Other investors are likely to follow Norwegian fund’s move out of coal-based investments – due to its size as the world’s largest sovereign wealth fund.
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’.