Norway’s KLP boosts renewables investment and cuts coal exposure

KLP, Kommunal Landspensjons-kasse, Norway’s largest life insurer that was formed in 1949, announced late this November that intended to further increase its investment by NKr500 million (c.£47m) in renewable energy capacity and revealed that it was pulling out of companies deriving “a large proportion” of their revenues from coal. The company said it was pursuing this strategy as it sought to “contribute to the urgently needed switch from fossil fuel to renewable energy.”

As Norway’s largest pension fund manager, KLP is already a major investor in renewable energy with around NKr19 billion (bn) invested in Norway alone. Noting that while it was important to achieve a good return on investments in order to safeguard future pensions, it stressed that equally important to consider how the long-term investments that it makes can “contribute to sustainable development.”

KLP defines coal companies as coal mining companies and coal-fired power companies that derive a large proportion - at the very least “50% of their revenues” - from coal-based business activities and exclude entities identified as such.

Preliminary estimates indicated that this would result in the sale of shares and bonds worth just less than NKr500m.
Sverre Thornes, KLP’s CEO, commenting on the decisions said: “We have long been an important source of funding for Norwegian hydropower, and have significantly larger investments in renewable energy than in oil, gas and coal companies combined.”

He added a caveat: ”That does not prevent us from going further in the same direction by earmarking an additional NKr500m for new renewable energy production capacity in emerging economies, where the need is great and the alternative is often coal. At the same time, we are divesting our interests in coal companies in order to highlight the necessity of switching from fossil fuel to renewable energy.” Thornes further pointed out that KLP has a “clear ambition” to “influence the companies it invests in to lower greenhouse emissions.”

At the request of Eid local government, KLP has assessed whether it is possible to contribute to a better environment by withdrawing its investments from oil, gas and coal companies, without affecting future returns. The results of that assessment have now been published and the divestment is limited to coal.

A KLP statement accompanying these moves explained that they were “a contribution to necessary change” adding: “Society around us, public authorities, the United Nations and engaged KLP owners highlight the importance of reducing carbon emissions so that the world can achieve its target of keeping global warming below two degrees Celsius.”

The names of the companies set to be excluded were scheduled to be published in an updated KLP list on 1 December 2014. And, KLP’s divestment from coal companies would also apply to the KLP funds.

Material impact?
While their divestment from coal companies - considered to have the largest negative impact in terms of carbon emissions per unit of energy produced and local pollution in the vicinity of the coal-based facilities - will have “no material impact” on KLP’s future returns, it said that any withdrawal of investments in oil and gas companies “would probably” do so.

Separately, KLP announced early this November that it had again witnessed a significant inflow of funds during the third quarter - amounting to NKr10.4bn (c.£0.97bn) - with sixteen municipalities and around 150 enterprises becoming clients in the period.

The return on a value-adjusted basis after third quarter ended at 4.9%.  

Against the backdrop of KLP's move the World Bank indicated late this November that the organisation would only fund coal projects in circumstances of "extreme need" as climate change will undermine its efforts to tackle extreme poverty, according to the Bank's president Jim Yong Kim.