Norway Pension Giant Dumps Nearly $3 Billion in Coal, Oil Stocks

However, weak krone erases over $438 million in value from now-excluded holdings. 

Norges Bank, Norway’s central bank, which also manages the country’s $1 trillion sovereign wealth fund, has decided to exclude 12 energy companies from the fund for environmental and human rights reasons.

Based on the Government Pension Fund Global (GPFG)’s holdings as of the end of last year, the dozen excluded companies had a value of $3.13 billion at the time. However, because of the weakness of the Norwegian krone so far during 2020, those holdings were worth approximately $2.7 billion, or $438.5 million less, as of May 15.

Since the beginning of the year, the Norwegian krone has seen the largest depreciation by far among G10 currencies against the dollar and the euro due to the COVID-19 pandemic and plunging oil prices, according to Commerzbank, which said the krone tends to react disproportionately to market turbulence because it’s a high-beta currency.

Among the companies Norge bank’s executive board decided to exclude are Canadian companies Cenovus Energy Inc, Canadian Natural Resources Limited, Suncor Energy Inc, and Imperial Oil Limited for unacceptable greenhouse gas emissions. The bank’s Council on Ethics recommended excluding the companies because of carbon emissions from production of oil to oil sands. It is the first time this criterion is being applied to the fund’s exclusion list.

Despite its stance against fossil fuels, Norway continues to be an oil and gas producer, and the country’s estimated total net cash flow from the petroleum industry in 2020 is nearly 98 billion kroner. However, the country imposes strict environmental regulations on the industry and claims that environmental and climate standards in the Norwegian petroleum industry are very high compared with those in other countries due to policy instruments that ensure the industry takes environmental and climate considerations into account.

Egypt-based ElSewedy Electric Co and Brazil’s Vale SA were also excluded after an assessment of the risk of contribution to severe environmental damage. It was recommended that ElSewedy Electric be excluded because of its participation in the development of a hydropower project in Tanzania, and the recommendation to exclude Vale was a result of repeated dam breach.

The executive board has also decided to exclude Brazil’s Centrais Eletricas Brasileiras “because of unacceptable risk that the company contributes to serious or systematic human rights violations” in connection with the development of the Belo Monte power plant in Brazil.

And the board also decided to exclude five other companies based on their involvement in coal production: South Africa’s Sasol Ltd., Germany’s RWE AG, the UK’s Glencore and Anglo American, and Australia’s AGL Energy Ltd.

The exclusions are based on new absolute thresholds for coal companies that were added to the fund’s guidelines last year. It is the first time these thresholds in the coal criterion are being applied to the fund’s exclusion list.

Additionally, the executive board also decided to place on an observation list BHP Group Ltd. and BHP Group Plc of Australia and the UK, respectively, US-based Vistra Energy Corp., Italy’s Enel SpA, and Germany’s Uniper SE after an assessment against the product-based coal criterion of the fund’s exclusion guidelines.

Meanwhile, Norges Bank has also decided to revoke the exclusion of US-based engineering firm AECOM and Hong Kong-based investment holding company Texwinca Holdings Ltd. based on recommendations from the Council on Ethics. AECOM Ltd had been excluded in 2018 for producing nuclear weapons, however, these activities have now been discontinued. Texwinca had been excluded in 2019 because of a systematic breach of workers’ rights in factories owned by a subsidiary, which has since been liquidated.

While the exclusions are based on the fund’s ethical policies, the fund is required to sell off some of its assets in order to help pay for a record $38 billion withdrawal due to the economic impact of the COVID-19 pandemic.

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