Norway’s decision to dump all coal-focused investments from its $900bn sovereign wealth fund could unleash a wave of divestment from other large funds, according to investment experts. The fund, the largest in the world, is one of the top 10 investors in the global coal industry.
The move, agreed late on Wednesday, is one of the most significant victories to date for a fast-growing and UN-backed fossil-fuel divestment campaign. It will affect $9bn-$10bn (£5.8-£6.5bn) of coal-related investments, according to the Norwegian government.
“Investments in coal companies can have both a climate risk and a future financial risk,” said Svein Flaatten of the governing Conservative party, which made a cross-party agreement to implement the selling of coal investments.
A series of analyses have shown that the world’s existing reserves of fossil fuels are several times greater than can be burned while keeping the temperature below the 2C safety limit agreed by the world’s governments. Furthermore, authorities such as the World Bank and Bank of England have warned that fossil fuel reserves will be left worthless if the action needed to cut carbon emissions kicks in.
“The significance of the Norway decision is that, because of their size and reach, this will act as a major signal for other investors to follow. This will certainly create a wave,” said Mark Campanale, founder of the Carbon Tracker Initiative, which has pioneered analysis of the financial risks of fossil fuels.
“Coupled with the news from AXA that it was exiting €500m (£355m) of coal and investing €3bn in renewables, this is a grim week for the listed coal majors,” Campanale said.
Tom Sanzillo, a former comptroller of New York State who oversaw a $156bn pension fund, also said Norway’s move was likely to spark others to do the same: “Coal stocks are losing money every day. No investment policy that I am familiar with can keep holding stocks in an industry with catastrophic losses and with no realistic case for an upside. Norway has led, and I suspect they will not be alone for long.”
Sanzillo, now director of finance at the Institute for Energy Economics and Financial Analysis, said: “Coal markets globally are in the midst of a wrenching structural decline. The coal industry has failed to compete with other energy resources, particularly wind, solar and energy efficiency.”
Heffa Schücking, at German NGO Urgewald and who has written several financial reports on Norway’s wealth fund, said: “This will send a strong signal to investors all over the world. Coal is yesterday’s fuel.”
The new investment policy was approved unanimously by Norway’s finance committee and will be formally adopted by parliament on 5 June.
It requires the fund, founded on Norway’s vast oil wealth, to exclude companies earning more than 30% of their revenues from coal or producing more than 30% of their electricity from coal. The fund withdrew from 32 coal companies in 2014 for environmental reasons, but recently faced criticism that its overall holdings in the industry had actually risen.
Norway’s wealth fund owns 1.3% of the entire world’s traded stocks and the new policy is likely to see it shed investments in companies all over the world, including Germany’s RWE, China’s Shenhua, Duke Energy in the US, AGL Energy in Australia, Reliance Power in India and Japan’s Electric Power Development Corporation.
“We expect that billions of euros will be withdrawn from the coal industry,” says Truls Gulowsen from Greenpeace. “This is a huge win for the divestment movement and a real sign of hope that investment patterns can be changed.”
Bill McKibben, co-founder of 350.org, the organisation leading the global fossil fuel divestment campaign, said: “If you’d told any of us, three years ago, that the planet’s largest sovereign wealth fund would begin divesting, we would have laughed. There’s much work to be done taking on coal, oil, and gas but the momentum is definitely on our side.”
Organisations that have cut or curbed coal investments recently include insurance giant Axa, the Church of England and Oxford University. The Guardian, which is running a campaign asking the world’s biggest health charities to divest, is owned by the Guardian Media Group, which announced it would divest its £800m fund from all fossil fuels in April.
