Does Norway’s sovereign wealth fund have a coal secret?
New research from the Nordic Center for Sustainable Finance says the fund has $18 bn invested in coal
In November 2021, Norway’s Prime Minister Gahr Støre addressed the UN climate change conference in Glasgow. He presented before the audience, a set of commitments. Key amongst them, was a vision for Norway’s sovereign wealth fund – the Norwegian Pension Fund Global.
“Our goal is to make it the leading fund in responsible investment and the management of climate risk”, proclaimed the Prime Minister. The ambition was noteworthy - the fund was established in the 1960s and its financial history is intertwined with Norwegian oil exploration.
A report by the Nordic Center for Sustainable Finance (NCSF) suggests that Mr. Støre’s vision might have fallen short.
“In 2023, The fund was the largest institutional investor in coal. By the end of the year, the fund had $18.6 billion invested in coal companies”, the report says.
NBIM’s coal assets
Of the $18.6 bn the fund has invested in coal, the majority is in thermal coal which is used in electricity generation. According to NCSF’s analysis, the fund has invested $14.2 bn in 81 companies exposed to thermal coal.
The exposure is geographically diverse from companies in Australia, Vietnam and Japan to those in India, China and South Korea.
In addition, the fund has invested $4.3 bn in metallurgical coal – used in steel production. The lack of viable technological alternatives has hitherto complicated the justification for divesting from metallurgical coal. NCSF claims that logic does not hold true anymore.
“This argument is outdated as technological advances now make it possible to produce coal-free steel and rapidly de-carbonize the industry”, NCSF says.
Norges Bank Investment Management, the asset management arm of the fund, has excluded companies based on its coal threshold in the past. The fund had excluded Glencore, AGL Energy, Anglo American, Sasol Ltd and RWE AG in May 2020.
Expansion plans
A common argument in favour of staying invested in fossil fuel behemoths is that the door for engagement remains open. In which case, the success of that engagement could be measured by the degree of altered corporate strategy.
NBIM is a proponent of the engagement philosophy. “We believe that our engage-to-change approach will yield the best financial results for the fund”, NBIM says in its climate action plan.
What seems surprising then is the expansion plans announced by 47 companies NBIM has invested in. These companies account for $11bn of NBIM’s investments.
NCSF research highlights the case of BHP, the Australian mining firm that is NBIM’s largest coal investment. BHP was placed under observation by NBIM back in 2020. BHP has proposed an extension to the Caval Ridge coal mine in Queensland. An approved permit would extend the mine’s operations until 2056.
“This shows that rather than planning for a Paris-aligned phase-out, BHP is facilitating the extension of the coal age and making a profit in the process”, the report says.
NCSF is calling for more stringent ethical guidelines for the fund that would exclude companies planning on coal production expansions from the fund’s portfolio.
The report concludes with stern advice: “it is no longer ethically justifiable to stay invested in the world’s most polluting industry”.
Norges Bank Investment Management has been approached for comment.
