Norway’s Government Pension Fund Global (GPFG) – the world’s richest sovereign wealth fund – has begun to divest from coal and other fossil fuels.
In May last year, the UN called on Norway to close its coal mines on the Arctic archipelago of Svalbard. Yet it seems as though the Nordic country has gone beyond that. At the end of 2014, the country had removed 32 coal mining company’s from the GPFG portfolio, citing the risk they face from regulatory action on climate change.
The country still has 5% of its US$850 billion wealth fund invested in fossil fuel companies. Yet mutterings from Oslo suggest that this could soon be cut, too.
In total, 114 companies have been dumped on “environmental and climate grounds” in the CPFG’s first report on responsible investing. The companies divested also include tar sands producers, cement makers and gold miners.
The country also committed itself to reducing emissions to 40% below 1990 levels by 2030 as its pledge to the international climate agreement set to be adopted at the end of the year at the UN summit in Paris.
The report comes on the back of recent findings in a study released by University College London (UCL) that 82% of the world’s coal reserves must stay in the ground if we are to stand a 50-50 chance of limiting global warming to 2°C and thereby avoid the potentially catastrophic effects of climate change such warming would bring.
“Our risk-based approach means that we exit sectors and areas where we see elevated levels of risk to our investments in the long term,” said Marthe Skaar, spokeswoman for GPFG, which has $40bn invested in fossil fuel companies. “Companies with particularly high greenhouse gas emissions may be exposed to risk from regulatory or other changes leading to a fall in demand.”
She said GPFG had divested from 22 companies because of their high carbon emissions: 14 coal miners, five tar sand producers, two cement companies and one coal-based electricity generator. In addition, 16 coal miners linked to deforestation in Indonesia and India were dumped, as were two US coal companies involved in mountain-top removal. The GPFG did not reveal the names of the companies or the value of the divestments.
“One of the largest global investment institutions is winding down its coal interests, as it is clear the business model for coal no longer works with western markets already in a death spiral, and signs of Chinese demand peaking,” said James Leaton, research director at the Carbon Tracker Initiative, which analyses the risk of fossil fuel assets being stranded.
A report by Goldman Sachs in January also called time on the use of coal for electricity generation: “Just as a worker celebrating their 65th birthday can settle into a more sedate lifestyle while they look back on past achievements, we argue that thermal coal has reached its retirement age.” Goldman Sachs downgraded its long-term price forecast for coal by 18%.
Edited from various sources by Sam Dodson