Norway’s $860bn oil fund will no longer put money into 52 companies for being too reliant on coal in one of the biggest ever fossil fuel-related divestment by a single investor.
The world’s biggest sovereign wealth fund is no longer able to invest in a number of companies including Drax in the UK, AES, Dynegy and FirstEnergy in the US, Reliance Power and Tata Power in India, and a string of Chinese groups.
The move comes four months after a landmark global agreement on climate change in Paris and highlights how seriously investors are now taking the debate on fossil fuels and potential stranded assets. The Norwegian fund’s decision is all the more striking because it derives its funding from petroleum revenues.
Norway’s parliament last year ordered the oil fund to sell out of companies in which more than 30 per cent of revenues or activities are derived from coal. The oil fund said it had already sold out of 28 of the 52 companies last year as part of risk-based divestments.
The oil fund on Thursday warned that “several more” rounds of exclusions would follow this year as it analysed all of its nearly 10,000 holdings.
It added that it had written letters to 50 affected companies and only received five replies. “We expected more replies than that,” a spokeswoman said.
The latest decisions almost double the number of companies the oil fund is not allowed to invest in. Previous exclusions have included tobacco companies, nuclear weapons producers, and individual cases such as Walmart for serious violations of human rights.
The oil fund has long been seen as one of the pioneers of responsible or ethical investing and it has stepped up its work in recent years. It now plays a more active role in the selection of board directors in many European countries and has begun to publish some of its voting intentions ahead of annual meetings, instead of just disclosing its votes afterwards.
But its most visible symbol of responsible investing remains exclusions, as dictated by its owner, the Norwegian people via the local parliament.
Among the exclusions on Thursday was Peabody Energy, the coal miner that this week filed for bankruptcy protection. Other exclusions include: China Coal Energy, China Power International Development, China Resources Power Holdings, China Shenhua Energy, Datang International Power Generation, and Yanzhou Coal Mining. Exxaro Resources from South Africa, Coal India and Gujarat Mineral Development from India, Hokkaido and Okinawa Electric Power from Japan, New Hope and Whitehaven Coal in Australia were also excluded.
Norway’s parliament considered whether to stop investing in all fossil fuel companies — including oil and gas producers — but decided against it. Some opposition parties have called for it to ban investments in tax havens following the release of the Panama Papers.