Under pressure from the global community (including CIEL), Norway’s Government Pension Fund Global has divested from some companies in the fossil fuel industry and is considering divesting from more.
The Fund announced this week that during 2014 it divested from more than 20 companies with operations in coal mining, oil sands, and coal-fired power production. The Fund divested from 14 coal mining companies because of the long-term risk of regulation or reduction in demand, including 7 in India and the United States.
Importantly, the Fund has recognized that corporate strategy and business structure are key factors in properly assessing the climate risks a company faces, and that companies whose strategy relies on value chains with substantial greenhouse gas emissions may be particularly vulnerable to such regulatory and demand risks.
Much remains to be done, however; an expert group on fossil fuel investment fell far short of recommending complete divestment when it reported to the Fund late last year. For instance, the expert group dismissed the concept of “stranded assets” as an appropriate guide to the Fund’s investment strategy. This dismissal is troubling because the concept of stranded assets is important and increasingly recognized. Indeed, the governor of the Bank of England, Mark Carney, wrote about stranded assets to the UK parliament a few months ago, explaining that the “majority of proven coal, oil, and gas reserves may be considered ‘unburnable’ if global temperature increases are to be limited to two degrees Celsius.”
Discounting the risks posed by stranded assets not only represents ‘irrational exuberance’ but also ignores the Fund’s beneficiaries and Norway’s national and international obligations to mitigate carbon emissions and ensure a safe climate for future generations. Luckily, comments can be submitted that respond to the expert report (CIEL submitted some today) and it is not the final word on divestment. The Fund has committed to undertake a more detailed study of the climate risks in its fossil fuel portfolio in 2015, and potentially to develop a climate criterion for divestment decisions. It’s about time: fossil fuel investments pose unacceptable risks for pension funds, for their beneficiaries, and for the planet!
In other exciting divestment news from Norway, its Government Pension Fund-Global also announced its divestment from Tahoe Resources, “due to an unacceptable risk of the company contributing to serious human rights violations” at its Escobal silver mine project in Guatemala. Read more here!
Originally posted on February 6, 2015.