MAC: Mines and Communities

Norway's hastened flight from coal

Published by MAC on 2019-05-11
Source: Reuters, Thomson Reuters (2019-05-07)

Our readers won't be surprised that the Norwegian government has now adopted one of the most radical policies against fossil fuel investment anywhere in the world.

What may raise some eyebrows is that the initiative comes from a centre-right Conservative Party, after many years of the country being ruled by left-wingers (see the second article below).

Norway's fifty-year old public sector workers' pension fund, KLP. has  stated it will no longer invest in thermal coal-related activies, beyond a 5% threshold.

In addition, KLP has sold its stake in Vale, due to the disastrous impacts of the collapse of the Bramadinho dam early this year.

 

 

Norway's KLP fund cuts coal exposure

Reuters

7 May 2019

* KLP also sold Vale stake after dam disaster

* Says minimal threshold is to allow for lack of information

LONDON - Norwegian pension fund manager KLP has sold 3.2 billion crowns ($366 million) of bond and equity exposure in 46 companies, including leading miners BHP and Anglo American, after a decision to withdraw from thermal coal.

Fund managers have become increasingly reluctant to risk investing in companies linked to fossil fuels or other activities regarded as unsustainable as popular pressure mounts for action to limit environmental damage.

KLP also said it sold its 97 million crown stake in Brazilian miner Vale last month because of concerns over a dam disaster that killed an estimated 300 people in January.

On Tuesday KLP said it would no longer invest in any company that obtains more than 5 percent of revenue from coal-based activities, adding that the minimal threshold is because it is difficult to get accurate information on all revenue below that level.

“Coal cannot and should not be part of energy supply in the future,” Chief Executive Sverre Thornes said in a statement.

KLP, which manages about 600 billion crowns in total, has progressively cut its coal exposure and says its stance now is among the strictest of any passive fund.

Vale, Anglo American and BHP did not have any immediate comment.

BHP is the world’s biggest shipper of coking coal, used for steelmaking, but also has some thermal coal.

KLP said it had previously divested from Glencore, the world’s biggest shipper of seaborne coal, which this year said it has capped its coal capacity.

BNP Paribas Asset Management said in March that it would stop investing in companies that obtain more than 10 percent of their revenue from thermal coal. ($1 = 8.7356 Norwegian crowns

Reporting by Barbara Lewis. Additional reporting by Christian Plumb. Editing by David Goodman

 


 
OPINION: Norway is using its wealth to lead an exodus from coal

by Lene Westgaard-Halle | Norway Conservative Party

Thomson Reuters

7 May 2019r

* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.

A law set to pass in June will see the Norwegian Oil Fund divest more from coal, and invest over $20 billion in renewable energy

Norway’s proposal to divest billions more from coal, and instead use the world’s largest sovereign wealth fund to invest in solar and wind is a sign of things to come - and may just be what catapults the global clean energy market into sky rocketing growth.

The proposal is set to pass into law in June and follows supportive policy agreed by the ruling Conservative Party last year. It will see the Norwegian Oil Fund invest up to 2 percent of its global trillion-dollar portfolio into solar, wind and other renewable projects – a sum of over $20 billion.

From a conservative perspective, this re-calibration of the Oil Fund is both a necessary response to climate change, and a very shrewd financial decision. Those who fear these developments should take this as an opportunity to sit up and see which way the trend, and money, is flowing.

There are many reasons why this decision is financially sound.

There is already a thriving multi-trillion dollar renewables infrastructure market, which is expanding steadily. Renewables are becoming cost-effective. Dramatically falling costs, rapid technological advances and sustained levels of investment mean wind and solar promise to deliver the Norwegian people the same steady, high returns enjoyed by many other funds.

Conversely, coal is sinking - a toxic investment being propped up not because it has a future but simply so those heavily invested can eke out the last dollar before jumping ship.

And they are jumping.

Since 2013, according to the global energy think-tank, IEEFA, over 100 financial institutions have placed restrictions on coal lending.

The U.S. is leading the way in cancelling coal power plants, and even Japan has backflipped on its aggressive pro new-coal approach, choosing instead to halt both new construction and upgrades to existing plants thanks to policy introductions from Environment Minister Yoshiaki Harada. South Korea – once touted by coal executives as a major future market - has stopped issuing permits for new plants.

Bloomberg and other media report that the Norwegian government’s new proposed criterion will lead to the divestment of some $4.2 billion from well-known names including RWE, Glencore, BHP Billiton, Anglo America, South32, Sumitomo and Uniper. Norway’s 2015 coal divestment policy is now being tightened to push out the remaining large miners and power company giants which have been too slow to move away from coal.

And it’s not just coal.

OIL NEXT?

Mark Lewis of BNP Paribas Asset Management (which manages $450 billion) has warned that renewables will inexorably corrode the profits of the oil-and-gas industry.

