Norway's wealth fund promise disappoints

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Adam Barber
April 11, 2014
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Norway's wealth fund promise disappoints

It isn’t often that £2bn of extra funding for renewables feels like a disappointment. But, this time, it does.

Norwegian prime minister Erna Solberg last month announced that the country’s £521bn sovereign wealth fund was going to increase its exposure to the renewable energy sector. This was greeted with great excitement, and for good reason.

The Government Pension Fund of Norway is the world’s biggest sovereign wealth fund, ahead even of Abu Dhabi's. Set up in 1996 to invest proceeds from North Sea oil and gas reserves, it now owns 1.2% of the world’s listed stocks and has huge clout.

Therefore, Solberg’s public commitment that the fund was gearing up to make “an important contribution towards greener growth” augured well for companies in the wind sector.

The fund already has an interest in wind. It backs companies such as Italy’s Enel Green Power, which has a portfolio of renewable energy schemes including wind farms. In total, the fund backs 166 firms that it defines as environmentally-friendly and Solberg’s announcement suggested this would grow significantly.

There was also the fun irony of an oil fund growing support for renewable energy firms.

However, the initial enthusiasm is waning since full details of the strategy came out last week in the Norwegian finance ministry’s report about how the fund was managed in 2013.

The fund is indeed planning to grow its green investments, but the figures are underwhelming. It plans to grow its investments in renewable energy firms from £3bn to £5bn, which is a decent rise but not the transformational change we were expecting.

While it would be churlish to dismiss the prospect of extra funding worth £2bn coming into the renewable energy sector, there is still a feeling that much more could be done.

Yes, some companies in the wind sector are likely to benefit, but the total of £5bn is still less than 1% of the total value of the Norwegian sovereign wealth fund.

It is also less ambitious than other funds in the sector. Danish fund PensionDanmark has a target of making 10% of its direct investments in renewable energy assets, and it has done a series of deals in projects ranging from US wind farms to German transmission assets.

It is not a totally fair comparison, of course. PensionDanmark’s assets total £15.5bn, which is tiny compared to the Norwegian fund. This means it can get involved investing in individual assets that would be much too small for the Norwegians.

But it does hint at a sense of ambition that some feel is lacking in the Norwegian fund's plans.

The disappointment is not just about numbers.

The ministry’s report gives no indication of the fund making good on its idea of divesting from fossil fuels. And it is also scrapping the ethical council that oversees which companies it invests in, which raises concerns that future “green” investments will be subject to less scrutiny than they have in the past.

These are all reasonable concerns. But, of course, they will be forgotten if the deals start to flow.

It isn’t often that £2bn of extra funding for renewables feels like a disappointment. But, this time, it does.

Norwegian prime minister Erna Solberg last month announced that the country’s £521bn sovereign wealth fund was going to increase its exposure to the renewable energy sector. This was greeted with great excitement, and for good reason.

The Government Pension Fund of Norway is the world’s biggest sovereign wealth fund, ahead even of Abu Dhabi's. Set up in 1996 to invest proceeds from North Sea oil and gas reserves, it now owns 1.2% of the world’s listed stocks and has huge clout.

Therefore, Solberg’s public commitment that the fund was gearing up to make “an important contribution towards greener growth” augured well for companies in the wind sector.

The fund already has an interest in wind. It backs companies such as Italy’s Enel Green Power, which has a portfolio of renewable energy schemes including wind farms. In total, the fund backs 166 firms that it defines as environmentally-friendly and Solberg’s announcement suggested this would grow significantly.

There was also the fun irony of an oil fund growing support for renewable energy firms.

However, the initial enthusiasm is waning since full details of the strategy came out last week in the Norwegian finance ministry’s report about how the fund was managed in 2013.

The fund is indeed planning to grow its green investments, but the figures are underwhelming. It plans to grow its investments in renewable energy firms from £3bn to £5bn, which is a decent rise but not the transformational change we were expecting.

While it would be churlish to dismiss the prospect of extra funding worth £2bn coming into the renewable energy sector, there is still a feeling that much more could be done.

Yes, some companies in the wind sector are likely to benefit, but the total of £5bn is still less than 1% of the total value of the Norwegian sovereign wealth fund.

