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​Norway clarifies SWF’s climate rules to facilitate exclusions

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Norway’s finance ministry has moved to end confusion around how companies should be excluded from the country’s giant sovereign wealth fund.

The ministry has clarified its rules in an attempt to allow the climate criterion of the Government Pension Fund Global’s (GPFG) ethical investment guidelines to be implemented fully for the first time since their introduction three years ago.

At the same time, changes are being made to the way coal companies are assessed for inclusion in or exclusion from the NOK9trn (€935bn) fund, which hold’s Norway’s petroleum wealth.

Last month, Johan Andresen, the head of Norway’s Council on Ethics – the advisory body for the sovereign fund – said the GPFG had not acted on any of the five climate-related recommendations the council had made since the criterion was introduced in 2016.

Andresen said the implementation of this criterion had proved difficult, with many of its underpinnings already having changed since it was brought in.

The government set out detailed points aimed at answering the queries the fund’s manager Norges Bank Investment Management had raised in relation to the council’s advice.

“Norges Bank has requested clarification from the ministry of finance of certain aspects of the conduct-based climate criterion,” the ministry stated. “In the report, the ministry notes that the evaluation of companies under this criterion should be based on an overall assessment of relevant considerations, including, inter alia, emissions and emission intensity, forward-looking plans and frameworks on climate.”

The council’s coal-related exclusion criterion was being amended to capture companies with considerable coal-related operations in absolute terms, as well as percentage terms.

The ministry said the relative 30% thresholds under the criterion were not being changed, but were to be supplemented by absolute thresholds for coal mining and coal power capacity.

“The ministry is proposing to put the thresholds at 20m tonnes for coal mining and 10,000MW for coal power capacity,” it said.

Further reading

Norway’s sovereign fund pulls plug on ESG managers to cut costs
Norway’s giant sovereign wealth fund terminated asset managers running NOK20bn of green investment mandates in 2018, bringing the investments in house to save costs.

Norwegian SWF ‘slow to act’ on climate-related exclusions
The head of Norway’s Council on Ethics says the Government Pension Fund Global has so far not acted on any of its climate-related recommendations.

Norway to cut €6.7bn of ‘upstream’ oil and gas companies from SWF
Norway’s Finance Ministry has decided against culling virtually all oil and gas stocks from the GPFG. Instead, it proposed the divestment of NOK66bn worth of exploration and production oil and gas companies.

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