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Norway’s oil fund may inject $40bn in renewables

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Norway Prime Minister Erna Solberg has confirmed plans to increase the exposure of its $920 billion sovereign wealth fund – the world’s largest – to renewable energy, part of its stated plans to use its vast wealth to combat climate change.

Norway currently invests only a fraction of its sovereign wealth fund (built up from mostly oil revenues) to green investment. Solberg says this will be expanded, but she will not say how much until April 4.

The government has already appointed independent experts to evaluate whether the fund should exit its coal, oil, and gas investments, which currently make up around 10 per cent of its value.

However, Solberg has not yet indicated whether she will support this.

In the past decade, the fund has already moved to exclude nuclear weapon producers and tobacco companies, as well as companies considered to do work that damages the environment or human rights.

The Government Pension Fund Global – established only in 1996 – owns 1.2% of the world’s listed stocks.

If it does, it could impact Australian firms. Its portfolio includes companies such as BHP Billiton, Woodside Petroleum and Whitehaven Coal, as well as the global oil majors.

In the past twelve months the World Bank, European Investment Bank and the European Bank for Reconstruction and Development have all committed to virtually end coal investments.

Norwegian private pension fund provider Storebrand has also divested from 29 coal and tar sands companies in the past year because of their obvious carbon exposure.

Green NGOs are delighted with the government move, hoping it adds fuel to their “divestment” initiatives which are putting pressue on leading funds managers to withdraw from certain fossil fuel investments.

They are hoping that the sovereign fund allocates around 5 per cent of its assets in infrastructure of renewable energy. That would equate to around $40 billion.

So far, the fund has spent up to $5 billion on projects deemed worthy. By the end of last year, those investments counted 166 companies, with returned 41 per cent in 2013.

“If done at scale, this will have global impact and redefine how we use money consistent with commitments to limit climate change,” said Nina Jensen, CEO of WWF-Norway.

“The pension fund is the largest state investor in the world. A solid renewable energy mandate will send a tremendously powerful signal and set the standard for other international investors.”

Heikki Holmas, an opposition lawmaker with the Socialist Left Party, said the oil fund is the “most important muscle we have”to affect international politics.

“It is rare that one government alone can bend the curve on climate change. Norway, through its sovereign wealth fund, can,” says Samantha Smith, Leader, WWF’s Global Climate & Energy Initiative. “WWF now looks to Norway’s leaders to commit to renewable energy investment at a scale that will make a global difference. This will be their legacy, and we are watching.”

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