The Norwegian parliament recently approved a historic decision to divest from fossil fuels, with the country’s sovereign wealth fund, which oversees assets worth $1tn, set to sell more than $13bn of investments. The plan involves divesting from eight coal companies, estimated to be worth $6bn, as well as around 150 oil producers. The coal companies in question could potentially include well-known names such as Anglo-American, Glencore, and RWE. This marks the largest fossil fuel divestment to date.
Norway’s Government Pension Fund Global, which is based on the country’s oil wealth, will sell investments worth $7bn in oil exploration and production firms. The fund will still hold stakes in oil companies that are reducing their fossil fuel reliance by investing in clean energy, such as BP and Shell, but exclude North Sea companies listed in London such as Premier Oil and Tullow Oil. The fund will also divest from any company that produces over 10GW of electricity from coal or mines more than 20 million tonnes of thermal coal per year. This marks a step forward in fossil fuel divestment. The fund will now have the legal authority to invest directly in renewable energy projects, with up to $20bn available for investment, starting with wind and solar projects in developed markets. This marks the first time the fund will have a mandate to do so.
BNP Paribas’ head of sustainability research, Mark Lewis, stated that the new laws in Norway will place the country in a leadership position among major investors in solar and wind power. Lewis mentioned that in the coming decade, the major shift in energy economics will be the replacement of fossil fuels by cleaner, cheaper, and faster to deploy renewable energy sources.
Norway’s finance ministry predicts that the global market for renewable energy infrastructure will grow by nearly 50% to reach $4.2tn by 2030, due to the rise in new solar and wind power capacity. The country’s decision to divest from fossil fuels comes as calls for investors to end their role in the climate crisis intensify. 80 civil society organizations and academics recently published an open letter to the European Investment Bank, calling for it to stop its fossil fuel financing which amounted to €2.4bn in 2018. The letter, coordinated by campaign group Oil Change International, criticized the bank for not keeping up with the science behind the climate crisis. It was released ahead of a crucial meeting of European finance ministers. The letter stated that public pressure for action on the climate emergency is stronger than ever and that the EIB must cease funding all fossil fuels.
The shift away from coal as a source of energy by governments and investors is becoming increasingly prominent, as it emits twice as much carbon dioxide compared to burning gas and has been a major contributor to the air quality crisis in China’s cities. Stephanie Pfeifer, head of the Institutional Investors Group on Climate Change, which is a coalition of investors who control assets worth $26tn, stated that the move of the government pension fund from fossil fuels to renewable energy sources sends a strong message to the rest of the market.
She further stated that other investors will take notice when a fund created from oil profits demonstrates that the future lies in clean energy. According to her, institutions with assets worth $8tn have already divested from the coal sector, while investors with $11tn in assets under management are advocating for the cessation of coal usage by 2030. Pfeifer also emphasized that oil companies must comply with the climate goals established in the Paris Agreement or risk facing increasing pressure from investors.
Norway’s government-managed state pension fund, built on its oil revenue, has long warned the government of the financial risks associated with investing in high-carbon companies. As the world moves towards a lower-carbon economy, these investments may lose value quickly, putting the fund at risk. This warning has been echoed by the governors of two major financial institutions, the Bank of England and the Banque de France. Although the fund has not yet disclosed the specific companies it will divest from, it is expected to make this information public in its official reporting next year.
It is heartening to see that amidst the challenges and hardships of the world, there are still numerous instances of positivity and hope. These stories serve as a reminder of the resilience and kindness of humanity, and inspire us to strive for a brighter and better future for all. It is through spreading awareness of these positive developments that we can foster a sense of unity and optimism in the world. At Newsum, we continue to highlight the good and spread joy, as we work towards building a brighter tomorrow.
