Norway has the world’s largest sovereign wealth fund, with assets that correspond to $244,000 for every Norwegian. Managed by Norges Bank Investment Management, it is a key driver of the clean economy transition and climate action.
Founded in the 1990s to invest oil and gas revenues abroad, the fund has a portfolio of about 9,000 stocks. In 2017, it delved into renewable infrastructure for the first time.
Why Norway?
Norway is a highly successful country and is considered one of the world’s best investment destinations. Located in the Nordic region, it boasts a large population, high quality infrastructure, a modern economy and abundant energy resources.
In addition to its oil wealth, Norway is also a renowned tourism destination. The country is home to a number of stunning landmarks, including fjords, mountain peaks and lakes. It’s a fantastic place to visit, especially for tourists from the rest of Europe.
When it comes to culture, Norway is one of the world’s top tourist spots, with a thriving artistic scene and a rich heritage. It’s famous for its Viking history, but there’s plenty more to discover about Norway and the people who live here.
Norwegians are very proud of their country’s history, and it shows. Throughout their long history they’ve had numerous wars and unions with Denmark and Sweden, so it’s no surprise that they have a strong sense of national identity.
The country’s unique terrain is a result of glaciation, and many of the peaks are above 2,000 metres high. This means that many of the mountains are incredibly beautiful and provide excellent skiing opportunities.
It’s also home to a vast amount of wildlife, including polar bears, reindeer and wolves. A lot of the land is covered in forests and other vegetation, making it a great place for hiking and outdoor activities.
A UNESCO World Heritage Site, the country’s natural beauty is something that tourists will not want to miss out on. The country’s fjords are some of the most spectacular in the world and there are several boat tours around them, so you can see this unique landscape up close.
With a low unemployment rate, average salaries and a generous social welfare system, the Norwegian economy is very stable. Even during financial crises, the country has not been affected as much as many other European nations. This makes it a great place to invest in the future. Despite its relatively small domestic market, the government is willing to work with foreign companies and offer them a range of incentives.
Oil revenue
Norway has built up a very large sovereign wealth fund, worth over US $1 trillion. Its oil revenue is one of the largest sources of this cash flow.
The money comes from taxes on oil companies operating in the Norwegian waters. This is known as the severance fee. It was created to prevent oil companies from using Norwegians’ resources for their own financial gain.
During the early 1970s, when Norway began extracting oil from the North Sea, the government introduced the idea of an investment fund into which surplus oil revenues could be transferred for the benefit of the economy as a whole. It was hoped that the fund would help stabilize a country’s budget during oil price fluctuations.
Since then, the fund has grown to become the world’s largest. At year-end 2021, its market value was NOK 12 300 billion.
The market value of the fund is largely made up of investments in equities, fixed income and real estate. In addition to its own investments, the fund also holds a stake in several global companies.
Its ethics council weeds out companies that have been found to be grossly unethical or otherwise unfit for investment. This includes companies that have been involved in wars, abuse of human rights and corruption.
This is a big shift in policy for the world’s largest sovereign wealth fund. It means that politicians are now starting to take a political angle when it comes to deciding how the fund should be managed.
As a result, the fund’s managers are more likely to choose companies that support climate change policies and reducing emissions. They’re also less likely to hold shares in fossil fuel companies or make any investments that aren’t directly related to the oil industry.
While the fund’s investors are motivated to protect and build up their own wealth, they’re also committed to preserving and strengthening Norway’s national and economic prosperity for generations to come. Hence, the fund’s ethics council makes sure that its investments don’t harm the environment or the nation’s citizens.
It’s a stark contrast to the way the Alberta government, whose oil revenue is valued at a fraction of Norway’s total, manages its money. As part of the debate around how to best use their petroleum wealth, Albertans have been arguing whether the fund should be used for the state budget instead of saving it for future generations.
Investments
The sovereign wealth fund norway invests the profits from its oil and gas sector abroad, focusing on a wide range of global markets. The funds assets are worth over $1 trillion, with two-thirds in stocks. It is the world’s largest sovereign wealth fund.
It is managed by Norges Bank Investment Management (NBIM) and the Norwegian central bank and has a staff of more than 2,000 people, mostly in Norway. It invests around 80% of its assets in equities and 10% in fixed income.
During the last few years, it has made significant investments in renewable infrastructure and real estate. It has also delved into international stock markets for the first time.
In the next few years, NBIM plans to focus on a more active portfolio management strategy in order to enhance returns. This will include “accessing attractive assets at acceptable risk” across asset classes, and to invest alongside “best-in-class” investment partners with a proven development track record.
Another major area of investment will be in cyber risk, which NBIM believes is becoming a bigger part of the world economy. The bank says it will use its broad liquidity to protect its portfolio against a range of cyber attacks and cyber-criminal activity.
Finally, it will work to develop “strategic partners” in the oil and gas sector that are able to help it access opportunities in emerging markets. These are expected to be key areas of future investment, and will be a part of the fund’s medium-term plans under chief executive Nicolai Tangen.
The Norwegian government’s ethics guidelines require the Sovereign Wealth Fund to exercise ownership rights in companies with the aim of promoting good and responsible conduct and respecting human rights and the environment where this is consistent with its financial interests. Moreover, the Ministry of Finance can decide to exclude fund investments in companies where there are serious reasons to believe that they could become complicit in grossly unethical activities.
Sustainability
Norway is one of the world’s richest nations, and its sovereign wealth fund is the largest. The fund is responsible for the country’s vast petroleum revenues and invests it to benefit citizens. Its economy is known for its high living standards, moderate inflation, low public debt, and a vibrant private sector that consists of both government and non-government companies.
The government-controlled fund, which is managed by Norges Bank Investment Management (NBIM), recently announced a plan to push its 9,300 shareholders to reduce their carbon emissions by 2050. NBIM said it would help the companies it invests in cut their emissions by engaging them in setting credible initial targets and creating plans to reach those goals.
Earlier this year, NBIM also started to divest from some companies that had failed to meet its environmental criteria. It has been trying to diversify away from bonds, equities and real estate into renewable energy investments.
In addition to that, the fund has established a new climate advisory board to develop its approach to managing “climate-related financial risks and opportunities” in its investment portfolio. The advisory board will help the fund identify companies that have strong sustainable strategies and track their progress.
This approach differs from many other investors, which tend to focus on short-term financial returns and low risk. It also systematically considers the environment, social responsibility, and corporate governance factors in its decision-making process.
The fund also has strict ethical guidelines that ban investments in companies that violate human rights or war crimes. However, there are some exceptions, such as nuclear arms and cluster munitions.