It is also less ambitious than other funds in the sector. Danish fund PensionDanmark has a target of making 10% of its direct investments in renewable energy assets, and it has done a series of deals in projects ranging from US wind farms to German transmission assets.

It is not a totally fair comparison, of course. PensionDanmark’s assets total £15.5bn, which is tiny compared to the Norwegian fund. This means it can get involved investing in individual assets that would be much too small for the Norwegians.

But it does hint at a sense of ambition that some feel is lacking in the Norwegian fund's plans.

The disappointment is not just about numbers.

The ministry’s report gives no indication of the fund making good on its idea of divesting from fossil fuels. And it is also scrapping the ethical council that oversees which companies it invests in, which raises concerns that future “green” investments will be subject to less scrutiny than they have in the past.

These are all reasonable concerns. But, of course, they will be forgotten if the deals start to flow.

It isn’t often that £2bn of extra funding for renewables feels like a disappointment. But, this time, it does.

Norwegian prime minister Erna Solberg last month announced that the country’s £521bn sovereign wealth fund was going to increase its exposure to the renewable energy sector. This was greeted with great excitement, and for good reason.

The Government Pension Fund of Norway is the world’s biggest sovereign wealth fund, ahead even of Abu Dhabi's. Set up in 1996 to invest proceeds from North Sea oil and gas reserves, it now owns 1.2% of the world’s listed stocks and has huge clout.

Therefore, Solberg’s public commitment that the fund was gearing up to make “an important contribution towards greener growth” augured well for companies in the wind sector.

The fund already has an interest in wind. It backs companies such as Italy’s Enel Green Power, which has a portfolio of renewable energy schemes including wind farms. In total, the fund backs 166 firms that it defines as environmentally-friendly and Solberg’s announcement suggested this would grow significantly.

There was also the fun irony of an oil fund growing support for renewable energy firms.

However, the initial enthusiasm is waning since full details of the strategy came out last week in the Norwegian finance ministry’s report about how the fund was managed in 2013.

The fund is indeed planning to grow its green investments, but the figures are underwhelming. It plans to grow its investments in renewable energy firms from £3bn to £5bn, which is a decent rise but not the transformational change we were expecting.

While it would be churlish to dismiss the prospect of extra funding worth £2bn coming into the renewable energy sector, there is still a feeling that much more could be done.

Yes, some companies in the wind sector are likely to benefit, but the total of £5bn is still less than 1% of the total value of the Norwegian sovereign wealth fund.

It is also less ambitious than other funds in the sector. Danish fund PensionDanmark has a target of making 10% of its direct investments in renewable energy assets, and it has done a series of deals in projects ranging from US wind farms to German transmission assets.

It is not a totally fair comparison, of course. PensionDanmark’s assets total £15.5bn, which is tiny compared to the Norwegian fund. This means it can get involved investing in individual assets that would be much too small for the Norwegians.

But it does hint at a sense of ambition that some feel is lacking in the Norwegian fund's plans.

The disappointment is not just about numbers.

The ministry’s report gives no indication of the fund making good on its idea of divesting from fossil fuels. And it is also scrapping the ethical council that oversees which companies it invests in, which raises concerns that future “green” investments will be subject to less scrutiny than they have in the past.

These are all reasonable concerns. But, of course, they will be forgotten if the deals start to flow.

It isn’t often that £2bn of extra funding for renewables feels like a disappointment. But, this time, it does.

Norwegian prime minister Erna Solberg last month announced that the country’s £521bn sovereign wealth fund was going to increase its exposure to the renewable energy sector. This was greeted with great excitement, and for good reason.

The Government Pension Fund of Norway is the world’s biggest sovereign wealth fund, ahead even of Abu Dhabi's. Set up in 1996 to invest proceeds from North Sea oil and gas reserves, it now owns 1.2% of the world’s listed stocks and has huge clout.

Therefore, Solberg’s public commitment that the fund was gearing up to make “an important contribution towards greener growth” augured well for companies in the wind sector.

