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World's largest wealth fund blacklists Glencore, other giants over coal use

Wednesday’s announcement, in a statement issued by the fund, is the first to show the tougher rules being applied.

Picture: AFP

OSLO - Norway’s $1 trillion wealth fund is excluding some of the world’s biggest commodities firms from its portfolio, including Glencore and Anglo American, because of their use and production of coal.

Underlining the growing role of climate considerations for long-term investors, the fund is also excluding German utility RWE, South African petrochemicals firm Sasol and Dutch company AGL Energy over their use of coal.

Norway’s parliament agreed in June 2019 to toughen existing limits on coal investments by the world’s largest fund by excluding companies that mined more than 20 million tonnes of coal a year or generated more than 10 gigawatts of power from coal.

At the end of 2019, the fund held stocks worth $1.6 billion in such companies, according to fund data.

Wednesday’s announcement, in a statement issued by the fund, is the first to show the tougher rules being applied.

The fund, set up in 1996 to save Norway’s oil and gas revenues for future generations and which now holds about 1.5% of globally listed shares, sells holdings before announcing any exclusions to avoid excessive market moves.

The fund put another set of companies - BHP, Uniper, Enel and Vistra Energy - under observation for possible exclusion later if they did not address their use or production of coal.

The value of holdings in this group stood at $3.9 billion at the end of 2019.

“This is good news that the biggest producers of coal in absolute terms are finally out of the fund,” Else Hendel, acting environmental policy leader at green group WWF Norway, told Reuters.

EXCESSIVE EMISSIONS

The fund operates under ethical guidelines set by parliament and excludes companies from its portfolio that do not respect them. Its exclusions are often followed by other funds.

The fund also said it was excluding four Canadian oil companies for producing excessive greenhouse gas emissions, the first time it has used that reason to blacklist firms from its portfolio.

Canadian Natural Resources, Cenovus Energy, Suncor Energy and Imperial Oil were excluded for “acts or omissions that on an aggregate company level lead to unacceptable greenhouse gas emissions,” it said.

The fund held stock worth $1.15 billion in these companies at the end of 2019.

The fund said on Wednesday it had taken a long time to sell shares of several excluded firms due to the “market situation, including liquidity in individual shares,” following weeks of global financial market turmoil due to the coronavirus crisis.

Responding to Wednesday’s announcement, Anglo American said: “We are working towards an exit from our remaining thermal coal operations in South Africa, ensuring that we do so responsibly.”

“We continue to examine suitable opportunities for our minority stake in Cerrejon,” it said, referring to a Colombian mining venture with BHP, Anglo American and Glencore.

Sasol said it was implementing an “emission reduction framework underpinned by short and medium-term targets,” although it said coal would continue to play role in South Africa during a transition to lower carbon energy sources.

Enel said it was developing its business in line with the Paris climate accords, which seek to limit the rise in global temperatures to 1.5 degrees Celsius and cut emissions to zero by 2050.

Uniper said it was in a dialogue with the fund about being under observation for possible exclusion.

“Uniper in its strategic new focus has presented a clear exit plan from coal and aims for climate-neutral power production in Europe by 2035,” said a company spokesman.

At RWE, a spokesman said the company had cut carbon dioxide emissions by 90 million tonnes since 2012 and committed itself to becoming climate neutral by 2040. It was investing around 5 billion euros ($5.43 billion) in the expansion of renewables up to 2022.

“Instead of quantitative stock-taking, the speed with which a company changes should be considered in our view,” said the company spokesman. “Already today, we are among the globally leading companies for renewable energies.”

Glencore declined to comment. BHP, AGL Energy and Vistra Energy were not immediately available for comment.

Canadian Natural Resources, Cenovus Energy, Suncor Energy and Imperial Oil did not respond to requests for comment after market hours.

UNACCEPTABLE

Parliament’s move last year tightened the fund’s existing rules that barred it from investing in a company that derived more than 30% of its revenues or activities from coal.

Excessive greenhouse gas emissions became a criterion for exclusion four years ago, joining grounds such as human rights violations and the production of nuclear arms, landmines and tobacco.

But the board of the central bank, the fund’s ethics watchdog and Norway’s Finance Ministry took time to agree on what constituted an unacceptable amount of emissions.

The Council on Ethics examined oil, cement and steel companies before recommending exclusions based on excessive greenhouse gas pollution.

The council makes recommendations to exclude companies or put them under observation. But a final decision rests with the board of Norway’s central bank.

The fund said three companies were excluded for causing environmental damage, namely Egypt’s ElSewedy Electric Co, Brazilian iron ore miner Vale SA and Brazilian power company Eletrobras.

Vale declined to comment. Eletrobras and ElSewedy could not immediately be reached.

The fund reverses exclusions if concerns are addressed. On Wednesday, it said New York-listed AECOM and Hong Kong-listed Texwinca Holdings Ltd were again eligible for investment.

AECOM had been excluded for involvement in producing nuclear arms, a business it has now discontinued, the fund said. Texwinca had been sidelined over perceived breaches of workers’ rights by a subsidiary that has since been liquidated.