Norway's Mighty Oil Wealth Investments Will Support Renewables

Oil Rig

By James Noble

March 27, 2014

Norway is set to increase the exposure of the nation’s $920 billion oil fund to renewable energy, reflecting a continuing shift toward using the country’s vast resource wealth to combat climate change.

Established in 1996 to ensure the well-being of future Norwegians, the fund — officially called the Government Pension Fund Global — currently owns 1.2 percent of the world’s listed stock. News of this latest commitment comes shortly after the government appointed independent experts to consider whether the fund should exit coal, oil and gas investments. Currently, those investments represent roughly 10 percent of the fund’s value.

Over the past decade, the fund has moved to exclude investments in weapons producers, tobacco companies and other companies that directly or indirectly damage the environment or threaten human rights. Now, companies seen as contributors to climate change have become the next candidates for exclusion, while those promoting climate-friendly technologies could be among those to benefit.

The International Monetary Fund and the Canadian International Council have recommended that Canadian governments establish sovereign wealth funds. Establishing a sovereign wealth fund helps smooth the commodity cycle, keeps government spending within means and allows governments to save for future generations.

Last year, British Columbia Premier Christy Clark announced the creation of a wealth fund that will collect profits from the proposed development of BC’s liquefied natural gas (LNG) industry. Significantly smaller than the Norwegian fund, the BC government projects it will collect $100 billion of a projected $1 trillion in LNG wealth generated over the next 30 years.

Other Canadian provinces have taken steps or are mulling the idea of establishing their own rainy day funds. However, the Harper government has roundly rejected the creation of a federal sovereign wealth fund. In 1976, Alberta originally established the Heritage Savings Fund. Then, after a decade in operation, the Alberta government stopped paying into it. Today, the Heritage Savings Fund stands at $16.7 billion, a tiny fraction of Norway’s prosperous fund.