Norway fund RE reforms disappoint

Norway’s government has disappointed green groups by coming up with proposals for using the country’s $790bn oil fund that fall well short of expectations over increased renewables investments.

Although the government mandated the country’s sovereign wealth fund to invest more in environmentally-related stocks, critics say the new government directive does little to increase the actual impact of those investments with regards to renewable energy.

Norway announced that stock investments made by the fund will grow from $5bn to about $8.4bn under the new mandate.

Renewable energy advocates had hoped that the fund would also bring the fund to bear directly on major clean-energy infrastructure projects.

But finance Minister Siv Jensen is reported as saying the oil fund – the world’s biggest sovereign wealth fund – is not ready to invest in new types of assets, and needs a year of study whether to buy into infrastructure or unlisted assets.

Jensen says the fund needed to see how its small but growing real estate portfolio functions and what the risk of more active management would be.

“We are in a learning process on building up in real estate...and that’s the portfolio we’re actually discussing with broadening in the (unlisted) sector,” Reuters reports the minister as saying.

Nina Jensen, chief executive of WWF-Norway, said it had expected the government to deliver something big on the sovereign wealth fund, particularly in light of its failure to act elsewhere on climate change.

“The government has raised ambition on the fund through its platform and the prime minister’s statements. We and others supported that level of ambition but now we see it was an empty promise.”

“The government announcement came amid expectations Norway would extend the existing mandate from stocks to include infrastructure, in order to allow for the fund to directly finance projects like solar and wind farms,” says Samantha Smith, leader of WWF’s global climate & energy initiative.

“This was Norway’s chance to deliver on climate change, the same week that world scientists have released their report on intense impacts of climate change. Norway knows what it has to do, and how to do it, but the announcement doesn’t reflect that,” she adds

Smith says while it was hoped Norway would direct more money from the state fund towards renewables, the government’s move falls far short of expectations. A commitment of up to 5% of the fund towards renewables could have been a scale large enough to cause ripple effects on renewables investment around the world.

Norway’s sovereign wealth fund invests money from the country’s significant oil and gas revenues. The fund has grown enormously over the years, with only a small percentage actually being spent.

The government has also appointed a panel of experts to assess future strategy for the fund to combat climate change, including potential divestment of about $80bn worth of coal, oil and gas shares.

The Storting (Norwegian parliament) is expected to decide in early 2015 whether the fund should sell its interests in coal and oil companies, or continue as an owner and put pressure on the companies to cut their carbon emissions.

Around 10% of the oil fund's assets are invested in coal, oil and gas companies.