Norway is increasingly withdrawing its pension or sovereign wealth fund from fossil fuels, but, or so Norwegian economists claim, for financial reasons and not to protect the climate.
Norway’s sovereign wealth fund, known simply as the fund, is one of the biggest in the world and was set up to manage revenue from Norway’s oil and gas resources for the benefit of the Norwegian population, Deutsche Welle (DW) reports.
Investments from the fund are spread strategically across most markets, countries, and currencies to achieve broad access to global growth and have a small stake in over 9,000 companies worldwide. The fund has a huge value. A look on the front page of the fund’s website gives it the current value of 9, 221 163 345 308 Norwegian Kroner, almost one trillion Euros. Norway is a debt free country and so its financiers can decide to invest their billions of euros wherever they want.
Norway is one of the richest countries in the world. The average wage is €70,000 a year and it has a generous social welfare system and cheap public transport and electricity. The fund was built initially on oil and gas revenues and is now for the first time beginning to pull back from fossil fuel investments.
In March this year, Norway’s parliament decided to remove another 134 coal and oil companies from the fund’s investment list and so Norway’s Central Bank will now have to decide what to do with the money and where to invest instead.
Line Blurred Between Finance and Ethics
Egil Matsen, Vice President of Norway’s Central Bank, explained to DW that the reason for the decision is because of fluctuations in the oil price, which leads to fluctuations in the fund’s yield. So, the reasons then are purely financial and have nothing to do with climate or ethical considerations?
But nothing is that simple, the world is too interconnected for that. Markets react to decisions made by the Norwegian Sovereign Wealth Fund, and companies which used to be regular cash cows, like Exxon and Shell, may soon be companies where the fund will no longer invest.
Matsen insists that he is not rushing decisions and that in the meantime Norway is urging the big fossil fuel companies to invest more in renewable energy if they want a guarantee that the fund will still invest in them.
Marianne Eikvag Groth, state secretary for the Norwegian Ministry of Finance, insists that the decision by Oslo’s parliament should not be overly analysed or interpreted in the wrong way.
“We are not aiming to send a message to the world… This fund is not an instrument of environmental policy or foreign policy, it’s an instrument to take care of the Norwegian people’s savings,” she told DW.
Ironically the fund was set up from revenue from Norway’s oil and gas reserves in 1990 with about 200 million euros and by 2008 had grown a thousand-fold to 200 billion euros. While most other developed countries were straddled with debt, Norway’s vast wealth was turning it into a force to be reckoned with.
And while Norway’s Central Bank insists that it is making decisions only on a financial basis, after 2008 they already started withdrawing investments from nuclear weapons stocks, tobacco companies, and companies accused of environmental pollution and employing child labour.
These decisions to divest from certain unethical companies have now made the technocrats in the central bank of this small north European country of just five million inhabitants the hope of climate activists across the world.
And while the financiers themselves insist the decisions they make are purely economic, the Norwegian Prime Minister, Erna Solberg, when she recently appeared in front of climate striking school kids, underlined the decisions made by Oslo to pull back investment from oil companies.