OSLO (Reuters) - Norway’s $1 trillion sovereign wealth fund will be able to invest again in British power firm Drax Group as the firm has cut its use of coal in producing electricity, the central bank said on Thursday.
Drax had been excluded from the world’s largest sovereign wealth fund after Norway passed a law in 2015 banning the fund from investing in companies that derive more than 30% of their revenues or activities from coal.
“The company has undergone significant restructuring, with a transition from coal to biomass as fuel,” the central bank said in a statement.
“Our estimates now indicate that the company’s coal power capacity is less than 30% of the total power capacity by a good margin, and thus that the company bases less than 30% of its operations on coal.”
The wealth fund is managed by a unit of the Norwegian central bank.
It was the first major fund to ban coal companies and those divestments in 2015 prompted other long-term investors to set similar guidelines, including German insurer Allianz later that year.
The rules were tightened last year and, in addition, the fund can no longer invest in companies that mine more than 20 million tonnes of coal annually or generate more than 10 gigawatts (GW) of power from coal.
Drax welcomed the move. “It’s great news that the Norwegian oil fund has recognized the pioneering transformation at Drax,” the company said in a statement.
“Converting Drax from coal to sustainable biomass has reduced emissions at Drax by over 80% since 2013, making us the largest renewable power generator in the UK and the biggest decarbonization project in Europe.”
Drax has converted four of its six coal power units to using biomass, with the remaining units set to close by 2024 at the latest under Britain’s plans to phase out coal-power generation.
It has set a goal to become carbon negative by 2030, claiming it would be the first company worldwide to do so.
Reporting by Gwladys Fouche; Additional reporting by Susanna Twidale in London; Editing by Terje Solsvik and Susan Fenton