Norway plots special environmental and developing countries funds for €267bn pension scheme

The Norwegian Ministry of Finance is to examine whether the €267bn ($420bn) Government Pension Fund, could dedicate part of its assets to invest specifically in environmental technology. One proposal is for the giant scheme to create a special environmental fund, which could become one of the biggest institutional funds of its kind in the world.
The Ministry said the scheme would also look at specific investments in developing countries with a suggestion to ally itself with the International Finance Corporation (IFC), part of the World Bank, in setting up projects that invest in infrastructure in sub-Saharan Africa. The IFC has initiated a platform for co-investment with sovereign wealth funds.
The government said there had been significant public interest in the Government Pension Fund making specific environmental commitments. The fund’s assets are generated from the receipts of the country’s petroleum sector, which has prompted criticism that it is saving for the future retirement of Norwegian citizens at the expense of the impact of fossil fuels on the environment.
The current review by the government into the fund’s policy on responsible investment, formally launched lastweek, has also given further indications of ways in which the fund will invest responsibly in the future.
In a major boost to the promotion of green real estate investment, the fund says that Norges Bank, which runs the scheme’s assets, will adopt best environmental practice in its property portfolio. The fund recently announced it would start investing about €13bn, or 5% of total assets, in property as part of a revised asset allocation strategy.
The Ministry has also effectively ruled out a proposal for the fund to make positive ESG selections in its investment portfolios, such as a ‘best-in-class’ or ‘pioneer screening’ approach to find companies focusing parts of their business on renewable energy or environmental technology. The analysis, which was carried out by Norwegian Professors Thore Johnsen and Ole Gjølberg, said positive selection tended to result in significant curtailment of the investment universe and a major bias to large-cap companies. Their findings suggest that any new environmental investment strategy at the Norwegian fund is likely to be based on venture capital allocations to sustainable energy related companies.