Divesting Coal

Norway Goes Green

DISTORTED mining brown coal mine NRW Source imago Westend6145275044
For Norway's oil fund, coal is dirty.
  • Why it matters

    Why it matters

    A decision by Norway’s financial committee could lead to a global sell-off of utilities and mining firms which make more than a third of sales from coal.

  • Facts

    Facts

    • The committee’s decision likely means Norway’s pension fund will sell off its €300 million investment in Essen-based utility RWE.
    • As a huge player in investment markets, any actions taken by the sovereign wealth fund reverberate far beyond the borders of Norway.
    • The Norwegian fund is funded by the country’s oil sales and manages about €835 billion in assets.
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    Audio

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Ordinarily, a decision made in the Norwegian parliament’s financial committee is not noticed much beyond the country’s borders, but the unanimous vote last week in Oslo is likely to attract international attention.

Members of the parliamentary committee passed a resolution that Norway’s Government Pension Fund – the world’s largest sovereign wealth fund – will no longer invest in coal.

An approval by a majority of Norway’s parliament later this week is considered so likely that energy giants such as Essen-based RWE must start looking for alternatives.

The committee’s decision will create a lot of problems. Starting next year, as dictated by parliament, the Norwegian fund is scheduled to sell its shares in the energy and mining groups if the coal’s share of business passes the 30 percent mark.

At utility RWE, coal electricity makes up 60 percent of total output, which means the Norwegian fund must divest its €300 million ($328.6 million) investment in RWE.

Meanwhile, RWE’s biggest rival, Düsseldorf-based E.ON, can breath a sigh of relief for now because its coal business falls under the Oslo limit.

But the committee’s action is much more significant.

 

144 RWE-01

With the clout that comes from managing assets of about €835 billion ($914.7 billion), the oil fund fueled by income generated by the Norwegian oil and gas business is a global trendsetter.

If this fund pulls out of industries, it is seen as a signal by other investors. This was demonstrated in the past when Norwegians sold interests in defense or tobacco companies, or in companies that were not particularly diligent about the use of child labor.

The Norwegian fund owns around 2.5 percent of all shares issued in Europe and its worldwide share amounts to about 1.4 percent, making it a powerful force in the financial world.

It is good the elected officials in Oslo are not sitting silently in the background, but instead are exerting pressure and bearing responsibility.With coal-fired power plants considered climate killers, ethical investment policies are long overdue.

It will be interesting to see what conclusions will be drawn from this in RWE’s headquarters in Essen and beyond.

 

Helmut Steuer is a Handelsblatt correspondent in Stockholm. To contact the author: steuer@handelsblatt.com.

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