Norway (Washington Insider Magazine) -Norway’s sovereign wealth fund has come into the spotlight as the Nordic country reaches the final stretch for its elections due to be held on September 13th.
After an unprecedented 2-terms in power for a Conservative-led minority, polls now put Labour leader Jonas Gahr Store at the front of the pack. His party has traditionally dominated Norwegian politics and will consider the last decade a disaster if they’re kept out of government for a 3rd consecutive election.
The country’s sovereign wealth fund has been a huge success since its inception in 1990. A few years earlier Britain had benefited from surplus revenues in its petroleum sector which was mostly spent. Norway on the other hand decided that future generations should receive a share in the resources generated by the oil wealth and the investments made have grown rapidly since. It currently owns around $1.3trillion in assets, which is fourfold its total from a decade ago and twentyfold its 2001 size. It owns on average a 1.4% stake of every listed company in the world.
With such a large responsibility, politicians were in agreement during its early years that it should remain a non-political and purely financial fund. With the global rise in green investment however has come increased pressure to use the wealth in line with Norway’s values.
Already some concessions have been made. The fund currently rules out cigarette companies, nuclear weapons producers, coal producers and intensive users, and pure oil explorers as unsuitable investments. Considering its fossil fuel foundations, some politicians have said the idea the fund can take a principled pro-climate stance is hypocritical.
The country’s relation to its pool of wealth has also been nudged by the economic impact of Covid-19 and the drop in oil prices. For the first time ever, it has been made to sell assets as Norway’s withdrawn a record amount of money from the fund.
This financial hardship has been an incentive for the Conservative party to clamp down in saying that this is no time to disrupt the oil fund, which has always been expected to stay out of things like foreign policy and remain apolitical. Store, who is a former foreign minister for Norway, disputed the long-standing stance when he claimed in 2019 that “we have to get used to saying that the oil fund is a political tool”.
The sheer size of the fund means it holds sway in capital markets. The ability to lead change and encourage others to engage in socially responsible investing (SRI) is certainly there. Where Norway deems itself in a fiscal position to take on such a role is another question, let alone what way they would try and lead markets if they decided to step in. Karin Thorburn of the NHH Norwegian School of Economics was recently appointed to a government-led committee to look at the oil fund’s climate risks said “There’s no such thing as non-political. To some extent, every decision is political.
