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Norway fund turns green, exits coal stocks

This is bad news for country's listed energy companies.

The $850-billion Norwegian Government Pension Fund, the world's largest sovereign wealth fund, has sold off almost all of its holdings of Indian coal and power stocks such as Coal India, Adani Power, GVK Infra and NTPC, Lanco Infratech, CESC and Monnet Ispat, among others, during 2014, citing risks posed to climate, according to the list of sovereign fund's holdings available with dna said.

The massive fund, which is minority shareholder in more than 9,000 companies across the globe, however has curiously made investment in Reliance Power during the year.

The sell-off has not been restricted to India alone as investments in global energy majors, 16 from the US including Alpha Natural Resources, Arch Coal, Consol Energy and Peabody, five Australian coal companies like Coal of Africa, Coalspur Mines and Whitehaven Coal, and also Exxaro of South Africa have been sold off.

"Many global clean energy and ethical fund follow investment policies of the Norway Pension Fund. In coming days we may see such funds getting rid of these investments also," said an analyst.

"In 2014, we divested from 49 companies after an assessment of environmental and social risks. We also stepped up our environment-related investments during the year. These are investments in areas such as renewable energy, energy efficiency and natural resource management, all subject to the same return requirements as the rest of the fund," said Yngve Slyngstad, chief executive of Norges Bank Investment Management, which manages the fund, said in the just released annual report of the fund.

Holdings in Indian companies divested fully are Adani Power, CESC, Coal India, GMR Infra, Gujarat Mineral Dev Corp, GVK Power, Jaiprakash Power, Lanco Infra, Monnet Ispat, NTPC, Reliance Infra, Tata Power and Torrent Power.

"We are a large international investor. It is therefore important for us to contribute to good business standards. Good standards are the best way of safeguarding our investments and assets in the longer term," he said.

The fund has written to management of Oil India Ltd to improve its reporting on climate change and identified five companies engaged in coal mining in India posing threat of deforestation, all of which were sold off.

"The objective is the highest possible return with an acceptable level of risk. Our work on responsible investment supports this objective," said Oystein Olsen, chairman of the Executive Board.

More sell-off would follow in holdings across the globe including possibly in Reliance Power as the fund continues to apply more stringent investment standards during 2015.

"Our work on responsible investment has evolved as the fund has grown. From January 1, Norges Bank has been assigned the task of taking decisions on the observation and exclusion of companies on the recommendation of the Council on Ethics. In such cases, the bank may also consider using other tools in its ownership work," the report said.

Going forward, the fund would focus on areas like children's rights, climate change and water management meaning it would invest in those companies whose policies are aligned with its objectives as it develops criteria guiding its global investments.

"There may be companies in specific sectors and countries that we choose not to invest in as a result of challenges related to the long-term profitability of business models or the external impacts of companies' activities," the report said.

source: http://www.dnaindia.com