The Norwegian Parliament has approved the decision of the Norwegian Pension Fund (also known as the Petroleum Fund and considered as the world’s largest sovereign fund) to divest oil and gas companies, worth 11,000 million euros, to turn to renewables.
This decision is based on the permanent decline in oil prices, the main source of income for the Nordic country, and aims to “reduce the vulnerability of wealth and diversify,” according to sources from the Norwegian Ministry of Finance.
The sale was unanimously supported by all the representatives of the Norwegian Parliament who voted yesterday. Although the exact amount that the fund will use to invest in renewables has not been set, it is estimated that it is authorized to disburse up to 17,000 million euros up to 2% of its capital in wind and solar projects in mature markets, one figure per over the 11,000 million he would get from the sale of his shares in fossil fuel companies.
According to sources in the sector, the measure will become the largest divestment in fossil fuels and the largest investment in renewable energy made to date. The fund is a giant that owns an average of 1.3% of all publicly-traded companies in the world, which means that the decision will have an inevitable impact on international markets.
In any case, it is a transcendental change in the international oil, gas and coal market. Currently, the Norwegian fund, managed by the state-owned Norges Bank Investment Management, has invested around 32,000 million euros in oil groups, mainly in Shell, BP, Total, Exxon and, at a greater distance, the Spanish Repsol, in which controls around 1.5% of the capital.
The Nordic fund has also received the mandate to withdraw from coal companies, including RWE and Glencore, which will leave their investment portfolio based on the new ethical exclusion criteria that the state agency manages.
Norway bases its economy on the production and export of oil and gas. Therefore, the commitment reached by its state fund to divest in fossil fuel companies has been described as historic. It differs from other sovereign wealth funds, which have only focused on disinvesting in coal.
The Nordic country understands that the growing climate risk also forces them to part with these investments. In addition to seeking diversification in the face of the permanent fall in the price of oil, it shows that smart money is in renewable energy. Investing billions in solar and wind projects is a sample of what will come.
The claim of the Norwegian fund opens an opportunity of great interest to Spain since the Spanish Government’s program to promote renewable energies included in the National Integrated Energy and Climate Plan becomes a claim to channel investments to Spain.
One of the main tasks of the Government of Sanchez is precisely to clear the ghost that led international investors to move away from Spain and, in many cases, denounce it for the paralysis of the subsidies of the old renewable plan.
According to the analysis commissioned by the Norwegian Ministry of Finance, it is estimated that the value of the global renewable energy infrastructure market will grow by almost 50%, from 2,900 million dollars in 2017 to 4,200 in 2030, mainly driven by new capacity additions of solar and wind energy. The measure arribada yesterday will suppose a great impulse for these investments.
The Global Pension Fund of the Norwegian Government was created in 1990 as a deposit of the benefits obtained from the exploitation of oil and gas. Its investment power has made it the largest sovereign fund in the world ahead of even those in the Arab countries – and one of the world’s leading investors.
Its assets exceed nine trillion Norwegian kronor more than 921,000 million euros with almost 70% maximum legally allowed inequities. In the first quarter of this year, it obtained a record profit of almost 75,500 million euros.
The objective of the fund is to prop up a reserve of money that guarantees pensions and the welfare state of the country when the fossil fuel runs out and stops nourishing the state coffers. It is also a world leader in transparency and ethical investment.
Apart from the new legal limitation introduced yesterday, more justified for economic reasons than ethical, it has been years since the fund excludes companies related to the manufacture of weapons, which violate labor rights or pollute.
For this, it has an ethical committee that monitors the more than 9,000 firms that have actions and carries out independent investigations if it has doubts about any of them. In Spain, its investments reach 85 companies, many of them from the Ibex, for a value of more than 9,500 million euros, not counting what they have in public debt and other fixed-income investments.