Norway’s largest manager of pension funds, KLP, has decided to sell off all its investments in coal companies. KLP executives will instead invest half-a-billion kroner (around USD 75 million) in renewable energy ventures.
KLP manages the pension funds for the majority of Norway’s public sector employees. With its total assets of nearly NOK 500 billion ($84bn/€67bn) its clout in the investment world ranks second only to the Norway’s huge sovereign wealth fund, known as the oil fund. Today’s decision sets an important precedent for the Oil Fund which is due to announce a decision on its investments in fossil fuels later this month!
Today KLP’s CEO Sverre Thornes announced that: “We are divesting our interests in coal companies in order to highlight the necessity of switching from fossil fuel to renewable energy.” KLP has decided to invest NOK 500 million more in increased renewable energy capacity.
After a query from one of its local municipal clients, the township of Eid in the mountainous Norwegian county of Sogn og Fjordane, KLP said it has “assessed whether it is possible to contribute to a better environment by pulling investments out of oil, gas and coal companies” without affecting future returns on its investment portfolio.
“We’re quite convinced that we will manage to deliver the same returns in the future without those from coal companies. We want our owners and customers to feel secure about that.” KLP’s chief executive Sverre Thornes
KLP’s decision to drop coal investments will mean that around 20 to 30 companies will be dropped from its portfolio. It currently invests in around 3,000 companies worldwide including Peabody Energy Corp, CONSOL Energy Inc, Coal India Ltd, Shougang Fushan Re and China Coal Energy Co Ltd.
Thornes also noted that KLP is a long established source of funding for Norwegian hydropower and already has “significantly larger investments in renewable energy than in oil, gas and coal companies combined,”. Now the company will earmark an additional NOK 500 million for new renewable energy production capacity in “emerging economies where the need is great and the alternative is often coal”.
The divestment decision comes as the result of an enquiry from the mayor of a community called Eid. He contacted KLP last March to ask whether it was possible to pull his community’s pension funds out of coal, oil and gas without risking a loss of pension value. The answer today was clear.
“KLP’s move sends a powerful signal to other financial players both nationwide and internationally. The green shift has started, and now the transfer of capital from the fossil fuel sector to the renewable sector is beginning to roll.” Alfred Bjørlo, mayor of Eid, Norway.
Another major Norwegian insurance company, Storebrand, has already dropped 10 fossil fuel companies from its portfolio earlier this year due to their involvement in coal production.
The Norwegian government set up an expert group last spring to examine whether Norway’s sovereign wealth fund should also drop its investments in the fossil fuel industry. This would be all the more significant because the fund’s wealth comes from Norway’s revenues from its own oil industry. A decision is expected this month and would send huge shockwaves through the investment world, so stay tuned for an update soon.