A Primer on Norway’s Divestment from Coal

The following post comes from Sheri Kindel:

Norway’s recent decision to sell off coal investments from the world’s largest sovereign wealth fund is the biggest divestment from coal in history. Due to its size, this decision will likely cause other investors and governments to follow.

The Norwegian fund, called the Government Pension Fund Global (GPFG), was built on wealth from oil and gas reserves off the nation’s coast and served as a buffer for when its offshore wells ran dry. Many people, inside and outside the fund, refer to it as the “oil fund.”

On May 27, 2015, Norwegian politicians received 44,000 petition signatures for the GPFG to divest from fossil fuels. After parliament also issued a unanimous recommendation to divest on the same day, it wasn’t long before the fund announced its plan.

On June 5, 2015, Norway’s parliament endorsed the divestment from its $900bn sovereign wealth fund, affecting 122 companies across the world. Major U.S. utilities to be affected by this decision include American Electric Power Company Inc., Dominion Resources Inc., Duke Energy Corp., MidAmerican Energy Co., NRG Energy Inc., PLL Corp., Southern Co. and Xcel Energy Inc. According to a spokeswoman, the reasons for divesting include “long-established climate-change risk-management expectations.” While a climate-related investment strategy evolved in 2010, Norway recently joined a growing list of organizations that have pledged to give up some of their fossil fuel investments, including many cities, universities, and religious institutions.

The fund sets an example for others in shifting from polluting energy sources towards clean, renewable power. It will eliminate companies from its portfolio if more than 30% of their revenue-generating business activity involves coal, totaling $8.7bn of the fund’s current investments and 1.2% of the fund’s investment portfolio. The percentage is based either on the company’s activity or on the revenue that comes from coal, including mining companies and power companies that burn coal respectively. Therefore, this new plan will mostly impact mining and utilities.

Nonetheless, according to the head of Greenpeace Norway, Truls Gulowsen, “Norway is also still engaged in Arctic oil drilling, so while this is great news, there is still lots of work to do for Norway before it can brand itself as truly climate friendly.” For the United States as a whole, Global Climate Convergence recommended the transition away from unabated coal to be complete in 2030.

The new guidelines for the GPFG will take effect by January 1, 2016 and are a critical first step away from fossil fuels. At this time, the fund will begin divesting in its portfolio according to the percentage standard set out above. To achieve full divestment, Greenpeace, World Wildlife Fund, Future in Our Hands, 350.org, and Urgewald claim they will campaign for the GPFG to invest at least 5% of its value in renewable energy sources, specifically in emerging economies. In a joint statement, they asserted, “For Norway itself, our goal is a just transition out of oil and gas and into the green jobs of the future. We are rapidly approaching the time when no country can rely on fossil fuels for its economy or energy safety.”