Norway considers commitments to green private equity

Norway’s sovereign wealth fund is considering allocating a portion of its assets to investments in private equity and infrastructure that would target environment-related opportunities.

The fund, called the Government Pension Fund Global, is considering establishing an investment programme that targets environmental-related opportunities that would include private markets, and investments in listed equities and bonds.

Examples of environmental investments outside the investment universe of the fund may be investments in green infrastructure projects, such as wind farms … and investments in start-up companies in eco-friendly technology. Norway Ministry of Finance

The ministry also is considering allocating capital to private equity and infrastructure funds for sustainable investment opportunities in the emerging markets.

Norway’s central bank, Norges Bank, is assessing the opportunities in investments in private markets and will make a recommendation in the fall, according to a spokesperson for Norway’s Ministry of Finance.

The Ministry of Finance, in its summary of the 2010 budget, estimated the environmental investment programme would have NOK20 billion (€2.5 billion; $3.4 billion) available to spend over a five years period. A portion of that total would be allocated to private equity and infrastructure, if ultimately approved by the finance ministry.

“Examples of environmental investments outside the investment universe of the fund may be investments in green infrastructure projects, such as wind farms … and investments in start-up companies in eco-friendly technology,” according to the report.

Environmentally targeted investments through funds in the private market “will be more demanding and will entail greater financial and operational risk than listed investments”, the ministry said.

“Investments in unlisted markets within these limited areas will require an extensive examination of the investment opportunities and a thorough assessment of factors relating to expected returns and risk related to such investments,” the report said. “It will be equally important to assess whether Norges Bank can establish an organisation to implement this kind of management.”

The Government Pension Fund Global, with an estimated NOK2.4 trillion in assets, manages revenue from Norway’s oil and gas industries. The fund was authorised to spend up to $22 billion in real estate globally over the next several years, including investing in funds targeting prime properties in mature, developed markets.