Norges Bank excludes an initial 52 thermal coal companies from Government Pension Fund

“Further exclusions will follow,” says influential investor

Norges Bank has decided to exclude an initial 52 thermal coal companies from the giant Government Pension Fund following the introduction of new guidelines – in what amounts to one of the most sweeping divestment actions ever seen.

The exclusions follow a first round of analysis by Norges Bank Investment Management, which runs the assets of the fund. The list runs from Aboitiz Power Corp in the Philippines to China’s Yanzhou Coal Mining Co. and further exclusions are likely to follow in 2016.

Just yesterday RI reported that Danish pension fund administrator PKA was taking its anti-coal strategy a step further, saying it will begin a dialogue with 53 firms which rely on coal for between 25% and 50% of their sales. It coincided with US coal firm Peabody Energy filing for Chapter 11 bankruptcy protection. Incidentally, Peabody is one of the firms excluded by Norges.

“The Executive Board has found that the recommendations satisfies the exclusion criteria and that the companies can be excluded from the fund,” Norges said in a statement.

It follows a new product related criterion in the fund’s exclusion guidelines that was introduced by the Ministry of Finance and which took effect on February 1. Under the new rules a company may be excluded where thermal coal is a significant part of its business activities.Specifically, coal power companies and mining companies who themselves, or through other operations they control, base 30% or more of their activities on coal, and/or derive 30% of their revenues from coal, may be excluded.

The analysis takes into account companies’ forward-looking product/fuel mix transition – as well as the degree to which the company utilizes renewable energy in its activities.

The guidelines also cover firms’ green bonds. They state that exclusion decisions shall not include a company’s green bonds if they are recognized through inclusion in specific green bond indies or verified by a recognized third party.

All bonds issued by the proposed exclusions have been screened against the universe of green bonds in the Barcap MSCI Green bond index.

As part of the analysis, Norges said it sent letters to the companies: “Five companies responded.”

The giant investor added: “We will continue our research to identify companies that may be excluded according to the product based coal criterion. The intention is to assess the remainder of relevant companies in the portfolio by the end of 2016.”