Martin Skancke, the former senior Norwegian government official who has just been named as the new chair of the Principles for Responsible Investment (PRI), is to chair an expert group looking at the Norwegian Government Pension Fund’s investments in fossil fuel companies.
It comes as the government has confirmed that the NOK5.1trn (€620bn) fund would almost double its environmental mandates, increasing its investments in renewable energy. The allocation will increase from the current NOK20-30bn to the NOK30-50bn range.
There has been an ongoing political debate in Norway about whether the fund should divest from all coal or petroleum companies. So now the Skancke group has been tasked with evaluating whether excluding them is a more effective way to address climate issues than the current strategy of “exercise of ownership and exertion of influence”.
The group will also be asked to advise on potential exclusion criteria for these types of companies. It will present its findings by the end of November and the Finance Ministry says it will carry out a “thorough and open discussion” when it is submitted.
The view hitherto has been that there was no need for “negative filtering” to exclude fossil fuel firms. But Finance Minister Siv Jensen stressed that whatever the panel recommends, the fund’s stance as a well-diversified, global financial investor was “not up for discussion”.
“A large deviation away from the market portfolio, such as curtailing a significant part of the investment universe, is a major strategic question which must be subject to a thorough theoretical analysis and debate,” she said.She added: “Ethical exclusion is a relatively limited tool – as a financial investor we cannot entirely ‘sell our way’ out of potential problems in the investment portfolio.” Exclusion was not necessarily the best way to promote change in companies, she argued.
“We cannot ‘sell our way’ out of potential problems” – Finance Minister
Skancke, an independent adviser who was previously Director General at Prime Minister’s Office and at the Ministry of Finance, will be joined on the panel by five experts.
They are Professor Elroy Dimson of the London Business School, Professor Michael Hoel of the Economic Institute at the University of Oslo, Laura Starks, finance professor at the University of Texas and Gro Nystuen, Senior Partner at International Law and Policy Institute and former chair of the fund’s Council of Ethics. The group is rounded out by Magdalena Kettis, the former Head of Ownership Risk and Head of Social and Environmental Issues at Norges Bank.
Dimson chaired the giant fund’s Strategy Council in 2013 which looked at the fund’s responsible investment strategy. The main recommendation was that the work of the Council on Ethics for the fund should be integrated into Norges Bank, a move the Council resisted. The government also confirmed today that the integration would take place, and that it would appoint a new group of experts to assess Norges’ work in this area. Jensen said the move would “give better results and a more efficient and consistent use of available resources”.