Copenhaggling

Ashby Monk

The UN climate change conference is underway in Copenhagen, and the haggling over a political agreement on how to deal with climate change has begun. Financial markets clearly have a role therein, probably in the form of a carbon market and the pricing of negative externalities. So, it is not surprising to see Norway’s SWF, the GPF-G, take up a place of some prominence in the discussions.

The GPF-G is not only one of the world’s biggest investors, but it also has an explicit ethical commitment to corporate engagement and to ensuring that the fund is not associated with companies that pose a risk to social and environmental justice.  As section 5 of the Guidelines for Management make clear:

“The Fund shall not make investments that entail an unacceptable risk that the Fund is contributing to unethical acts or omissions” including violations of humanitarian principles, human rights, gross corruption, and severe environmental damage.

So, what’s the SWF looking to achieve in Copenhagen? It is campaigning for some sort of mechanism to price externalities in financial markets, in effect taking up the position espoused by Ronald Coase. The fund noted:

“We are stuck with a global financial system that doesn’t internalise the externalities, such as setting an effective price on greenhouse gases.”

Additionally, the fund came to announce some of its own policies on the environment. This will raise awareness about it’s ongoing role in the fight against global warming (which in turn solidifies its domestic legitimacy).

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About

This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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