The oil fund boss Yngve Slyngstad will not be an instrument in Norwegian climate policy.
Across the debate on the fund’s investments in dirty coal companies he holds onto his role: The Fund is always a “financial investor” – and only the
Thursday, Norges Bank sent a letter to the Ministry of Finance, signed by the Governor and Slyngstad. It says with clear link to those who will use the Oil Fund in climate policy: “Use of the Fund as a climate policy tools beyond what is consistent with the Fund’s role as a financial investor, would be very unfortunate for the management of the fund.”
The term “very unfortunate” is largely the strongest wording Norges Bank may allow himself the Ministry of Finance. Slyngstad will only drive the fund to get the highest possible return, taking into account all forms of risk.
Yet the world’s climate challenges at full speed into the fund analysis. Slyngstad thinking probably more on climate change and climate policy than he has ever done in his time in the fund.
It leads to action: Last year sold the fund out of 22 companies strongly linked to coal and oil sands. Fund believes environmental considerations and environmental policy means that they have no economic future. The fund makes as many in Parliament and in the environmental movement will, but with a strictly economic grounds.
Thursday la Fund presented its first report on “responsible management”.
Climate policy is money
Put another way: Slyngstad will not withdraw the fund from coal-fired German power companies to save Pacific islands from flooding by the warmer climate. But it may well be that he sells German power stocks because strict emission requirements of the European leading power companies to bankruptcy.
Therefore, Oil Fund started analyzing coal consumption, water consumption and greenhouse gas emissions in investment.
– Our investments are long term. Therefore, we must also analyze the long-term risk. A climate policy to reduce emissions sharply will clearly affect the profitability of our investments. The probability of this is so great that we must take into account in our management of the fund, says Slyngstad Aftenposten.
Obtain figures
The trustees in Oil Fund likes best to act on the basis of numbers. Yesterday fund for the first time forward calculations showing greenhouse gas emissions from the companies they invested in. As part of corporate governance asks fund companies report on their energy sources, their emissions and their plans to meet a stricter climate policy.
Slyngstad not saying that climate policy certainly is, or should be, tighter. Instead he evaluates probabilities in an uncertain world.
– The likelihood that greenhouse gas emissions are reduced through regulations, taxes, quotas or other climate policy is so high that we certainly can not ignore from there when we consider the outlook for the fund 20-30 years into the future, he said.
The trend in share prices on coal-fired German power companies is an example of this. Germany has poured in with subsidies to developers of wind power. It has helped keep energy prices in periods have been very low. The value of coal fired corporations have received the same downturn. Large billion values have disappeared in climate policy.
Will act quickly
The higher emissions in relation to sales, the more vulnerable are companies for stricter future climate policy.
– To know the emissions from the companies or emissions in the power generation they rely on, allowing us to react faster and better in line with climate policy evolves, says Slyngstad
Wednesday joined parties with majority Parliament the EU’s goal of reducing greenhouse gas emissions by 40 percent until 2013, regent from 1990 emissions. Implemented will affect most industries directly or indirectly, but dissimilar from industry to industry.
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Slyngstad aiming to get a head start by having the most detailed knowledge about the effects.
– Having better information than others in the market is always an advantage to get good returns over time, says Slyngstad.
Water can cost
Water scarcity is another environmental theme fund analyzes increasingly. Many of the fund’s investments are in companies that use a lot of water.
– If the companies eventually have to pay for water, it will affect the profitability and hence the fund’s returns, he said.
The risk is also in the interaction between different industries.
– Mining companies use a lot of water. It can go beyond national consumption. We may have investments in both the mining company and food producer. We must invest and exercise its ownership in a way that makes the overall return fullest, says Slyngstad.
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