The in-house manager for Norway's Government Pension Fund Global, Oslo, has excluded 10 companies based on its coal guidelines for observation and exclusion.
The move by Norges Bank Investment Management follows its third round of analysis of companies that may be affected by the criteria, and includes all companies' private subsidiaries that issue bonds. Companies that issue Green bonds, or subsidiaries deemed to have significant renewable energy activity, are exempt from the exclusions. Exclusions following the fund's first and second rounds of analysis were revealed in April and December.
NBIM has also placed two companies under observation. Companies may be placed under observation where there is doubt as to whether the conditions for exclusion have been met, or where observation is deemed appropriate for other reasons. A total of 69 companies have been excluded under the guideline and 13 companies are under observation.
The Ministry of Finance introduced product-related criteria under the guidelines, effective Feb. 1, 2016. Where thermal coal is a significant part of the company's business activities, it may be excluded from the fund. Coal power companies and mining companies that base 30% or more of activities on coal, and/or derive 30% of revenues from coal, may be excluded from the 7.6 trillion Norwegian kroner ($902 billion) fund.
The companies are CEZ AS, Czech Republic; Eneva SA, Brazil; Great River Energy, U.S.; HK Electric Investments & HK Electric Investments Ltd., Hong Kong; Huadian Energy Co. Ltd., China; Korea Electric Power Corp., South Korea; Malakoff Corp. Bhd, Malaysia; Otter Tail Corp., U.S.; PGE Polska Grupa Energetyczna SA, Poland; and SDIC Power Holdings Co. Ltd., China. The two companies under observation are based in the U.S. — NorthWestern Corp., and Portland General Electric Co.
A spokesman for NBIM said the benchmark value in the portfolio of the excluded companies was 2.3 billion kroner.