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Norway Oil Fund Sheds More Coal Assets

Norway’s sovereign-wealth fund, the world’s biggest, informed parliament on Monday it has exited most of its holdings in pure-play coal mining companies, as lawmakers of the Scandinavian nation debate whether to restrict or even ban it from investing in certain fossil-fuel industries.

Norges Bank Investment Management, which runs the fund under the supervision of Norway’s central bank, said it held 500 million Norwegian kroner ($65.79 million) in pure-play coal mining companies at the end of the first quarter, roughly one fifth of the 2.6 billion kroner it held as of late 2013.

Although the nearly $900-billion fund built its might and keeps expanding on the back of Norway’s oil and natural-gas exports, NBIM is under growing pressure from parliament to dust off its books from investments in some polluting businesses.

“It’s positive that the fund regards coal assets as risky and has reduced its coal holdings, but we still think the parliament should vote to exclude some of the most coal-exposed companies,” said Liberal Left lawmaker Terje Breivik, part of a six-party alliance that dominates the assembly.

After the disposals, Norway’s sovereign fund said it still held 109 billion kroner in utilities and 31 billion kroner in general mining companies, many of which have coal operations.

The debate in Norway is closely watched for both financial and environmental reasons.

Some analysts recommend easing out of coal and other fossil-fuel industries ahead of a possible international accord aimed at limiting carbon emissions. A deal, they say, could send the value of those energy companies in a tail spin, and hit the financial performance of funds such as NBIM.

Meantime, environmental activists are lobbying funds to enshrine the change in asset-management policy into their bylaws to ensure they don’t again plow money in coal, for instance, even if it becomes a bright investment prospect in the future.

In the U.S., activists have been pressuring pensions, university endowments and other institutional investors to shed their coal, oil and gas investments.

Some of the wealthiest schools, including Harvard University, have thus far refrained from dumping companies tied to fossil fuels as they weigh pressures to boost returns.

But Stanford University agreed to a partial withdrawal, and in recent months, the San Francisco Employees’ Retirement System, Syracuse University and the city of Minneapolis have taken steps toward divesting at least a portion of their fossil-fuel investments, according to 350.org, an advocacy group founded by author and environmentalist Bill McKibben that is pushing for fossil-fuel pullbacks across the U.S.

The California State Teachers Retirement System, the second-largest public pension in the U.S., also decided last month to have its staff and consultants study the divestment of coal companies.

In Norway, NBIM supervisors warned that introducing too many restrictions could affect the fund’s ability to generate stable returns over time. So far, the fund is banned from investing in companies that produce tobacco, land mines, cluster bombs and nuclear weapons.

“We’re not on the edge of the cliff yet, and I won’t say exactly where the edge is,” central bank Governor Øystein Olsen told reporters after a session of the parliament’s finance committee on the issue.

In the last year, the fund has outlined new and tougher expectations to companies on climate change issues, and divested from more than 100 companies with unsustainable business models, including a number of coal producers, NBIM chief executive Yngve Slyngstad told the same parliament hearing.

The fund has also asked mining conglomerates to consider demerging coal assets, and asked utilities for specific plans to phase out the use of coal in power generation, Mr. Slyngstad said, adding that this dialogue could last for years.

Norway’s right-wing government has advised against a move to exclude companies based on coal as a product, proposing instead conduct-based exclusions of companies that contribute to climate change to an unacceptable degree, on a company-by-company basis. But the government doesn’t have a majority in parliament and may not be able to prevent the six-party alliance from narrowing NBIM’s investment scope.

source: http://www.wsj.com