This Massive Sovereign Fund Got More Capacity for Unlisted Renewable Infrastructure Investments

Posted on 04/01/2022

Norway’s Finance Ministry is keen on having its mega sovereign wealth fund align its investment activities in a way consistent with global net zero emissions in accordance with the Paris Climate Agreement. Norway Government Pension Fund Global (GPFG) is getting guidance from the government with regard to climate risk.

“The Government wants to make the GPFG world leading in responsible investment and the management of climate and nature risks. There is, at the same time, a broad political consensus that the Fund has a financial objective and is not a climate policy tool“, says Norway Minister of Finance Trygve Slagsvold Vedum (Centre Party) in a press release.

Since a more ambitious climate risk management and reporting arrangement is now being established for the sovereign wealth funds as a whole, Norway’s Ministry of Finance is proposing to remove the management mandate requirement for Norges Bank to establish specific environmental investment mandates. It is the requirement that it is being proposed to be removed. This does not mean that the sovereign wealth fund’s investments in climate- and environmentally-related activities must be reduced. The GPFG may still be invested in unlisted renewable energy infrastructure, within the current cap of 2% of the market value of GPFG. This implies, in somewhat simplified terms, that the cap on such investments is increased from NOK 120 billion (US$ 13.77 billion) to about NOK 240 billion (US$ 27.55 billion), based on the market value of the sovereign wealth fund at the beginning of this year.

To date, Norges Bank Investment Management (NBIM), which oversees GPFG, bought a 50% interest in the Borssele 1 & 2 offshore wind farm located in the Netherlands.

The GPFG’s investment universe is limited to listed companies and negotiable debt instruments as well unlisted property and unlisted infrastructure for renewable energy. However, it is possible for the sovereign wealth fund’s assets to be invested in unlisted companies where the board has expressed an intention to apply for listing in a recognized and regulated marketplace. The management of the GPFG has a financial goal the highest possible return at an acceptable risk.

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