Last week, Norway announced that it will reduce its greenhouse gas emissions by 40 percent (from 1990 levels) by 2030. In the meantime, the country’s massive sovereign wealth fund has dumped a significant portion of its fossil fuel investments.
As if both those statements weren’t notable enough – Norway has, after all, become the first nation to commit to fossil fuel divestment – the potential ramifications for the rest of the world are even greater. Norway’s sovereign fund (commonly referred to as “the oil fund”) is so large that its divestment will send shockwaves through financial markets.
How big is the fund? Here’s some perspective for you. The population of Norway is about five million people – less than Atlanta’s entire metropolitan area. Last year, Norway’s sovereign wealth fund reported $890 billion in assets, or $178,000 for every Norwegian citizen. According to Quartz, the fund holds about one percent of all the stocks and bonds in the world.
On Thursday, Norges Bank, the manager of the fund, published its first report on how it will be adjusting its portfolio to reflect its environmental and climate change consciousness. In a press release, the fund managers state that it chose to divest from 49 companies in 2014 where “we considered there to be high levels of uncertainty about the sustainability of their business model.”
According to Yngve Slyngstad, CEO of Norges Bank Investment Management, “We have gradually increased the scope of risk-based divestments, both geographically and thematically.”
In total, the fund has divested from 114 companies in the past three years. Most of these were coal-mining groups, but they also included tar sands producers, palm oil producers, cement makers and two mountain-top removal coal operations in the United States.
Norway’s action follows a growing movement in the U.S. and beyond to divest from fossil fuels. The impetus is as much financial as it is environmental, as investors see once-fruitful oil and coal interests becoming “stranded assets” in the face of international regulations and oil’s dwindling value. In January, Goldman Sachs reported that over $900 billion of oil investments may no longer be profitable. Last year, both Stanford University and the Rockefellers joined the divestment movement.
Norway’s fund is not completely fossil-free, however. The Guardian reports that $40 billion of its portfolio remains in fossil fuel companies for the time being.