The Norwegian government pension fund should divest from fossil fuels and rather create an internally managed portfolio of renewable energy investments, suggests US think tank IEEFA. (photo credit: IEEFA)
- An report from American think tank IEEFA suggests that Norway needs to concentrate less on investments related to oil assets but focus on renewables
- Norway needs to allocate some amount out of its 7.5 trillion NOK ($976 billion) Government Pension Fund Global to renewables, the report suggests
- Ministry of Finance in Norway is opting to increase the proportion of fund assets invested in the stock market from 62.5% of the total to 70%
- This shift will mean re-allocation of around 554 billion NOK ($72 billion); out of this, IEEFA suggests 190 billion NOK ($25 billion) be invested into building a renewable energy portfolio
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Cleveland based Institute for Energy Economic and Financial Analysis (IEEFA) has suggested Norway to allocate more of its Government Pension Fund Global (GPFG) assets to renewable energy. The fund is currently worth 7.5 trillion NOK ($976 billion).
The GPFG holds an important position in the country as it supports the annual budget of Norway. It has two main sources of income – returns on invested capital and revenues from the sale of Norwegian oil assets. It invests some of its oil revenues in stocks and bonds to generate more money. With a global transition away from fossil fuels, IEEFA is recommending to invest about $25 billion to a renewable energy portfolio.
Norwegian Ministry of Finance has opted to increase the proportion of fund assets invested in the stock market from 62.5% from of the total to 70%. The US based think-tank emphasizes that the renewable energy sector is producing attractive returns and continues to grow worldwide.
“The shift under consideration will require the re-allocation of approximately 554 billion NOK (US$72 billion). We recommend that the Fund allocate approximately 35% of this capital—190 billion NOK (US$25 billion)—to a renewable energy portfolio,” accordint to the report.
The IEEFA suggests investing this money in the following:
- Targeted investments to utilities and listed infrastructure companies that are growing their renewable portfolios
- Investment in indexes with exposure to renewables, and
- A set-aside for direct investments in listed and unlisted infrastructure projects
It could later be adjusted or expanded to other areas as the fund becomes more experienced.
“The action recommended here offers the Fund a prudent way to diversify its investments and achieve attractive rates of return while complying with policy positions that the Norwegian Parliament, the Storting, has laid out for the Fund with regard to divestment from the coal sector,” said Tom Sanzillo, director of Finance for IEEFA.
The report recommends urgent creation of an internally managed portfolio of renewable energy investments by the pension fund. The IEEFA report can be accessed free of cost on its website.
Norway wants to achieve a 67.5% share of renewable energy in its total electricity supply by 2020, as per the International Energy Agency (IEA).