Is There Growing Politicization of Norway’s Sovereign Fund?
Norway has been able to amass tremendous financial wealth from petroleum revenue over the past fifteen years. The wealth fund commands attention from policymakers, asset managers and the citizens of Norway. Thus, Norway’s Government Pension Fund Global (GPFG), the ex-Norway part of oil-derived assets, wields significant influence when it comes to corporate governance and investment policy. For example, allocation to renewable and environmental strategies gained further traction in 2009, amid pressure from Norwegian politicians. During that period, Norway’s sovereign fund awarded mandates to a number of external managers in environmental-related mandates. By 2014, Norges Bank Investment Management (NBIM) established their first portfolio dedicated to green bonds, in which the reference portfolio is based on a sub-segment of the Barclays MSCI Green Bond Indices. In parallel, NBIM has excluded a number of companies from its portfolio based on recommendations from its Council on Ethics which was established by Norwegian royal decree in November 2004. Divested companies were in violation of areas such as excessive greenhouse gas emissions (cement companies, oil sands firms, and coal-fired plants), deforestation, water issues and corruption. These inclusionary and exclusionary investment policies, so far, have had a negligible impact on the fund’s growth and performance, while signaling to the capital markets their beliefs on how companies should be properly managed.
Norway’s wealth assets are at an inflection point.
Political Parties Have Different Dreams of Norway’s Sovereign Wealth Assets
With that being said, there has been talk by Norwegian politicians of dividing up Norway’s massive pile of sovereign wealth into mission-driven funds. Norway’s ruling Conservative Party publicly agreed to this idea. Norway’s Green Party has been able to sway the country’s parliament to force the wealth fund to divest from coal investments, while advocating the wealth fund partake in large-scale renewable investments. There is also talk of more investment into infrastructure. The biggest news driver is Norway’s own economy, in which the key policy rate was lowered from 0.75% to 0.5%, while the Norges Bank Governor warned the fund will withdraw some assets.
Dag Dyrdal from Montalban AS penned a paper in Internasjonal Politikk titled, “Tverrpolitisk pensjonskasse eller aktivt politisk verktøy?” It essentially translates in English to Bi-partisan Pension Fund or Active Political Tool? Dyrdal in his paper praises past Norwegian politicians on keeping up with the fiscal rule, even during tough times in 2007 and 2008. Dyrdal concludes that the wealth fund has achieved success based on broad consensus from Norway’s parliament, but also limited politicization of the wealth fund, at home and abroad.
Norway’s wealth assets are at an inflection point. With increasing external pressures from prolonged low oil prices, currency turmoil, and a weakened domestic economy, Norway will have to decide how much capital from the fund they will want to tap to achieve their goals.
Contact the writer or creator of this article or page.
Questions or comments: support(at)swfinstitute(dot)org
Follow on Twitter at @swfinstitute and @sovereignfunds
Learn, Attend and Network: Institutional Investor Events and Summits
Go Back: HOME: Sovereign Wealth Fund Institute