The fund already has an interest in wind. It backs companies such as Italy’s Enel Green Power, which has a portfolio of renewable energy schemes including wind farms. In total, the fund backs 166 firms that it defines as environmentally-friendly and Solberg’s announcement suggested this would grow significantly.

There was also the fun irony of an oil fund growing support for renewable energy firms.

However, the initial enthusiasm is waning since full details of the strategy came out last week in the Norwegian finance ministry’s report about how the fund was managed in 2013.

The fund is indeed planning to grow its green investments, but the figures are underwhelming. It plans to grow its investments in renewable energy firms from £3bn to £5bn, which is a decent rise but not the transformational change we were expecting.

While it would be churlish to dismiss the prospect of extra funding worth £2bn coming into the renewable energy sector, there is still a feeling that much more could be done.

Yes, some companies in the wind sector are likely to benefit, but the total of £5bn is still less than 1% of the total value of the Norwegian sovereign wealth fund.

It is also less ambitious than other funds in the sector. Danish fund PensionDanmark has a target of making 10% of its direct investments in renewable energy assets, and it has done a series of deals in projects ranging from US wind farms to German transmission assets.

It is not a totally fair comparison, of course. PensionDanmark’s assets total £15.5bn, which is tiny compared to the Norwegian fund. This means it can get involved investing in individual assets that would be much too small for the Norwegians.

But it does hint at a sense of ambition that some feel is lacking in the Norwegian fund's plans.

The disappointment is not just about numbers.

The ministry’s report gives no indication of the fund making good on its idea of divesting from fossil fuels. And it is also scrapping the ethical council that oversees which companies it invests in, which raises concerns that future “green” investments will be subject to less scrutiny than they have in the past.

These are all reasonable concerns. But, of course, they will be forgotten if the deals start to flow.

It isn’t often that £2bn of extra funding for renewables feels like a disappointment. But, this time, it does.

Norwegian prime minister Erna Solberg last month announced that the country’s £521bn sovereign wealth fund was going to increase its exposure to the renewable energy sector. This was greeted with great excitement, and for good reason.

The Government Pension Fund of Norway is the world’s biggest sovereign wealth fund, ahead even of Abu Dhabi's. Set up in 1996 to invest proceeds from North Sea oil and gas reserves, it now owns 1.2% of the world’s listed stocks and has huge clout.

Therefore, Solberg’s public commitment that the fund was gearing up to make “an important contribution towards greener growth” augured well for companies in the wind sector.

The fund already has an interest in wind. It backs companies such as Italy’s Enel Green Power, which has a portfolio of renewable energy schemes including wind farms. In total, the fund backs 166 firms that it defines as environmentally-friendly and Solberg’s announcement suggested this would grow significantly.

There was also the fun irony of an oil fund growing support for renewable energy firms.

However, the initial enthusiasm is waning since full details of the strategy came out last week in the Norwegian finance ministry’s report about how the fund was managed in 2013.

The fund is indeed planning to grow its green investments, but the figures are underwhelming. It plans to grow its investments in renewable energy firms from £3bn to £5bn, which is a decent rise but not the transformational change we were expecting.

While it would be churlish to dismiss the prospect of extra funding worth £2bn coming into the renewable energy sector, there is still a feeling that much more could be done.

Yes, some companies in the wind sector are likely to benefit, but the total of £5bn is still less than 1% of the total value of the Norwegian sovereign wealth fund.

It is also less ambitious than other funds in the sector. Danish fund PensionDanmark has a target of making 10% of its direct investments in renewable energy assets, and it has done a series of deals in projects ranging from US wind farms to German transmission assets.

It is not a totally fair comparison, of course. PensionDanmark’s assets total £15.5bn, which is tiny compared to the Norwegian fund. This means it can get involved investing in individual assets that would be much too small for the Norwegians.

But it does hint at a sense of ambition that some feel is lacking in the Norwegian fund's plans.

The disappointment is not just about numbers.

The ministry’s report gives no indication of the fund making good on its idea of divesting from fossil fuels. And it is also scrapping the ethical council that oversees which companies it invests in, which raises concerns that future “green” investments will be subject to less scrutiny than they have in the past.

These are all reasonable concerns. But, of course, they will be forgotten if the deals start to flow.

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Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.