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World’s Largest Fund to Review Climate Change Impact

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View over Kongsfjord/Svalbard from Mount Ny Alesund Norway has just made a stride forward on coal, oil and gas investments and climate change. Global institutional investors must do the same, and Norway must now lead on clean, renewable energy investments.

For the past two months a proposal has been on the table in Norway to make a historic move to divest from coal. In a last-minute move, a split in parliament has resulted – instead – in a full review of the fund’s investments in coal, oil and gas.

This review is a milestone globally as Norway’s sovereign wealth fund is the largest portfolio to ever do such a review. WWF calls on all institutional investors to also assess their carbon exposure and climate risk.

What are carbon exposure and climate risk:

These concepts come from the fact that the world has agreed to a 2 degree limit to avoid dangerous climate change. To do this, at least 2/3 of coal, oil and gas must remain in the ground.

As the world begins to make an active and efficient transition to renewable energy, investors are realizing that they have investments in coal, oil and gas (also known as fossil fuels) that cannot – and will likely never – be able to be used. This is called carbon exposure.

On top of that, climate change is beginning to have impacts around the world on nature, people and places. This begins to impact investors in terms of property, cities, agriculture and communities where investments are placed. This is called climate risk.

This is, however, only one part of the bigger picture. What is ultimately needed is quick action on those investments. It is clear already that coal, oil and gas (also known as fossil fuels) have increasing risk and cost. As Michael Liebreich of Bloomberg New Energy Finance said last week, “…We have ever-cheaper renewable energy versus increasingly obvious costs and down-sides to fossil fuels.”

The Government of Norway must now make clear its intentions in advance of the review. WWF calls on the Government of Norway to reaffirm its intention to divest from coal, just as key investors such as the World Bank and European Investment Bank have done.

While the Government of Norway has begun to raise the bar for sovereign wealth funds and pension funds globally, more is required. The next step for Norway will be to deliver on its previous commitment to consider a renewable energy mandate for the fund. The impact of this would redefine progressive investments globally.
“Norway’s sovereign wealth fund is the world’s largest, with over 700 BN USD in assets. When Norway acts – either on divestment from coal, or investment in renewables – there is no question that it’ll get investors globally to follow suit,” says Samantha Smith, leader of WWF’s Global Climate & Energy Initiative.

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