Norway's $900 bln sovereign fund told to reduce coal assets

By Stine Jacobsen

OSLO, May 27 (Reuters) - Norway's $900 billion sovereign wealth fund, the world's largest, should cut its exposure to the global coal industry and sell stakes in firms that focus on the sector, a key parliamentary committee said on Wednesday.

The finance committee agreed in a bipartisan motion that the fund, which owns about 1.3 percent of all listed companies globally, should sell stakes in firms that generate more than 30 percent of their output or revenues from coal-related activities.

Already under pressure from Norway's political establishment, the fund has been selling down its coal portfolio in recent quarters and said its holdings were already small.

"Investing in coal companies poses both a climate risk and a future economic risk," the parties said in a joint statement.

"Coal is in a class by itself as the source with the greatest responsibility for greenhouse gas emissions, so this is a great victory in the battle against climate change," opposition Labour MP Torstein Tvedt Solberg added.

The law still needs to be approved by parliament.

The minority right-wing government, which originally proposed softer criteria, also warned that adding too many investment criteria could lower the fund's long-term returns.

"If you start to add non-financial aims or constraints to the management that will affect returns for the fund and that does mean lower welfare and standard living for future generations. It might lead to lower returns," Finance Ministry State Secretary Paal Bjoernestad told Reuters on Wednesday.

The new exclusion criteria would be applicable to producers, such as mining firms, and consumers, such as power generators, the committee said.

But the new rules would not be rigid and the fund, managed by the central bank, would make the actual divestment decisions, also taking into account if companies plan to transform their business and reduce their coal exposure.

Its coal mining assets totalled 493 million crowns ($63.51 million) at the end of the first quarter, down from 805 million three months earlier while its general mining assets were worth 31 billion crowns and power production 109 billion.

Environmental groups dispute the coal exposure calculation, however, and say the actual figure is much larger because it does not include such companies as BHP Billiton (NYSE: BBL - news) , one of the world's biggest coal firms, because coal is a relatively small part of their business.

($1 = 7.7631 Norwegian crowns) (Editing by David Evans)