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Norway wealth fund faces ban on US$4.5 billion in coal investments

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Tanker ships sit moored in the port at the Mongstad oil and gas refinery, part-owned by Statoil ASA, near Bergen, Norway. Norway's parliament reached an agreement to ban the country's US$890 billion sovereign wealth from investing in companies that base at least 30 per cent of their business on coal or revenue from the fuel.

[OSLO] Norway's parliament reached an agreement to ban the country's US$890 billion sovereign wealth from investing in companies that base at least 30 per cent of their business on coal or revenue from the fuel.

The decision, backed by all parties, will be announced in the Oslo-based legislature's Finance Committee on Thursday, according to a statement from the ruling Conservative Party. The ban could include 50 to 75 companies with an investment of 35 billion (US$4.5 billion) to 40 billion kroner, according to an estimate by Norwegian Finance Minister Siv Jensen.

"Investing in coal companies poses both a climate-related and economic risk," said Svein Flaatten, a Conservative member of the committee.

The move comes after the minority Conservative-led government balked at more restrictions on the world's biggest wealth fund, arguing it shouldn't become a political tool. The fund has also already sold out of the biggest pure coal miners and earlier this year sent letters to the biggest power producers it owns, including EON SE, to provide information on their strategy and timeline for phasing out coal.

Banning the fund from investing in utilities that use more than 30 per cent of coal in their fuel mix would force it to sell stakes in power producers such as RWE AG, SSE Plc and Duke Energy Corp., all among the investor's top 10 holdings in that industry, according to presentation material from the fund. Those three holdings alone represented US$1.7 billion at the end of 2014, according to the fund's website.

Rising Pressure Marthe Skaar, a spokeswoman for the fund, said in a text message that it will "adapt to potential amendments in our mandate" from the Finance Ministry.

Pressure is rising on coal producers and companies that use the fuel to switch to sources with lower carbon emissions. Investors from Stanford University to pension funds such as KLP and the Church of England have pledged to reduce or scrap such holdings.

"It's a very good start," said Rasmus Hansson, a member of parliament for Norway's Green Party. "We've crossed an important line declaring the fund as a climate policy vehicle."

The Norwegian fund's investment in pure coal producers has plummeted to about US$65 million, according to the presentation to parliament. Coal producers represent 0.01 per cent of its equity portfolio. It's still invested in companies focused on production of metallurgical coal used in steel.

The fund owns about 31 billion kroner of stocks in the mining industry, including top-ten stakes in Glencore Plc and Anglo American Plc. Its equity holdings in power-producing companies amount to about 109 billion kroner, including stakes in Iberdrola SA, GDF Suez and SSE Plc.

BHP Billiton Ltd and Rio Tinto Group, the world's two biggest mining companies, derive less than 30 per cent of their sales from coal. Glencore, the world's largest exporter of coal, also falls under the threshold thanks to its commodity trading business.

"The maximum limit of 30 per cent coal in any company that has been set by the Norwegian Parliament today represents a new global standard for investments that we expect will represent a global challenge to the entire fossil fuel industry in the years to come," said Truls Gulowsen, head of Greenpeace in Norway.

BLOOMBERG