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IEEFA update: Norway moves to invest in unlisted renewable energy

December 17, 2018
Tom Sanzillo

Norway’s pension fund, the Government Pension Fund Global (GPFG), has launched a modest investment initiative in unlisted renewable energy infrastructure. And the truth is, when GPFG, the world’s largest sovereign wealth fund, makes a modest investment, it is anything but modest.

GPFG, worth more than $1 trillion, has historically strayed only infrequently from a conservative paradigm of stocks and bonds. Thus the adoption of unlisted renewable energy infrastructure investments is a big deal.

The final details of the investment strategy will be agreed upon in the spring, but the long sought after consensus within the Norwegian government seems clear. Over the last three years, the fund has conducted a diligence process to determine whether there is a “fit” for this new form of investment in the growing solar, wind and other green sectors. Unlisted infrastructure poses new questions about GPFG’s returns, asset classification, governance, transparency, and geographic mix, as well as foreign policy.

Can renewables provide an adequate rate of return? Yes!

The first test was whether an adequate rate of return could be met. The answer is yes. Prequin, which provides and monitors financial data and information on the alternative assets market, places average returns in the industry in the range of 10% over the last decade.

The remaining risk factors have all been determined to be manageable. To address these issue GPFG has decided to place the investment in its environmental mandate fund – a pool of approximately $9 billion. The ceiling on this fund is to be raised as details are finalized, but earlier discussions place an initial goal of about $3-$4 billion over time in the unlisted space.


First, a major institutional investor is now joining the growing ranks of investors that have taken a look at this sector and determined its cash position is sound, exit strategies healthy and outlook positive. The Norges Bank, GPFG’s chief advisor, points out there are now 13 pure play renewable funds globally attracting investment. This network of fund managers and investment support suggests steady, stable partners are available to the fund. It also recognizes that there is a growing consensus within national governments of all shapes and sizes that nurturing these investments is part of a healthy economic development strategy. Norway’s final action will serve as a kind of invisible investment upgrade.

Second, the gradual approach suggests GPFG will seek relatively low risk investments as it enters the market and then, as staff and advisers develop deeper understanding, will move with confidence into a broader portfolio with additional investments. The Norges bank speaks to adding staff and new advisers and acknowledges that the future for renewable energy will be increasingly in emerging markets.

The entrance of GPFG into the unlisted renewable energy space is a positive financial sign. It follows several other funds that are taking steps to pursue opportunities in the broader renewable energy space. New York State Comptroller Tom DiNapoli recently announced that the New York State Common Retirement Fund is expanding its low emissions investment program to $10 billion.

The pace of change in the financial markets, however positive, is too slow to address the kind of changes outlined in the recent report from the International Panel on Climate Change (IPCC). Capital reallocation is a critical ingredient to bringing about a realignment of societal priorities to combat climate change, but it is not a substitute for the collective work of peoples and nations to substantially reduce carbon emissions.

Tom Sanzillo ([email protected]) is IEEFA’s director of finance.


IEEFA Report: Norway Sovereign Wealth Fund Stands to Gain by Investing Now in Renewable Energy Infrastructure

IEEFA Report: Renewable Energy Opportunity Now for Norway’s $976 Billion Pension Fund as Global Institutional Capital Migrates Out of Fossil Fuels

IEEFA Update: Norway Shows What to Do With Fading Oil and Gas Holdings

Tom Sanzillo

Tom Sanzillo is Director of Financial Analysis for IEEFA. He has produced influential studies on the oil, gas, petrochemical and coal sectors in the U.S. and internationally, including company and credit analyses, facility development, oil and gas reserves, stock and commodity market analysis, and public and private financial structures. He also examines such areas as community and shareholder activism, institutional investment, public subsidies and Puerto Rico’s energy economics.

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