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Wednesday, July 17, 2024

Critics attack Oil Fund changes

Finance Minister Siv Jensen’s plans to change the management of the country’s huge sovereign wealth fund, announced on Friday, quickly met a torrent of criticism. Critics argued that disbanding the fund’s ethical council would reduce independence and transparency, and that the new plan does nothing to safeguard human rights or encourage more environmentally investments.

Statoil's CEO Helge Lund said the "Snorre" field in the North Sea stands to see its profitability cut by 30 percent if the tax hike on oil companies goes through. PHOTO: Statoil/Terje S Knudsen
Norway’s massive oil wealth has been invested in the so-called “Oil Fund,” the world’s largest sovereign wealth fund. The government outlined plans on Friday to disband an ethics council advising on responsible investments, saying ethical decision-making would be stronger and more effective if handled by the fund itself. That’s attracted criticism from politicians and interest groups, who say the move reduces transparency and accountability, and does little to safeguard human rights or encourage wider investment in green technologies. PHOTO: Statoil/Terje S Knudsen

Jensen met political resistance as soon as she presented the proposed changes to the so-called “Oil Fund”. Some claimed the changes may consolidate too much power with the central bank, while others bemoan the absence of firm plans to diversify the fund’s investments away from fossil fuels and towards renewable energy.

Jensen’s own sister, Nina Jensen, who heads the environmental organization WWF in Norway, claimed the government had completely “broken its promise” last month of using the Oil Fund as a means of trying to help halt climate change.

Jensen argued that the fund’s management of “responsible investments” would be strengthened if the Norges Bank Investment Management (NBIM) unit got to choose which companies to invest in, as well as handling the day-to-day management of the fund. The overhaul is based on the advice of a strategy council set up last year to examine the best use of the ethical council, finance ministry and central bank’s combined resources.

Two of the government coalition’s cooperating parties, the Christian Democrats (Kristelig Folkeparti, KrF) and the Liberals (Venstre), immediately announced they did not support the scrapping of the ethics council. Both agreed with making Oil Fund investments more ethical, but said they were skeptical about giving the central bank (Norges Bank) the power to decide which companies to exclude from the fund. NBIM was criticized just last month for inappropriate investments.

Venstre believes the independence of the council is very important to safeguard,” said finance spokesman Terje Breivik. “I give all credit to the ethics council, which is one of the reasons that the Oil Fund garners international recognition.” It could be difficult for Jensen to disband the council without the two parties’ support when the government’s proposal is debated in Parliament after Easter.

UN warned against moves
Jensen denied the changes threatened independence, transparency and accountability, saying the criteria for excluding companies and the ethical considerations remained unchanged. “And we’re creating an expert role on the outside which will actively evaluate the achievements,” she told newspaper Dagsavisen.

Virginia Gomes from the United Nations (UN) Committee on Economic, Social and Cultural Rights, was among those who remained unconvinced. “I see no reason to close down the ethics council,” she told news bureau NTB. “It is the ethics council that will ensure awareness of human rights violations. What advantage would the state have from this?”

Gomes said reduced openness could lead to less debate over the fund and the human rights aspects of the investments. “You could then experience a lack of trust from the public,” she warned. “I therefore see no reason for Norway to go down this path.”

Centre Party (Senterpartiet, Sp) finance spokesman Trygve Slagsvold Vedum told Dagsavisen the best approach was to strengthen ethical work both within Norges Bank and the ethics council. “It is wise and good to have an external adviser who asks questions about the management of the world’s biggest fund,” he said. Instead of scrapping the council, Vedum proposed it should get the power to remove individual companies from the oil fund itself.

Calls for greener investments
Environmental advocates like Nina Jensen said they would hold the government to making the Oil Fund greener, with more investment in renewable energy and sustainable companies, and more projects in poor countries. Her finance minister sister claimed that the value of investment stakes in green companies would in fact rise.

Various organizations called for a separate mandate for renewable energy investment, more funds into infrastructure facilitating production and distribution of green energy, and an expert group to review the fund’s investments in coal, gas and oil. Among them was Sony Kapoor, who heads the Re-Define think thank that’s been critical of the Oil Fund’s lack of diversification in its investments. He issued a statement on Friday suggesting that Jensen’s changes “will endanger the future prosperity of Norwegians” because of the government’s “failure to recognize and mitigate the excessive exposure that the future value of the Oil Fund has to fossil fuels.” He also called the “absence of a coherent strategy” to diversify the Norwegian economic base away from oil and gas and towards green technologies and biomedicine “extremely shortsighted.”

The head of the WWF’s international climate and energy arm, Samantha Smith, said the Norwegian oil fund should follow Denmark’s lead. Renewable energy infrastructure makes up more than 5 percent of Denmark’s portfolio. “The Oil Fund is the world’s largest sovereign wealth fund,” she told Dagsavisen. “It can set a standard for others. The world currently invests more than 1,000 billion dollars in new coal, oil and gas projects, on top of the existing infrastructure. Only a quarter of that sum is invested in renewable energy.”

Norway’s sovereign wealth fund investments include stock, bonds and real estate across more than 8,000 companies in 82 countries. Its market value has made it the biggest sovereign wealth fund in the world. Woodgate and Nina Berglund



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