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Norway’s Sovereign Wealth Fund To Mandate Investment In Renewable Energy

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"Norway’s Sovereign Wealth Fund To Mandate Investment In Renewable Energy"

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Norwegian Prime Minister Erna Solberg speaks during a new conference at Maximos Mansion in Athens on Tuesday, Dec. 3, 2013.

Norwegian Prime Minister Erna Solberg speaks during a news conference at Maximos Mansion in Athens on Tuesday, Dec. 3, 2013.

CREDIT: AP/Thanassis Stavrakis

On Thursday, Norway’s Prime Minister Erna Solberg announced plans to invest more of the nation’s $840 billion sovereign wealth fund in renewable energy in an effort to cut greenhouse gas emissions as the country struggles to meet its 2020 climate goals.

Norway’s sovereign wealth fund, built in large part on investment from the country’s oil and gas reserves, currently only invests a small fraction of money in green technology. The fund invests in listed equities, bonds and real estate, about 10 percent of which is made up of coal, oil and gas investments. The fund is also evaluating whether to exit these investments, as over the last 10 years nuclear weapons producers, companies in-breach of human rights, and tobacco companies have all been excluded.

“If the fund were allowed to expand its portfolio to include direct investments in assets like wind and solar plants and other infrastructure, this could potentially have a very significant impact on the total flow of capital to the renewable energy sector,” writes Terje Osmundsen of the Norwegian Climate Foundation.

Last week, Norway’s Environment Agency said that “powerful and quick” cuts would be necessary to meet the goal of reducing GHGs by 30 percent from 1990 levels by 2020. Bloomberg Businessweek reports that in 2012 the country emitted pollution equivalent to 52.7 million tons of carbon, up 4.6 percent from 1990.

“We’re working on better funding for new technologies, more restrictions in certain areas and we’ll outline our strategies later,” PM Solberg said after making the announcement. “After the previous government shut down the Mongstad CCS project, we now have to completely re-evaluate our process.”

The previous government, which Solberg took over for in October, abandoned plans to build a carbon capture and storage plant and refinery as costs spiraled out of control and delays persisted. However, the government is still pushing toward developing CCS technology, and to make good on the pledge to build a full-size plant by 2020.

“The government is currently developing a strategy for its policies on CCS and will provide an update on this process late this spring,” Tord Lien, Norway’s minister of petroleum and energy, told Reuters last month.

Lien didn’t have further details on how this would be achieved and Solberg said details for the sovereign wealth fund plan, such as how much money would be invested in renewable energy, won’t be released until early next month with the publication of a white paper. Established in 1996, Norway’s sovereign wealth fund owns an impressive 1.2 percent of the world’s listed stocks, giving the country surprising international muscle when it comes to multinational investments and impacts on global policies.

“This government takes environmental problems very seriously but we need to have a good look at how to address through positive investments in renewable energy in sustainable companies overseas through the fund,” Solberg said. “It’s important that Norway leads the way beyond our borders.”

The World Wildlife Fund has long advocated that Norway invest up to five percent of its fund in renewable energy infrastructure. “If done at scale, this will have global impact and redefine how we use money consistent with commitments to limit climate change”, Nina Jensen, CEO of WWF-Norway, wrote in a statement about the recent announcement. “A solid renewable energy mandate will send a tremendously powerful signal and set the standard for other international investors.”

According to Terje Osmundsen of the Norwegian Climate Foundation, “If the fund is allowed to invest up to 5 percent — equal to the target set for its property investments — of its total assets into renewable energy-related infrastructure, the fund could on average allocate in the range of $10 Billion USD per year to the green energy investment market from 2015 onwards. This is admittedly a modest amount compared to the $500 billion in yearly green energy investments which, according to the IEA, is required if we seek to limit global warming to 2 degrees. But it could still make Norway’s sovereign wealth fund one of the worlds largest, if not the largest, single clean energy investor.”

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