OSLO (Reuters) - Norway’s $828 billion sovereign wealth fund believes a new rule curtailing its investments in coal-dependent businesses could lead it to sell shares in companies across the world worth about 55 billion Norwegian crowns ($6.6 billion), it said on Friday.
Around 120 companies are likely to be affected, it said in a letter to the country’s finance ministry.
Under a deal struck in parliament in June, the fund will divest from companies that get more than 30 percent of their turnover from coal, including both mining firms and power generators.
The business of buying, selling or transporting coal should, however, be exempted from exclusion, as should the distribution and trading of power, the fund said in its letter.
And while it plans to exclude producers and consumers of thermal coal, there should be an exemption for metallurgical coal used for steel production, it added.
The fund expects to finish its evaluation of most relevant firms in its portfolio of 8,000 companies by the end of 2016.
“The direct transaction costs of excluding this number of companies can be estimated at around 400 million crowns,” it wrote.
“Given the size of the fund, transactions of this kind in individual stocks will lead to large trades that will to some extent be predictable for other market players, making the costs difficult to gauge,” it added.
Burning coal releases large amounts of greenhouse gases. Norway has had little debate about wider divestment from fossil fuels, a sensitive subject since the fund itself is built from Norway’s offshore oil and gas revenues.
Environmentalists have predicted sales of shares in European and U.S. power companies including Duke Energy Corp (DUK.N), RWE AG (RWEG.DE), American Electric Power Co Inc (AEP.N) and Dominion Resources Inc (D.N).
Reporting by Terje Solsvik and Henrik Stolen; Editing by Pravin Char and Mark Potter