OSLO (Reuters) - Norway’s $470 billion sovereign wealth fund should refrain from earmarking funds specifically for green projects, the central bank said as Norway debates expanding its investment universe to include private equity.
The central bank-run wealth fund -- the world’s second largest after that of the United Arab Emirates -- and the fund’s owner, the Norwegian government, have been in a tug-of-war over whether the SWF should earmark funds for environmental projects.
Norges Bank and its Norges Bank Investment Management (NBIM) arm say such specialization would water-down the fund’s mandate of maximizing financial returns for “future generations.”
But Norges Bank welcomed opening the fund -- which can now invest in stocks, bonds and real estate -- to investments in unlisted or pre-IPO companies as well as infrastructure, as long as these projects were picked according to returns, not subject.
“The fund should not be an alternative source of funds” for items that should be financed by the state budget, Norges central bank Governor Svein Gjedrem and NBIM boss Yngve Slyngstad said in a letter to the government.
“Norges Bank recommends that unlisted investments focusing on the environment and sustainable growth should be made within the context of a broad management mandate,” their letter said.
“Such investments should be subject to the same requirements for return and risk management as other investments. The approach to new investment opportunities should not be made through investments in a narrow and risk-prone segment.”
Reporting by Wojciech Moskwa; Editing by Ron Askew