Norway is a rich country because of its oil. It hopes to stay that way when the oil runs out. Since 1990, Norway has been putting its money from North Sea oil into a fund for future generations. The Government Pension Fund Global is now the largest sovereign wealth fund in the world.
The GPFG now owns 1.3% of the world’s stocks, 2.5% of Europe’s stocks, and prime real estate in London, Berlin and Paris. Last year, the GPFG saw a return of 15.9%, or about US$115 billion. GPFG is currently worth almost US$850 billion. (You can see its current value here.)
Investing the profits from oil is an excellent idea (putting aside for a moment the fact that this money comes from oil profits and burning fossil fuels is what’s driving climate change). Particularly compared to what the UK did with its money from North Sea Oil. Instead of saving and investing the money, Margaret Thatcher’s Conservative government threw it away by awarding tax cuts to the rich. The UK now has almost nothing to show for its share of North Sea Oil.
Perhaps to assuage the guilt of all this oil money, Norway is also pouring money into REDD. Norway’s International Climate and Forest Initiative is at least aiming to reduce deforestation.
But through the GPFG, Norway is investing considerably more money in forest destruction than it is in trying to prevent forest destruction through REDD. Rainforest Foundation Norway has reviewed GPFG’s 2013 investment portfolio and found that US$21.5 billion is invested in oil and gas, palm oil, mining, cattle farming, timber and paper, soy beans and energy. These are “the very industries that constitute the greatest threats to the world’s rainforests,” Rainforest Foundation Norway points out.
For several years, NGOs have been raising this issue. Vemund Olsen of Rainforest Foundation Norway notes that,
“The Government Pension Fund still invests in a series of businesses that destroy rainforests, and we have dug up more such companies than before. Norway invests 43 times as much in businesses that destroy rainforests as we spend on saving rainforests over the development aid budget. It’s time Norway’s central bank (Norges Bank) responds to the Norwegian parliament’s request and presents a clear strategy for how they’re going to go about reducing their ecological footprint in the rainforests.”
There has been some progress. In 2013, for example, the GPFG divested from 23 oil palm companies. In 2013, the Fund divested from 27 mining companies.
And Norges Bank recently asked Rainforest Foundation Norway for help in identifying and avoiding investments that contribute to rainforest destruction. Rainforest Foundation Norway will help in the development of a tool “to gather and systematize information on forest degradation and destruction and present this information in a form that investors can put to use”.
Such a tool is urgently needed. GPFG’s 2013 report shows investments of US$3 billion in companies with coal mining operations in Indonesia. “This is a double blow to the climate,” Rainforest Foundation Norway’s Olsen explains, “as it causes emissions from both deforestation and coal combustion.”
There is currently a debate in Norway about whether the GPFG should pull its money from all investments in fossil fuels. This would amount to around 10% of GPFG’s holdings. WWF Norway is calling for the GPFG to invest 5% of its portfolio in renewable energy infrastructure.
Such a move could actually increase the GPFG’s returns. Norway’s Green Party calculates that the GPFG’s “green investments” produced a 41% return – considerably more than the GFPG’s overall return of 15.9%. Rainforest Foundation Norway notes that,
Greening the Norwegian Pension Fund is thus a win-win solution – and a necessity if Norway is serious about rainforest protection and emission reduction.
Full Disclosure: REDD-Monitor has in the past received funding from Rainforest Foundation Norway. Click here for all of REDD-Monitor’s funding sources.
Of course rich Norway is only one example, the majority of pension funds are invested in fossil fuels. Two example references, one from the World Development Movement: http://www.wdm.org.uk/sites/default/files/Climate%20campaign%20option%202%20-%20Pensions.pdf and the other from the Amercian Petroleum Ins: http://www.whoownsbigoil.org/
@Michelle Thomasson (#1) – Thanks for this. I should have pointed out in the post that at least the Norwegian sovereign wealth fund (it’s not really a pension fund, even though it has the word “pension” in its title) is transparent about where they put their money.