PR and lobbying won’t avoid the issue and the promises of carbon ‘capture and storage’ have proven to be challenging. Only a real shift out of fossil fuels and into solar and wind will save businesses from financial ruin.

For now, the Norwegian Oil Fund has decided to maintain some of its overseas investments in oil and gas giants such as Shell and Exxon. Particularly given Norway’s double exposure to these declining markets through our state-owned oil giant, Equinor, these holdings are becoming a milestone around our collective necks, both environmentally and financially.

The Norges Bank has already tolled the bell, warning that the Oil Fund would be almost $40 billion better off if it didn’t own oil and gas shares overseas. It seems only a matter of time before this too is divested.

The irrefutable truth is that climate change is shaping our global economy, and renewables are our financial future. Norway is starting to get ahead of the curve and the faster it moves, the greater the rewards it will reap. Rather than cling on to stranded fossil fuel assets, our country has to use its wealth to propel us into and shape our future; a future that will bring sustainable prosperity, both financially and socially.

It is a step that will change the global energy market forever. Investors and governments that value high capital returns, and their future, would be wise to follow suit.
Themes

Energy
Climate Politics
Climate Finance

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OPINION: Norway is using its wealth to lead an exodus from coal
by Lene Westgaard-Halle | Norway Conservative Party
Tuesday, 7 May 2019 09:59 GMT
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* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.
A law set to pass in June will see the Norwegian Oil Fund divest more from coal, and invest over $20 billion in renewable energy

Norway’s proposal to divest billions more from coal, and instead use the world’s largest sovereign wealth fund to invest in solar and wind is a sign of things to come - and may just be what catapults the global clean energy market into sky rocketing growth.

The proposal is set to pass into law in June and follows supportive policy agreed by the ruling Conservative Party last year. It will see the Norwegian Oil Fund invest up to 2 percent of its global trillion-dollar portfolio into solar, wind and other renewable projects – a sum of over $20 billion.

From a conservative perspective, this re-calibration of the Oil Fund is both a necessary response to climate change, and a very shrewd financial decision. Those who fear these developments should take this as an opportunity to sit up and see which way the trend, and money, is flowing.

There are many reasons why this decision is financially sound.

There is already a thriving multi-trillion dollar renewables infrastructure market, which is expanding steadily. Renewables are becoming cost-effective. Dramatically falling costs, rapid technological advances and sustained levels of investment mean wind and solar promise to deliver the Norwegian people the same steady, high returns enjoyed by many other funds.

Conversely, coal is sinking - a toxic investment being propped up not because it has a future but simply so those heavily invested can eke out the last dollar before jumping ship.

And they are jumping.

Since 2013, according to the global energy think-tank, IEEFA, over 100 financial institutions have placed restrictions on coal lending.

The U.S. is leading the way in cancelling coal power plants, and even Japan has backflipped on its aggressive pro new-coal approach, choosing instead to halt both new construction and upgrades to existing plants thanks to policy introductions from Environment Minister Yoshiaki Harada. South Korea – once touted by coal executives as a major future market - has stopped issuing permits for new plants.

Bloomberg and other media report that the Norwegian government’s new proposed criterion will lead to the divestment of some $4.2 billion from well-known names including RWE, Glencore, BHP Billiton, Anglo America, South32, Sumitomo and Uniper. Norway’s 2015 coal divestment policy is now being tightened to push out the remaining large miners and power company giants which have been too slow to move away from coal.

And it’s not just coal.

OIL NEXT?

Mark Lewis of BNP Paribas Asset Management (which manages $450 billion) has warned that renewables will inexorably corrode the profits of the oil-and-gas industry.

PR and lobbying won’t avoid the issue and the promises of carbon ‘capture and storage’ have proven to be challenging. Only a real shift out of fossil fuels and into solar and wind will save businesses from financial ruin.

For now, the Norwegian Oil Fund has decided to maintain some of its overseas investments in oil and gas giants such as Shell and Exxon. Particularly given Norway’s double exposure to these declining markets through our state-owned oil giant, Equinor, these holdings are becoming a milestone around our collective necks, both environmentally and financially.

The Norges Bank has already tolled the bell, warning that the Oil Fund would be almost $40 billion better off if it didn’t own oil and gas shares overseas. It seems only a matter of time before this too is divested.

The irrefutable truth is that climate change is shaping our global economy, and renewables are our financial future. Norway is starting to get ahead of the curve and the faster it moves, the greater the rewards it will reap. Rather than cling on to stranded fossil fuel assets, our country has to use its wealth to propel us into and shape our future; a future that will bring sustainable prosperity, both financially and socially.

It is a step that will change the global energy market forever. Investors and governments that value high capital returns, and their future, would be wise to follow suit.
Themes

Energy
Climate Politics
Climate Finance

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Email

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