Norway $1tn SWF on Cusp of Unlisted Investing

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Stockholm (NordSIP) – Norway’s ruling Conservative Party voted Saturday to allow the country’s $1 trillion sovereign wealth fund to invest in unlisted renewable projects, strengthening the possibility that the fund will be able to invest in this asset class, which includes solar parks and wind farms.

“Let the fund invest in unlisted infrastructure for renewable energy with the same demand for profitability as for other investments,” the motion read.

Divisions have emerged within Norway’s minority coalition government, which includes the Conservative Party of Prime Minister Erna Solberg, the right-wing Progress Party and the pro-green centrist Liberal Party, however, related to debate over what kind of investor the SWF should be. “Private equity may risk the entire Norwegian asset management model,” ex fund official and associate professor at the BI Norwegian business school in Oslo Espen Henriksen told the Financial Times.

It follows there is a split between those within the government arguing that the fund should continue to invest in publicly traded securities, and those who wish for it to behave more like a pension fund, with investments in a wide range of unlisted assets.

“Opening for [e.g.] infrastructure gives the fund the possibility to diversify, which will be good for the fund. In addition, it is a good bonus that it will contribute towards a shift to a low-carbon society, which must happen globally if we are to achieve climate targets,” Tina Bru, a Conservative lawmaker in favour of the motion told Reuters.

A second motion put forward suggested the government “should consider whether to let the fund invest in unlisted infrastructure and unlisted firms, with the same demand for transparency, return and risk as for other investments.”

The SWF has expressed dissatisfaction in the past that it was missing good opportunities because it could not invest in unlisted firms. It is currently only allowed to invest in unlisted firms on the cusp of stock exchange listing. It recommended in January that it be permitted to invest in private equity, starting by investing in funds or alongside them. It is presently not allowed to own above 10 per cent of the equity of listed companies outside Norway.

The request had met with scepticism within the government prior to Saturday’s vote. “One of the dangers, if you allow way more discretion for the fund managers, is that it removes the restraints for politicians to also suggest investments,” Henriksen said, reiterating concerns from Norwegian politicians that their ability to make the fund invest more in asset classes like renewable energy and emerging markets would be curtailed.

One fear is that allowing investment in the broader equity market will actually dilute its responsible investments in favour of more traditional industrial or technological ones.

In addition, the government received a report by Swedish academic Per Stromberg in January warning of the risks to the fund being associated with an industry “perceived to avoid taxes and to lack transparency about fees.”

A white paper on the fund’s investment prospects will be presented by Norwegian Finance Minister Siv Jensen Tuesday.

Image: (c) welcomia-shutterstock.com

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