WORLD’S LARGEST SOVEREIGN WEALTH FUND BACKS COAL INVESTMENT

An expert group set up to advise the Norwegian government on the investment strategy of its sovereign wealth fund has strongly supported continued investment in coal and petroleum companies.

Norway’s Government Pension Fund Global, or GPFG, is the largest sovereign wealth fund in the world, valued at US$870 billion and this recommendation leaves the strategy of the divestment activists in tatters.

The view of the expert group is welcomed by the Australian coal industry and it reinforces the sensible view expressed by the Hon Peter Costello AC, Chairman of the Future Fund Board of Guardians who last month vigorously rejected calls by the Australian Greens for divestment of fossil fuels by the Future Fund.

The expert committee recommended that the GPFG continue to invest in fossil fuel companies noting energy products “constitute an important basis for our society, and fossil fuels – both petroleum and coal – will remain part of the energy mix for decades to come. The average investor must thus by definition be an owner of fossil fuel companies.”

The report should be compulsory reading for institutions in Australia investing on behalf of others but feel compelled to follow other objectives.

In particular they noted “we believe the use of the fund as a climate policy instrument beyond what is compatible with its role as a financial investor would be both inappropriate and ineffective.” It also said it did not believe the concept of ‘stranded assets’ is an appropriate guide to the investment strategy for the fund.

It is encouraging we are continuing to see a rejection of calls to divest from fossil fuels. Prestigious universities in the United States, including Harvard which has the largest university endowment fund in the world, Columbia, Cornell and the University of California have all made the same call.

Similarly the Vice Chancellor of the University of NSW Professor Fred Hilmer has sensibly pointed out: ‘We recognize that fossil fuels will be needed for many years to come to provide the energy and materials on which millions of lives depend.’

The Norwegian expert committee report serves as a good reminder that the divestment movement has no rational basis and its only intention is to stigmatise and damage important industries attempting to lift living standards for billons of people around the world.

From an Australian perspective coal remains our second largest export and is strong contributor to the domestic economy including providing over 200,000 direct and indirect jobs most of which are in regional areas.  It is welcomed that the industry continues to enjoy strong investor support which clearly recognizes the positive demand outlook for the decades to come.

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