Norwegian sovereign fund halves coal company holdings
Norway’s sovereign fund has nearly halved its exposure to thermal coal since the beginning of the year, only retaining shares in companies where mining is one of several business areas.
Since the end of 2014, the NOK7trn (€806bn) Government Pension Fund Global (GPFG) has divested seven coal mining companies, leaving only eight manufacturing thermal coal used in energy production – worth only 0.01% of its entire equity portfolio.
Yngve Slyngstad, chief executive at Norges Bank Investment Management (NBIM), told a Norwegian parliamentary hearing the fund retained its stake in large mining conglomerates but that the divestment came as part of its sale of a dozen companies due to concerns over water, deforestation and carbon emissions.
The chief executive said: “Some sectors are facing particular environmental and social challenges. Based on an overall financial assessment, we may divest from individual companies. Over the past three years, we have sold off our shares in 114 companies on the basis of such assessments.”
The fund earlier this year divested a number of firms over its environmental and human rights records, including some involved in the acquisition of phosphate from Western Sahara.
Across its entire portfolio, NBIM now only retains NOK31.5bn in coal and general mining projects, slightly smaller in size than its dedicated environmental mandate of NOK42bn.
Slyngstad compared the return of the environmental mandate with that of the whole fund, noting that the 5% return fell short of the 7.6% produced overall in 2014.
“The environment-related mandates are currently confined to stock market segments that are well suited to active investment management,” he added.
“Our investment managers have outperformed the environmental indices we use as a benchmark.”
However, Slyngstad noted that the environmental mandate had underperformed the fund’s overall equity portfolio by 7 percentage points since its inception in 2009, echoing earlier comments.
In his own remarks before the committee, Norges Bank governor Øystein Olsen also said the sovereign fund’s potential expansion into infrastructure would bring with it a team dedicated to the asset class.
Discussing NBIM’s approach to real estate, in line with its goal to invest 1% of assets into property a year until it hits the current 5% cap, Olsen noted that a standalone property management team had been established.
New properties will either be approved by the real estate team’s investment committee or, where sizeable acquisitions are occurring, by the fund’s executive board.
Olsen noted that establishing an unlisted infrastructure portfolio is likely to see a similar resource-intensive approach to investment.
The Norwegian government last year announced it would investigate relaxing the current 5% hard cap on real estate, and including infrastructure assets in the fund’s investment universe.