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Norges Bank Investment Management (NBIM), part of Norway’s central bank, has excluded major commodity and energy players from the country’s wealth fund over environmental, social and governance (ESG) concerns.

The sovereign fund, known as Government Pension Fund Global and set up in 1996 to save oil revenues for future generations, is among the world’s largest investors, owning around 1.5% of all globally listed shares.

Petrochemicals firm Sasol, utilities company RWE, commodity trader Glencore, Australia’s AGL Energy and miner Anglo American have all been excluded from the fund over their coal operations.

Energy companies Vistra Energy, Enel and Uniper, along with miner BHP, are on an “observation list” for possible exclusion later if they fail to address their use of coal.

Decisions are made by Norges Bank’s executive board based on recommendations provided by the fund’s ethics council.

With regards to coal, observation or exclusion from the fund may be decided if companies or their entities derive 30% or more of their income from thermal coal; base 30% or more of their operations on thermal coal; extract more than 20 million tonnes of thermal coal per year; and/or have a coal power capacity of more than 10,000MW from thermal coal, according to NBIM.

Olivia Caddy, partner at energy-focused law firm Bracewell, tells GTR that NBIM’s decision serves as a pressing reminder that a transition to cleaner energy “remains a key development which the energy sector needs to continue to focus on”.

She explains that ESG ratings have become important criteria for investors and financiers, which will be weighed up when making funding decisions. “Shareholders are, and will become more, demanding to see progress and the ‘green’ impact of their investments.”

 

Oil sands under fire

In a separate statement, NBIM has also blacklisted four Canadian companies, including Canadian Natural Resources, Cenovus Energy, Suncor Energy, and Imperial Oil after an assessment concluded the companies are contributing to “unacceptable greenhouse gas emissions”.

The blacklisting is due to the high volumes of carbon emissions that are emitted from the extraction and production of oil from oil sands, which contribute to global warming and climate change. The companies are all known to engage in the oil sands process.

Canada has the third-largest oil reserves in the world, the vast majority of which is trapped in oil sands, reveals the Canadian Association of Petroleum Producers (CAPP), an association which represents oil and gas companies in Canada. According to a 2019 report by the Canadian government, Canada is warming twice as fast as the rest of the world.

Elsewhere, Japan’s MUFG Bank has also recently put oil sands extraction on its “restricted transaction” list. “We recognise that while contributing to energy supply, these sectors’ impacts on ecosystems, indigenous communities, and other factors must be considered,” the bank said on May 13.

 

More blacklists made

In the same statement, NBIM also excluded Egypt’s ElSewedy Electric and Brazilian miner Vale due to the risk they pose of “severe environmental damage”. ElSewedy Electric has been blacklisted because of its participation in the development of a hydropower project in Tanzania, and Vale as a result of “repeated dam breach”.

Built in the Selous game reserve in Tanzania, a UNESCO world heritage site since 1982, the hydropower project has been repeatedly criticised by environmentalists. UNESCO says the project could have “a devastating and irreversible impact on Selous’ unique ecosystem”.

Vale’s Dam I at the Córrego do Feijão iron ore mine in Brazil collapsed at the start of 2019, triggering more than 10 million cubic metres of material to free flow and flatten the mine’s adjacent office, killing more than 250 people. It was not the first dam failure for the company to be associated with.

Brazilian power company Eletrobras has also been removed because of the “unacceptable” risk it poses of “serious or systematic human rights violations”.

NBIM says it had taken a long time to sell shares of several of the blacklisted companies due to the “market situation, including liquidity in individual shares”. It always sells its holdings before any exclusions are announced, to avoid excessive market movements, it says.

In an about-turn, NBIM has revoked the exclusion of infrastructure firm AECOM and Texwinca Holdings, an investment holding company.

AECOM was excluded in 2018 because of the production of nuclear weapons. These activities have now been discontinued, meaning there is no longer a basis for exclusion. Texwinca Holdings was excluded last year because of a “systematic breach of workers’ rights” in factories owned by a subsidiary; the subsidiary has since been liquidated.