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Major Norwegian fund invests more in renewables, less in coal

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Man examines the King's wind farm, Thailand

It is a good day when you see signs of change that bring the world forward in fighting climate change. Today is one of those days.

This morning, Norway’s largest life insurance fund announced new investments in renewables, and that it was reducing those in coal.

The announcement

Norway’s leading firm, KLP, announced that they will be divesting an estimate of just under US$74 million from coal. They will publicly post the companies they are excluding on Dec 1. They will also be investing just over US$74 million directly into renewable energy, adding to their US$2.8 billion renewables portfolio.

They will divest from both coal mining and coal power. All companies that get more than 50% of their revenue from coal will be cut out of KLP’s portfolio. This comes because of an assessment done by KLP on its coal, oil and gas investments. KLP says in their press release:

“…Divestment from coal companies will have no material impact on future returns.”

 

Why is this significant?

This is not a huge amount of money, but it is a major shift in the financial conversation for three reasons:

1. This divestment is from both coal power and coal mining. Previous ends to coal investments (World Bank, European Investment Bank, European Bank for Reconstruction and Development) was only out of coal power. This is more inclusive.

2. What is taken out of coal is being put directly into renewables – and it is going directly to emerging economies. This is an intentional compensation for the lost funding of power development where it is needed most.

And last, but foremost:

3. They’re doing it because of climate change. They are doing this to contribute to the global target of keeping the world below 2°C.

“…We are divesting our interests in coal companies in order to highlight the necessity of switching from fossil fuel to renewable energy.” – KLP’s CEO Sverre Thornes

“Society around us, public authorities, the UN and engaged KLP owners highlight the importance of reducing carbon emissions so that the world can achieve its target of keeping global warming below two degrees Celsius.” – KLP press release

 

This comes on the heels of UN Secretary General Ban Ki-moon’s statement calling the world to action on climate change:

“I have been urging companies like pension funds or insurance companies to reduce their investments in coal and a fossil-fuel based economy to move to renewable sources of energy.” – Ban Ki-Moon, UN Secretary General.

What’s next?

This comes at an important time in Norway. The government is currently going through a year-long review of the coal, oil and gas investments of the country’s sovereign wealth fund, the Government Pension Fund Global (except it’s not technically a pension fund.) This is the world’s largest sovereign wealth fund in the world, valued at over US$890 billion. The review is looking at the climate change impact and carbon emissions of these coal, oil and gas investments.

WWF is calling on Norway’s sovereign wealth fund to divest from fossil fuels, especially coal power, and to invest 5% directly into renewable energy. The results from the carbon exposure review are expected to be brought to Norway’s Ministry of Finance most likely next week, with a decision on action expected to be made in Parliament in May or June 2015.

As the world’s largest sovereign wealth fund, all eyes are on the decisions of the fund.

Zoe Caron is the co-author of Global Warming for Dummies and a climate change expert for WWF. zcaron@wwf.no

WWF and KLP are hosting an investor seminar on January 16th, 2015 in Oslo, Norway on the topic of sharing practical solutions on direct renewable energy investments from leading practitioners in the field, and how to scale up these investments in the face of climate change.

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