Unlisted renewable energy infrastructure investments ‘unattractive’ for Norwegian wealth fund

On the 10/30/20 at 1:53PM


Tuba Raqshan

Nicolai Tangen, CEO of Norges Bank Investment Management (NBIM), which manages the €1trn sovereign wealth fund, said that difficulties in finding projects and pricing makes this asset class unattractive for the fund.
Nicolai Tangen, CEO, Norges Bank Investment Management

Speaking at a parliamentary hearing on the management of the €1trn Government Pension Fund Global (GPFG), Tangen stated, “In our experience so far, there are many investors looking for these investments and pricing is thus not always as attractive for us. These investments are subject to the same risk and return requirements as the GPFG’s other investments. In the near term, finding projects that meet these requirements may be demanding.” In 2019, the parliamentary committee mandated the fund to invest in unlisted infrastructure for renewable energy.

Tangen also underlined that tax and transparency were important to the fund, adding that some companies with weak or no reporting related to this area were divested.

External equity managers have contributed with a net excess return of NOK 60bn, said Tangen. About 10% of the fund’s equity portfolio is invested in emerging markets, where using external managers has not only increased profits but also avoid companies with reputational risk.

This year, the Ministry of Finance has proposed changes in the composition of the equity benchmark.  “We will sell equities in Europe and buy equities in North America, especially the US. In order to keep transaction costs as low as possible and reduce timing risk, it is wise to implement the change over a long period of time,” added Tangen.