O n Wednesday (27 May), the Norwegian Storting made the unanimous decision to pull the government pension fund out of coal by 1 January 2016.
The decision means that the fund – the world’s largest pension fund - will not invest in “Coal power companies and mining companies who themselves or through other operations they control, base 30 per cent or more of their activities on coal, and/or derive 30 per cent of their revenues from coal”.
It is at this point not evident how the no-coal principle will be implemented. According to the Storting’s webpage the principle “should also be developed over time, based inter alia on changes in energy production and technological advances”.
Terje Breivik, a Liberal party member of the Storting’s Committee on Finance and Economic Affairs, told the Financial Times that he expected utilities such as Germany’s RWE and E.ON, and Vattenfall, to be affected by the decision. In 2014, hard coal and lignite totalled roughly 40 per cent of Vattenfall’s electricity generation. In 2014, the pension fund held the equivalent of roughly SEK 230 million Vattenfall bonds.
Klaus Aurich, Head of Investor Relations at Vattenfall, explains that if the Norwegian pension fund sells its Vattenfall bonds, it would probably have a very limited impact on the pricing of the company’s outstanding bonds.
NO COAL BY 1 JANUARY
The new no-coal principle is expected to be implemented by 1 January 2016 at the latest.
The operational management of the government pension fund with a market value of roughly NOK 7,000 billion is carried out by Norges Bank and Folketrygdfondet.
According to the Financial Times, the oil fund’s chief executive Yngve Slyngstad explained to the Norwegian parliament last year that its exposure to coal was between NOK 2.6 billion and 116 billion at the end of 2013, depending on how the sector was defined.
The fund’s holdings in general mining companies, including coal, was NOK 36.6 billion at the end of 2013, while 77.3 billion was invested in utilities.