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Exclusion of coal companies from the fund

14 April 2016

Norges Bank has excluded 52 companies from the Government Pension Fund Global after an assessment of companies and the new product-based coal criterion in the guidelines.

The exclusions are a result of Norges Bank Investment Management’s analysis of a first tranche of companies that could be affected by the criterion.

In June 2015, the Parliament discussed a product-based criterion for exclusion of coal companies from the fund. In September 2015, the Ministry of Finance put forward a proposal to the Parliament for implementation of the criterion.

After the Parliament’s deliberations, the new product-based coal criterion for observation and exclusion was introduced on 1 February 2016.

The new criterion states that mining companies and power producers which themselves or through entities they control derive 30 percent or more of their income from thermal coal, or base 30 percent or more of their operations on thermal coal, could be excluded from the fund.

Exclusion process

The process of identifying companies for exclusion is complex. It is challenging to get good information on income and production at a sufficiently detailed level for all relevant companies.

Norges Bank Investment Management has first identified companies that can be categorised as mining companies or power producers. We thereafter identified mining companies that derive 30 percent or more of their income from extraction of thermal coal and assessed whether they should be excluded.

Assessments of power producers related to the thresholds set in the criterion are often more complex. Power producers that derive 30 percent or more of their income from power production are further assessed. If 30 percent or more of a company’s power production is based on thermal coal, the company could be excluded.

We have contacted all the companies that are assessed for exclusion and given them the opportunity to provide data and facts on future strategies related to coal. It has been important for us to give the companies an opportunity to give their input before they were excluded.

The process going forward

During the year Norges Bank will analyse all companies that could be affected by the criterion. We will through several rounds of public disclosure publish lists of companies that are excluded based on the product-based coal criterion.