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Doublethink: Norway’s Pension Fund to stop investing oil profits in climate change and deforestation

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DoublethinkNorway is by far the biggest donor to REDD initiatives around the world, with two billion dollar deals, one in Brazil and one in Indonesia. But Norway’s Pension Fund invests way more in companies responsible for rainforest destruction.

In October 2011, Rainforest Foundation Norway and Environmental Investigation Agency wrote to Norway’s Prime Minister, Jens Stoltenberg, about the deforestation caused by some of the companies in which the Pension Fund invests. In March 2012, Rainforest Foundation Norway and Friends of the Earth Norway published a report titled “Beauty and the Beast”, highlighting the contradictions in Norway’s investments.

The Norges Bank Investment Management (NBIM) is responsible for investing the assets of the US$650 billion Norwegian Government Pension Fund Global. In September 2012, NBIM produced a report titled “NBIM investor expectations: Climate change risk management”, which includes the following statement:

NBIM expects companies to manage risk associated with the causes and impacts of climate change resulting from greenhouse gas emissions and tropical deforestation. Our expectations are directed at companies with operations or value chains in sectors and regions materially exposed to such risk.

The report notes that “there is overwhelming scientific evidence that climate change threatens long-term financial returns”.

This is an important acknowledgement from NBIM that investing in companies that destroy rainforests is a problem. Rainforest Foundation Norway welcomed the change. In a statement, Lars Løvold, director of Rainforest Foundation Norway, said,

“This decision is a turnaround from the Norwegian government and an important step forward in the battle to save the world’s rainforests. Companies responsible for deforestation now get a message from one of the world’s largest investors that it is unacceptable to continue destroying rainforests for profit.”

In its Investor Expectations report, the NBIM states that,

When assessing companies that are exposed to risks related to tropical deforestation, NBIM considers the following questions:
 

  • Does the company disclose information on its tropical forest footprint, how it monitors its impact on tropical forests over time, and its assessment of whether it poses a risk to its business operations?
  •  

  • Has the company, or its suppliers, committed to achieve compliance with international standards for sustainable production of agricultural commodities, or sustainable forest management?
  •  

  • Does the company report on the implementation of its commitments to reduce tropical deforestation?

What happens next will be interesting. The NBIM does not specify which international standards companies should commit to achieving. Neither is there any deadline set for actually achieving these standards.

The NBIM expects companies “to identify material risks, define an optimal mitigation strategy and take action to implement that strategy”. Companies are to “disclose sufficient information demonstrating an effective approach to climate change risk, including risk related to tropical deforestation”.

Here’s a list of the Pension Fund’s top ten largest investments, as of 30 September 2012:

Norwegian Pension Fund Top Ten

In fourth place on the Pension Fund top ten list, is HSBC, the UK banking and financial services company. Norway’s Pension Fund has US$4.3 billion invested in HSBC. In June 2012, a report by a US Senate committee found that HSBC provided a conduit for “drug kingpins and rogue nations”. Earlier this month, Global Witness released a report that details how HSBC has bankrolled logging companies operating in Sarawak. The companies have caused “widespread environmental destruction and human rights abuses”, despite HSBC’s sustainability policies. HSBC earned about US$130 million in the process.

This top ten also includes a total of US$14.3 billion invested in oil and gas companies. REDD-Monitor looks forward to seeing how Royal Dutch Shell, Exxon Mobil Corp, BG Group and BP explain to the Pension Fund their approach to climate change risk. Of course, since the money in Norway’s Pension Fund comes largely from the country’s oil profits, Norway is itself already greatly increasing climate change risk.

Mark Curtis’ 2010 report about Norway’s foreign and development policy, is titled “Doublethink”, a term from George Orwell’s book, 1984. Doublethink is the ability to hold two contradictory beliefs at the same time. “Norwegian ministers seem to think that they can have a large oil industry and lead the fight against climate change,” Curtis writes.
 


Full Disclosure: REDD-Monitor has received funding from Rainforest Foundation Norway. Click here for all of REDD-Monitor’s funding sources.
 

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