GREENPEACE: Activists protesting Shell.
Norway has made billions from fossil fuels. Our US$900 billion Sovereign Wealth Fund – the world’s largest – has been harvested from nearly two decades of careful management of its oil wealth. But it’s time for Norway to turn its back on its oil-fuelled past, and embrace a different future.
On 28 February, the fund’s manager published data showing it had increased its holdings in oil majors during 2016 – companies including Shell, Exxon and the tar sands company Suncor.
To put these companies into perspective, Shell, BP, Chevron and Exxon are collectively responsible for more than 11% of all historic global industrial emissions. And extracting and burning tar sands is incompatible with preventing dangerous climate change, according to scientific research. Both Shell and Exxon have been under fire recently for knowing the facts about climate change for decades, but continuing to extract oil anyway.
But while Norway’s five million inhabitants continue to make money, maybe this doesn’t matter? At the moment the so-called Oil Fund owns stocks in around 9000 companies worldwide, including oil majors, and overall stock investments gained 8.7 percent in 2016. This amounts to tens of billions of dollars of gain.
Dirty oil money with losses on the horizons
The main driver behind this capital surge was Trump. His surprise victory boosted share prices as US markets factor in higher growth outlook due to tax cuts and deregulation.
But oil markets are notoriously volatile, and face an uncertain future. While oil companies confidently predict continuous growth in demand, recent research suggests that changing trends – particularly a switch to electric cars – could mean global oil demand levels out as early as 2020.
In 2016, global oil markets recovered slightly from a historic low of US$28 a barrel. The fossil fuel industry has been caught on the hop over the last few years by the rapid and unprecedented switch away from coal and towards renewables. The global oil industry could be facing the same sort of changes as coal over the next few years. Put simply, investing in oil may not be such a good bet after all.
Above all, oil burning drives climate change which threatens human survival. If we don’t change where we put our money, it makes no difference if Norway has a trillion dollars in the bank. This isn’t just about the lives of our grandchildren. Dramatic climatic changes look set to occur in the lifetimes of people alive today if we don’t reduce emissions very fast.
Can Norway make money without destroying the planet?
Last week, the US financial expert Tom Sanzillo was in Oslo. He made the case that investing in renewables could bring financial returns of up to 15%. Sanzillo used to oversee the New York State pension funds and bonds programs, amounting to over US$350 billion, so he knows how to make solid investments with a giant fund.
As he pointed out, huge fund managers like Brookfield Asset Management are already investing in renewables infrastructure – and are reaping huge rewards and managing the risks. China and India are leading the way in renewables investment. China installed an average of two wind turbines an hour throughout 2015 and will invest US$360 billion in renewables by 2020. Billions are being invested into India’s 100 gigawatt solar plan.
Sanzillo recommended that Norway screen out coal in 2015 and decision makers made an historic decision to do so on climate grounds. This was the biggest fossil fuel divestment to date anywhere in the world, sending a chill wind through the global coal industry. Soon after major coal company bankruptcies took place. Smart move then. But now it’s time to divest further from carbon majors and look to cleaner investments.
Time to act on solar and wind investments
Unfortunately, the Oil Fund actually reduced its largest investments in renewable energy companies in 2016, according to Future in our Hand’s most recent data. This is despite the fact that solar and wind costs are falling dramatically, and steady returns are rising. One example of the growth in renewables is the US solar market.
The annual government white paper on infrastructure comes out in one month’s time. MPs have dragged their feet on this issue for a decade, since the Fund first proposed it in 2006. This is the chance for Norway to invest in the type of infrastructure that would give us a shot at human survival, rather than the fossil giants of the past. We’re at a fork in the road – Norwegian decision makers must listen to its citizens as the world watches on.