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Tuesday, July 23, 2024

Oil Fund under new political pressure

Norway’s huge Oil Fund is often used as the country’s politically correct investor abroad. Now several Norwegian politicians want to also use it as a “political tool” at home to promote climate measures, over the strong objections of the Conservatives’ Prime Minister Erna Solberg. She calls any such efforts “dangerous.”

Prime Minister Erna Solberg reacted strongly to her arch rival Jonas Gahr Støre’s suggestion at the Zero Conference last week that Norway’s Oil Fund is a “political tool.” Støre’s remarks have since fueled lots of debate. PHOTO: Alexander Eriksson/ZERO

Debate over how to best exploit the sheer financial power of the Oil Fund has been flowing since Solberg and Labour Party leader Jonas Gahr Støre squared off last week at a conference organized by the environmental foundation ZERO. The foundation’s stated goal is to “create a modern zero-emissions society where human activity won’t damage the climate.”

Støre, who leads the opposition in Parliament and is actively trying to take over Solberg’s job, claimed before a large audience of climate defenders and activists that “we have to get used to saying that the Oil Fund is a political tool.” He wants the managers of Norway’s sovereign wealth fund, in which the country’s oil revenues have been placed and invested since 1996, to look towards more investments in renewable energy. Such revenues are currently limited to just 2 percent of the fund’s market value, but Støre told business news service E24 that he hopes that can increase in the years ahead.

Oil Fund as ‘a machine for change’
Støre’s comments were enthusiatically received by other parties on the left side of Norwegian politics. “This is positive and I like his thinking,” said Torgeir Knag Fylkesnes, deputy leader of the Socialist Left party (SV). He told newspaper Klassekampen that the Oil Fund, “with its thousands of billions of kroner, should be a machine for change.”

Arild Hermstad of the Greens Party (MDG) agreed, claiming that Støre raised expectations that he’ll be more willing to “go much further in moving money away from fossil fuels and towards renewable energy in the Oil Fund.” Bjørnar Moxnes, leader of the Reds Party, called Støre’s remarks “good signals” that Labour will be willing to use “some of our 10,000 billion kroner on sensible climate and industrial policy.”

After years of promoting and protecting Norway’s oil industry, Solberg still wants to hang on to it and rejects efforts to turn its legacy, the Oil Fund, into a “tool” for promoting renewable energy. She’s shown here arriving at the Gudrun platform in the North Sea in 2014, before state oil company Statoil eliminated “state” and “oil” from its name by changing it to Equinor.  PHOTO: Statoil/Harald Pettersen

Støre’s comments were not at all welcomed by Prime Minister Solberg, however, who didn’t mince words in her reaction.

She said it would be “dangerous” for the Oil Fund itself, which is meant to save Norway’s oil wealth for future generations, to invest too heavily in risky areas that could harm the fund’s returns. Parliament approved investing up to NOK 120 billion (USD 13 billion) in unlisted infrastructure for renewables earlier this year, as long as that doesn’t exceed 2 percent of the fund’s value.

Solberg maintains that the Oil Fund’s management and investment decisions must be made solely out of economic considerations, not political. She claimed that Støre “is out driving in a direction that I think is stupid.”

Labour’s partner sides with Solberg
She won some support from the farmer-friendly Center Party, which has long cooperated with Labour, strongly supports Norway’s oil industry, and is regularly criticized for weak environmental and climate policies. Center Party leader Trygve Vedum tried to downplay Støre’s comments at the Zero Conference and to E24, and warned against putting the Oil Fund into political play.

“It would not be good to have political parties getting the Oil Fund to invest here and there,” Vedum told Klassekampen. “Then we should rather withdraw money from the fund through the annual budget debate, in line with the rules (that limit annual withdrawals to 3 percent of the fund’s market value) before we spend or invest the money.” If the fund’s own professional money managers think certain investments in renewables are “sensible,” he added, “then that’s fine. But I don’t think politicians should discuss how the fund should invest any more than it does today.”

The Oil Fund’s international investments on foreign stock exchanges have been guided over the years by an ethics panel appointed by the Finance Ministry. That’s what’s led to divestments in both oil and coal companies, and some specific companies that don’t meet the panel’s ethical standards.

Making the Oil Fund ‘greener’
The other left-wing parties in Parliament, which both Vedum and Støre would need to form a government to replace Solberg’s non-socialist coalition, disagree. They’ll be lobbying Støre, whose Labour Party remains the largest of them all, to go further in making the Oil Fund greener.

“We should use the fund to become a force in winning the climate battle,” Fylkesnes of SV told Klassekampen. Instead of checking whether investments meet the fund’s ethical guidelines, Fylkesness wants renewables, for example, to be pre-qualified. “The Oil Fund should be steered by the simple principle that it can’t invest in companies that undermine the Paris emissions goals,” he said.

The Reds, meanwhile, have proposed using money from the Oil Fund to set up a “green industrial fund” that could invest in the climate industry in Norway. SV has also opened up for investing Oil Fund money in Norway, for the first time.

“Nothing should be ruled out,” said Fylkesnes of SV. “We must do what we can to get us through this green shift.” Berglund



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