Norwegian pension fund more than triples investment in green assets

kristy Green Prosperity

A publication from Fund Balance

Environmental Finance:

22 March 2011

Norway?s Government Pension Fund Global has more than tripled its
green-themed assets under management to NOK25.7 billion ($4.6 billion) in
one year.

Last year, Norges Bank Investment Fund (NBIM), which manages the pension
fund, awarded six mandates with a focus on environmental investments, the
fund said in its annual report released last week. This brings to nine the
total number of green-themed investment mandates, split evenly between
clean energy, water management and environmental technology.

Assets managed under the environmental mandates totalled NOK 7.3 billion
in 2009, the first year NBIM awarded such mandates. The mandates are
subject to the same profitability requirements as the fund?s other
investments, the fund said.

The Government Pension Fund Global has more than NOK3 trillion in total
assets under management.

Green stream: Norway?s leading pension fund boosted environmental
investments to $4.6 million in 2010

All of the environmental mandates awarded in 2010 went to external
managers and, as of the end of last year, seven of the nine were managed
externally. Internally managed asset totalled NOK14.5 billion while
externally managed assets amounted to NOK11.2 billion.

In 2010, the pension fund returned 9.6% or NOK264 billion, which NBIM
attributed to broad gains in the global stock and bond markets. However,
returns were significantly down from 2009?s record of NOK613 billion.

Despite the fund boosting green investment, the best performing stock
sector was basic materials, followed by industrial and consumer goods.
Food giant Nestlé posted the fund?s biggest stock gains, measured in
Norwegian currency returns. The fund did not disclose the performance of
the environmental mandates.

Penny Shepherd, chief executive of UK sustainable investment association
UKSIF, said increasing exposure to climate change-related investments
?makes long-term financial sense?. While some less green companies and
sectors may perform well in the short term, there is an ?underlying
strategic direction? toward a transition to a low-carbon economy, she

Mark Robertson, spokesman for London-based EIRIS, an environmental, social
and governance research organisation, said the Norwegian fund?s increasing
environmental investment is part of a wider focus on green investment among
institutional investors.

?We work with some of the world?s biggest institutional investment funds
and, on that basis, it?s a trend we?re seeing,? he said, adding that
investors are considering not only the returns on environmental
investments, but also the issues associated with climate risk and the
reputational benefits of investing in greener companies.
Norwegian pension fund quizzes climate change, water risk

In late 2010, the fund updated its expectations in relation to how
companies in which it invests manage the risk of climate change. In its
annual report, the fund said an assessment of 40 companies revealed 18
companies ?slightly improved? their disclosure with the fund?s climate
expectations, while the disclosure of 10 companies worsened.

On water management, it found 44% of the 431 companies the fund assessed
report on water management, usage and associated risk, ?indicating that
such issues are of concern to companies?. However, only 9% report on how
they manage water in their supply chain.

Charlotte Dudley