Biggest Wealth Fund Seen Dashing Hopes of Green Energy Activists

  • Labor Party says open to discussing environmental mandates
  • Labor willing to look at separating fund from central bank

Environmental activists hoping to see a big push by Norway’s $890 billion sovereign wealth fund into emerging market renewable energy and infrastructure projects are likely to be disappointed, according to a key Norwegian lawmaker. 

The government and parliament are set to again review later this year whether to allow the fund to expand into infrastructure. But the conservative nature of the oversight framework will likely mean that it won’t get too adventurous in where it puts its cash even if it gains more freedom, which the fund has also indicated.

“The signals are clear that we won’t start with African solar energy if we open up to infrastructure,” Marianne Marthinsen, the Labor Party’s spokeswoman on fiscal policy and member of the finance committee, said in an interview. “The NGO community is very keen on opening for unlisted and infrastructure so it’s probably not huge investments in German airports that it envisages, but that’s what can be the result -- at least to start.”

Environmental Mandate

The Labor Party, the biggest opposition group, is open to discussing whether to increase the so-called environmental mandates for the fund, currently at 30 billion to 60 billion kroner. The fund has recently dumped most of its coal stocks as well after a push by parliament.

But she cautioned that parliament shouldn’t get too involved in deciding on investments for the funds on financial grounds. “In a way then I might as well start having an opinion on developments in the London real estate market,” she said.

The fund has been lobbying to expand its investment mandate beyond stocks and bonds, and proposed in December 2015 to invest as much as 5 percent in infrastructure as it seeks to boost returns. It said in December that a move into unlisted infrastructure would be regulated the same way as its real estate investments and restricted to developed nations. The fund was freed in 2010 to invest in real estate and it has since built a $20 billion portfolio of high-profile properties from Paris to London and New York. 

Marthinsen said that there needs to be a thorough review of oversight and control mechanisms before the fund can invest in unlisted infrastructure because there would be “large political risks” and many more cases related to corruption.

Labor is also open to looking at whether to move the fund out of the central bank, where it was placed in part to limit political interference. Concerns have been raised that the fund has grown too big and complex for the central bank’s board to handle. A special deputy governor was brought in at the start of last year to boost oversight. In April, an advisory panel is expected to issue a recommendation on whether to further separate the fund and create an independent oversight board.

"It was a step in the right direction when we got a special deputy governor" Marthinsen said. "The executive board of the central bank should spend a lot of time discussing monetary policy -- they need to focus on that."

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