Government Pension Fund: Climate on the agenda
Norway aims to set aside billions of dollars on oil cash to invest in environmental technology or sustainable development projects in emerging markets. Over the next five years, the pension fund will buy environmental company shares and shares in developing countries for $3.03 billion.
Norway takes climate change seriously. On April 3 the Norwegian Government presented a Report to the Storting detailing its plan to establish a new investment programme pertaining to environmental issues and initiating a broad climate-change study. “We also want to strengthen the focus on issues related to climate change in Norges Bank’s work on engaging with companies,” says the Norwegian Minister of Finance Kristin Halvorsen.
As a broadly diversified and long-term investor, the Fund has an interest in avoiding negative economic repercussions of climate change. “These measures we are proposing will ensure that the Government Pension Fund – Global will be among the leading funds internationally in this area,” says the Minister of Finance.
Climate change has been an important topic among the commenting bodies in the consultation process on the ethical guidelines for the Fund. Minister of Finance Kristin Halvorsen says that plans are being made to establish an environmental investment programme, in keeping with the inputs from the consultation process. The environmental programme will be aimed at investments that can be expected to yield indisputable environmental benefits, such as climate-friendly energy, improving energy efficiency, carbon capture and storage, water technology and management of waste and pollution.
Environmental investments will also serve to help develop expertise in the refinement of the Fund’s investment strategy. It is expected that these sub-markets will have high growth in the years to come. The Government wants to set aside a sum of money that can make a difference, but bearing in mind that there are clear capacity restrictions on investments in these markets.
“We are planning that the entire amount for the environmental programme and a possible investment programme aimed at sustainable growth in emerging markets will be around NOK 20 billion, invested over a five-year period. This will entail substantial investments in terms of both the size of the markets and investments in other comparable funds internationally,” says Halvorsen. However, before the investments can start, a number of matters must be clarified.
In addition, the Government is aiming to initiate a broad study to assess how the challenges of climate change may affect the financial markets and how investors ought to act in light of this.
The Government is also going to ask Norges Bank to prepare more documents outlining its expectations in the engagement effort with companies. One important area will be the environment, and an expectations document regarding companies’ strategy on climate change is considered particularly relevant. Norges Bank has given priority to climate-change issues in its ownership work and in 2008 has taken part in several major investor initiatives. “This kind of expectations document will express more clearly Norges Bank’s expectations of the companies in this area,” says Halvorsen.
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