the Christian Democrats, which together represent a majority, want to include companies whose coal production or consumption is large on a global scale even if it makes up less than 30 percent of their business. They also want to make sure no subsidiaries fall through the cracks, and, possibly, widen the ban to activities such as coal transportation or oil sands production.

The world’s biggest wealth fund has excluded more than 50 companies after the new criteria were implemented in February. It plans to announce more divestments later this year. When the ban was agreed on in 2015, the fund estimated it would need to sell holdings in about 120 companies valued at about 55 billion kroner. 

The fund is one of the biggest investors to restrict coal-related holdings as managers from Allianz SE to the Church of England seek to reduce their carbon footprint amid escalating international efforts to limit global warming.

Stricter rules could force Norway’s fund to exit some of the world’s biggest producers of thermal coal such as Glencore Plc and BHP Billiton. Those companies weren’t culled in the first round because more than 70 percent of their business comes from other commodities or activities such as trading. Tighter rules could also exclude rail-road developers or dry-bulk shippers, as well as subsidiaries set up solely for funding purposes such as selling bonds.

At the same time, a harder line on coal and possibly other fuels would deepen the contradiction between Norway’s ambition to keep its investments green while it remains western Europe’s biggest oil and gas producer. The country even produces coal on the remote Arctic island of Svalbard, keeping mines alive for geopolitical strategic reasons.

That dissonance isn’t a double standard because Norway needs to avoid exposure to fossils fuels as it reinvests its petroleum wealth, said Terje Breivik, a Liberal lawmaker, and Hans Olav Syversen, a member of the Christian Democrats who chairs the Finance Committee. Those two parties support the minority Conservative-led government, but have joined forces with the Labor-led opposition in the past.

The Greens, however, view the increasingly apparent contradictions as serving their agenda of weaning Norway completely off fossil fuels.

“Parliament has set off on a slippery slope and there’s no way back,” said Rasmus Hansson, the Greens’ only parliamentarian. “There’s no longer any logic in saying yes to some carbon and no to other carbon.”

Svein Flaatten, an MP for the ruling Conservative Party, said the current ban must be allowed to be fully implemented before any more changes are made.

“We’ve said before that we expect the coal criterion for exclusions to evolve over time,” said Marthe Skaar, a spokeswoman for Norges Bank Investment Management, which runs the fund. “We will of course relate to any changes.”

Tvedt Solberg said they’re satisfied also with the financial implications of the ban on coal.

“We’ve made money by not being so heavily invested in coal,” he said. “As opposed to tobacco, our divestment from coal is a success when you look at the bottom line. The companies we’ve exited have plunged in stock value.”

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