Shockwaves are being felt far and wide: global investments in renewable energy capacity have outpaced investments in new fossil-based power generation for the last 3 years. Yesterday, the Norwegian Parliament decided that the world’s biggest sovereign wealth fund will divest from coal.
Norway’s Government Pension Fund Global (GPFG), a US$900 billion petroleum-fed piggy bank, will divest from companies which get more than 30% of their income from coal extraction or coal power generation. Basically, the GPFG has placed coal where it belongs: in the same category as tobacco—another industry the fund is not allowed to invest in—which profits from harming people and the planet. Good on you, Norway!
The breaking news follows a series of announcements from major investors that they will divest from coal or reduce their financing for it. This includes AXA, Bank of America and Crédit Agricole. Divestment is not only driven by coal’s role in causing dangerous climate change but also by structural decline in the coal market. Investors have clearly understood that coal is both unethical and a bad financial investment.
A global phase-out of fossil fuels must happen in tandem with a phase-in of renewable energy. A transition to full decarbonisation is going to need public money, including the money channeled through sovereign wealth funds, to unleash the trillions needed for investments in renewables and other clean technologies.
GPFG already invests in renewables, but this investment is marginal compared to its fossil fuels portfolio. The next step must therefore be to invest more in renewables, and a good way to start would be a mandate to invest at least 5% of the portfolio directly in renewable energy infrastructure for production and distribution. This investment of US$45 billion could help cover those difficult upfront costs.
And, while GPFG is on a roll, it should next divest from all fossil fuels. Not only coal but also oil must stay in the ground if we are to avoid catastrophic climate change. Why not strike when the iron is still hot?