The world’s largest wealth fund may become a large green energy investor

Norway’s Sovereign Wealth Fund, officially called the Government Pension Fund Global (GPFG), is the world’s largest sovereign wealth fund . Currently the fund is allowed to invest in listed equities, bonds and real estate. However, if the fund were allowed to expand its portfolio to include direct investments in assets like wind and solar plants and other infrastructure, this could potentially have a very significant impact on the total flow of capital to the renewable energy sector.

A number of organizations and institutions in Norway have for some time been advocating such a reform. Even the Fund’s manager, Norway’s Central Bank, has asked the Ministry of Finance to let it enter into direct infrastructure investments, so far without approval. However, last week an influential and unusual alliance of leading companies and organisations in finance, religion, renewable energy, environment and development, put the question on the top of the Norwegian agenda through a joint initiative . The Norwegian Government Pension Fund Global should start to invest directly in infrastructure for the production and distribution of renewable energy, was their message. Direct investments in renewable energy would be a good move on the basis of both a financial and sustainability perspective, they argue.

The group of signatories includes financial institutions such as KLP, Storebrand Asset Management, the Ulltveit-Moe Group, the green energy company Scatec (my employer), the Catholic Diocese of Oslo and a number of organizations in the field of environment and development: WWF Norway (World Wildlife Fund), The Norwegian Climate Foundation, The Development Fund, Future in our hands, Zero, Greenpeace, Friends of the Earth Norway and Young Friends of the Earth Norway.

In the letter, the signatories underline that other large European pension funds are already investing directly in renewable energy, and that the GPFG is very well positioned to do the same. The size of the fund, the long-term investment horizon and the fact that the fund does not have on-going liquidity needs, makes it possible for the GPFG to aim at investing directly in renewable energy projects, they say. Another argument to do so is that global warming threatens the long-term performance of the Pension Fund. With more extreme weather the international community must spend an ever increasing amount of resources on repair and adaptation, at the expense of investments that can yield higher productivity and hence good returns on financial investments.

A move by Norway’s so-called Petroleum Fund into renewables would be significant, both directly and indirectly. According to Marius Holm, leader of Zero, «there are few other areas where Norway is able to contribute in such a relevant way to the global shift to green energy». The possible direct significance is derived from the sheer size of the Fund. According to the Ministry of Finance, the value of the Fund may rise to 1000 Billion USD by 2020.

If the Fund is allowed to invest up to 5 percent – equal to the target set for its property investments – of its total assets into renewable energy-related infrastructure, the Fund could on average allocate in the range of 10 Billion USD per year to the green energy investment market from 2015 onwards. This is admittedly a modest amount compared to the $ 500 billion in yearly green energy investments which, according to the IEA, is required if we seek to limit global warming to 2 degrees. But it could still make Norway’s SWF one of the worlds largest, if not the largest, single clean energy investor. In a recent IEA report development banks like the European Investment Bank, KfW, World Bank among others are highlighted as leading financial institutions in the green energy sector:

--------------30--------------

This BLOG  looks at pensions and their impact on what are called Public Private Partnerships or P3’s these are not really about private funding at all but about two streams of public funding, pensions and government with private capital a third partner.
We will also deal with other pension matters, such as Defined Contribution Plans (DC) vs Defined Benefit (DB) PLANS, the weakness in private plans, the need for pension reform in public pensions to have shareholder rights, directorships and ethical investment directives and policies. 
Finally taking the long view we will show how these funds are forms of evolving social capital that is dominating private capital as we evolve into socialization of capital. 
Click HERE to read more....