The world's largest sovereign wealth fund, Norway's $1.3 trillion sovereign wealth fund, revealed its first investment in clean energy infrastructure on Wednesday, as part of a diversification away from bonds, equities, and real estate amid a global drive to combat climate change.
• Norges Bank Investment Management (NBIM), Norway's central bank's asset management arm that manages the sovereign wealth fund, has agreed to buy a 50% stake in the Borssele offshore wind farm in the Netherlands from Danish energy company Ørsted A/S for €1.375 billion ($1.63 billion).
• When the sale is completed — in the second or third quarter of 2021 — Ørsted will remain a co-owner and manager of the wind plant.
• According to NBIM, Borssele – the world's second-largest working wind farm – has a capacity of 752 megawatts and can meet the average electricity demand of around 1 million Dutch households.
• According to Line Aaltvedt, an NBIM spokeswoman, the sovereign wealth fund has a requirement from Norway's parliament to spend up to 2% of its assets in clean energy assets and ventures.
· The fund was given permission by parliament to invest in clean energy assets for the first time in 2019 and assessed eight other projects before investing in the Dutch wind farm last year.
The sovereign wealth fund, which was founded in 1990 as a platform for investing Norway's large oil and gas revenues, has previously only invested in stocks, bonds, and real estate. The fund currently holds shares in more than 9,000 firms around the world, including Apple, Microsoft, and Samsung, and has a 1.4 percent interest in all publicly listed companies in the world.
“We think we have a competitive advantage in that we’re a large fund that can write a large check. This [renewable energy] is an area where we see a lot of opportunities going forward. For the fund, we see the diversification it can give us,” Mie Holstad, chief real assets officer at NBIM, said.
On Wednesday, Holstad told Bloomberg that the fund, which delivered $123 billion in returns in 2020, is looking for renewable energy projects to invest in, mainly in Europe and the United States. Due to high competition and unattractive pricing, NBIM's chief executive Nicolai Tangen told Reuters in October that the fund was having trouble finding viable renewable investments. Some sovereign wealth funds, on the other hand, have been investing in renewable energy ventures.
A subsidiary of Qatar Investment Authority, the oil-rich Persian Gulf state's sovereign wealth fund, partnered with Italian energy company Enel in January to build and run renewable energy plants in South Africa and Zambia. In November, a division of the Abu Dhabi Investment Authority, the world's third largest sovereign wealth fund, in collaboration with the Ontario Teachers' Pension Plan Board announced a $1.25 billion investment in Equis Development, a Singapore-based clean energy company.
The Sovereign Wealth Fund Institute (SWFI), which analyzes the portfolios of sovereign wealth funds and other major global investors, warned, however, that sovereign wealth funds have been slow to invest in renewables. According to SWFI, sovereign wealth funds invested $10.26 billion in fossil fuel sectors in 2020, while only $1.17 billion were invested in renewables. In 2019, sovereign wealth funds made direct investments in fossil fuels totaling $6.18 billion and renewables totaling $2.89 billion.