Norway’s $760-billion Sovereign Wealth Fund (SWF), the largest in the world, should set up a separate $200 billion growth fund to focus on investments in infrastructure and private equity in developing countries, according to Sony Kapoor, managing director of international think tank Re-Define.
Not only would this change in investment strategy enable the government pension fund (GPF) to achieve its target 4 percent rate of return, but it would also benefit the recipient countries of such investments through development, job creation, poverty reduction, and better quality of life, Kapoor – a former investment banker who has worked for Lehman Brothers, the World Bank and the United Nations – stated in the report.
“The GPF squanders its potential for being the ultimate long-term investor by having more than 99 percent of its investments in liquid securities that investors with much shorter time horizons can also hold,” Kapoor said in a report released last week and commissioned by aid organization Norwegian Church Aid.
According to the report, the fund is heavily invested in developed, Organisation for Economic Cooperation and Development (OECD) members where growth rates and yields are expected to be lower, while risks are expected to rise.
Furthermore, Kapoor calls on the fund to sell off its oil, gas and coal assets to reduce exposure to policy actions designed to address climate change, and to turn towards green investments.
“This is the only way GPF can deliver on its fiduciary duty towards Norwegian citizens – by maximising returns for moderate risk in both a sustainable and responsible way,” Kapoor said in the report. “Not only will this be good for Norway, it will also enable faster growth in poorer economies and creating millions of much-needed jobs.”
“If we had invested considerably more in these countries we would have contributed to more jobs, tax income and economic growth in these countries,” Norwegian Church Aid general secretary Anne-Marie Helland said in a statement. “As it is, we contribute to a more unequal world and that needs to stop,” she added.
Headquartered in London and with offices in Berlin and Brussels, Re-Define advises governments, international agencies and non-government organisations on sustainable development, climate change, improving governance, and reforming the financial system.