The Norwegian government announced on April 5 that its sovereign wealth fund will be permitted to double its investment in unlisted renewable energy ventures to $14 billion. In a statement, it said it is “now allowing for the Government Pension Fund Global to be invested in unlisted renewable energy infrastructure. The investments shall be made within the scope of the special environment-related mandates only.”
The official announcement continued, “The market for renewable energy is growing rapidly. A major part of the renewable energy investment opportunities is found in the unlisted market, especially in unlisted infrastructure projects. Expectations of significant investments going forward mean that this market is of interest to institutional investors such as the Government Pension Fund Global.”
Siv Jensen, Norway’s finance minister, said at the time of the announcement, “We are not stipulating that the Fund shall be invested in unlisted renewable energy infrastructure, but are enabling Norges Bank to make such investments if deemed profitable,” according to OilPrice.com.
Unlisted projects make up more than two thirds of the whole renewable infrastructure market, which is worth trillions of dollars according to a report in The Guardian. Sverre Thornes, CEO of Norwegian pension fund KLP, told it, “This move will most likely expand the market further and faster. Our overall renewables infrastructure rate of return was around 11% last year. Clean energy is what will move us away from the dangerous and devastating pathway we are currently on.”
The news comes just weeks after the sovereign wealth fund decided to end investments in oil and gas exploration operations. Climate advocates may celebrate both announcements but the Norwegian government says the moves are based strictly upon sound financial planning and are not inspired by political or ideological considerations.
Also on Friday, the Norwegian government said the sovereign wealth fund would divest from more coal companies, a process it began in 2015 when it eliminated nearly $7 billion in investments in coal producers from its inventory.
“Unlisted renewable energy is a growth industry,” said Tom Sanzillo at IEEFA. “Investments by Norway’s fund now allow it to take advantage of this growth and to use its resources to develop the market for decades. This is a strong step for the health of the fund and the planet.”
Per Kristian Sbertoli, at the Norwegian climate thinktank Zero, tells The Guardian the announcement represents an “historic breakthrough.” Even though the action may not be driven by concerns for the environment, “These actions by the world’s largest sovereign wealth fund are noticed and contribute to reducing the cost for renewables, whilst accelerating the global shift away from coal.” Worldwide, nearly 1000 institutional investors with more than $6 trillion in assets have joined the fossil fuel divestment movement.
Mark Lewis of BNP Paribas Asset Management sums it up nicely. “Renewables are the new rust for the oil-and-gas industry and if the industry does not adapt to this new reality they will corrode its future profits just like rust corrodes oil rigs.”