After several years of lobbying, Norway’s $1 trillion wealth fund has persuaded the government that it would be a good thing to invest some of the country’s nest egg in unlisted renewable energy infrastructure projects. But the amount involved is paltry, given both the scale of the world’s climate-change challenge and the potential investment opportunities likely to be available to the fund.

The government plans, subject to parliamentary approval, to double the upper limit on environment-related investments the fund is allowed to purse to 120 billion kroner ($14 billion). That is a tiny amount given the sheer scale of the fund: It’s equal to about half of what it has invested in property around the world, for example. Moreover, restricting the initiative to projects in developed markets is a fainthearted stipulation that will hopefully be swiftly abandoned.

The proposal marks a second step in Norway’s efforts to reduce its economic exposure to petrochemicals. Last month, the country agreed to gradually start selling the fund’s $7.5 billion holdings of oil and gas exploration and production companies, though the remainder of its $37 billion of holdings in the wider industry remains unchanged for the time being.

As the biggest petroleum producer in western Europe, about a fifth of Norway’s gross domestic product comes from oil and gas revenue. The Nordic country risks being left with so-called stranded assets, offshore fields that lose their value as the world increasingly switches to renewable sources of energy.

Bloomberg New Energy Finance predicts that a cumulative total of $9.3 trillion will be invested in renewable energy by 2050. Those investments will bring new efficiencies. In wind power, for example, BNEF expects onshore turbines to more than increase their median power generation to 5.2 megawatts from 2.5MW currently, while offshore towers will more than quadruple their capacity to 18MW from 4MW.

Investing in unlisted green energy projects is likely to be more expensive for the fund than taking the equity stakes that the bulk of its money is allocated to. In an October report, the fund said that the management costs of its renewables investments are likely to be similar to the 0.23 percent of its unlisted real estate holdings. That’s rather more than the 0.06 percent the fund pays overall in charges.

But as the world’s biggest sovereign wealth fund, its ability to take a long-term view should give it an advantage in the range of projects it can consider. Moreover, the October report noted that a reduced need for government subsidies in renewable energy projects has reduced the political risks involved in such investments. That still leaves their potential returns subject to fluctuations in energy prices and how the deals are financially constructed — but these, the fund says, are the types of risk it is better suited to bear.

Less than 0.2 percent of the $8 trillion that sovereign wealth funds around the world have available is invested in renewable energy, according to United Nations data the World Economic Forum cited in a report it published in February. As I argued at the time, the world is losing the race to curb carbon dioxide emissions, and sovereign funds are a unique source of underutilized capital that can be unleashed in the battle against global warming.

So Norway’s move is to be welcomed as a first step. But it is just that. Freeing the fund’s managers to use more of their economic firepower to combat climate change makes social — and financial — sense.

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Mark Gilbert is a Bloomberg Opinion columnist covering asset management. He previously was the London bureau chief for Bloomberg News. He is also the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”

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