Norway Divests From Oil Sands and Coal Companies
The worldwide pandemic isn’t stopping investors from following through on climate action. Sovereign wealth funds, banks, and asset managers around the world have pledged to reduce their investments in companies with essentially bad environmental outlooks. Fossil fuel exposure is one of those categories.
Norway’s sovereign wealth fund – estimated $1 Trillion USD – is the latest to take action on its goals, divesting approximately $3.3 Billion USD based on environmental and social criteria. Norway is divesting its investments in oil-sands firms Glencore PLC and Anglo American PLC, utility RWE AG, Salsol Ltd., and AGL Energy Ltd. According to the Norwegian Central Bank, which manages the fund, these actions are based on the “new absolute thresholds for coal companies” that the Norwegian government enacted in 2019. The fund is also excluding from its investment portfolios Canadian Natural Resources Limited, Cenovus Energy Inc, Suncor Energy Inc, and Imperial Oil Limited, all oil sands companies, because of “unacceptable greenhouse gas emissions,” and ElSewedy Electric Co and Vale SA because of excessive risk of “severe environmental damage.”
This move shows that fossil fuel-focused and -reliant companies need to make real movement towards reducing carbon exposure. Future plans, small changes, and “green washing” just won’t cut it for investors that are focused reducing carbon exposure in the immediate term. RWE recently underwent a restructuring after a transaction with E.ON. to focus more on creating a sustainable energy supply through increased renewable energy sources and storage technologies. Its website is full of references to reducing CO2, sustainability, and a climate-neutral goal by 2040. Similarly, Glencore’s “commitments on the transition to a low-carbon economy” were not enough to save it from the cutting block. Nor were Anglo American’s planned exit within the next three years of its South African operations (its largest thermal coal business) and efforts over the past decades to position itself as an environmental and social champion.
The irony of these moves is of course that Norway’s sovereign wealth fund was built on the country’s revenue from its own oil and gas production. The fund has taken a leading global role in responsible investing, with its efforts spanning the ESG spectrum. These include a ban on tobacco, leading to the exclusion of Mexican company Grupo Carso SAB de CV from “the investment universe” of the fund in 2011, and restrictions based on human rights, including the recent exclusion of Brasil’s Eletrobras on the basis of its contributions to “serious or systematic human rights violations.”