Norway ranked as the country with the second highest increase in foreign direct investment (FDI) projects in 2020, bucking a sharp global decline caused by the pandemic, as the rich Nordic country aims to diversify and green its economy.

Companies based overseas announced 48 greenfield investments in Norway last year, up by 12 from a year earlier and contrasting with the 36.5% fall worldwide, according to the latest figures from investment monitor fDi Markets. This placed Norway second globally, behind Switzerland, in terms of its increase in FDI projects between 2019 and 2020, due in part to an influx of business services investments into its capital Oslo.

The Nordic nation’s relatively effective pandemic response, being the country with the second-lowest coronavirus deaths per capita in Europe, has helped to underline the country's resilient business environment, which ranked first in the world, according to a 2020 index produced by commercial property insurer FM Global.

“Norway is by any relative measure only mildly affected by the pandemic,” says Jon Kristian Sjåtil, a partner in the Oslo office of law firm Schjødt, where he represents foreign strategic and financial investors in Norway. For Mr Sjåtil, the pandemic has been a catalyst during the early stages of the Norwegian economy’s transformation to become more sustainable, with its recent focus on sectors such as renewable energy, infrastructure and aquaculture. “The tempo with which this transition is moving has, if anything, only accelerated through the pandemic,” he adds.

Green credentials

While Norway continues to be Western Europe’s largest petroleum producer — with the industry accounting for 36% of its exports and 10% of government revenues — it is making progress in several aspects of the green agenda. 

The country broke records in 2020, when electric cars accounted for 54.3% of all vehicles sold in the country. As the government pursues its pledge to become carbon neutral by 2030, it has set an ambitious deadline of 2025 to transition completely away from fossil fuel-powered vehicles. 

“Norway’s pioneering approach to ending the sale of petrol and diesel cars by 2025 is a signal to investors about its commitment to sustainability and the green agenda,” says Guy Douetil, managing director for Europe, the Middle East and Africa at site selection consultancy Hickey & Associates.

Some investors have moved to serve Norwegian demand for cleaner mobility, as well as rising popularity across the EU, where electric vehicles are forecast to reach 15% of overall sales in 2021, according to green policy group Transport & Environment.

In November 2020, Japan-based electronics giant Panasonic announced in a joint statement that it is exploring a lithium-ion battery partnership with Norwegian state-controlled energy company Equinor and renewables multinational Hydro. 

“We believe the combined strengths of Panasonic, Equinor and Hydro represent an attractive starting point for exploring the possibilities for a profitable and sustainable battery business in Norway,” Arvid Moss, Hydro’s executive vice president of energy and corporate development said in a statement.

Windy affair

Another key draw to Norway has been its readily available and reliable renewable energy. At the beginning of 2021, the country was home to 1681 hydropower plants, from which it produces 90% of its total electricity, according to Energy Facts Norway.

Meanwhile, wind power currently accounts for 10% of the country’s production capacity, with the Norwegian government focusing on developing the country’s offshore potential, in which it has been a relatively slow mover compared to neighbouring countries, such as Denmark and the UK.

A report commissioned by Export Credit Norway estimates that the “offshore wind industry has the potential to become one of Norway’s most important export industries”, generating up to €12.9bn by 2050.

In December, Norway’s petroleum and energy minister Tina Bru announced that the Norwegian government was investing €11.3m into a new wind energy research centre to further its development.

“Rapid growth in offshore wind power internationally offers great opportunities for Norwegian businesses,” said Ms Bru.

Meanwhile, foreign investors have ramped up their activity in Norway’s onshore market, announcing seven wind farm developments since March 2019, according to fDi Markets. This includes Germany-based asset managers Luxcara and MEAG’s plans to finance a 294MW wind cluster in Bjerkreim — the output from which will supply social media giant’s Facebook Nordic data centres under a 15-year agreement.

“Despite being heavily reliant on oil and gas revenues, Norway has a huge amount of hydro power capacity and a relatively cool climate, making it an attractive location for operations that need a lot of power and generate a lot of heat,” says Mr Douetil, who points to data centres and battery plants as examples.

“This aligns with the increasing focus on renewables and the green agenda that these companies are targeting,” he adds.

Data centre drive

Boosted by the Norwegian government’s national data centre strategy, launched in 2018 with tax reductions, several foreign companies have moved to set up in the country, including US-based consortium Silent Partner International and tech giant Microsoft. 

More recently, in November 2020, Hamburg-based Aquila Capital announced plans to build an exclusively renewable energy-powered data centre close to Oslo. Roman Rosslenbroich, the chief executive and co-founder of Aquila Capital, said in a statement that “the growing data centre market offers investors an attractive investment environment with sustainable return opportunities”.

Traditional strengths

But despite a diversification drive, Norway is set to continue tapping its abundant oil reserves, with production expected to rise by 19% through to 2024, according to S&P Global Platts. Foreign investors have followed suit, with Canadian oil and gas producer Zenith Energy and the UK Exceed both setting up a subsidiary in Stavanger, the country’s energy capital, in 2020.

Foreign companies also entered Norway’s other traditional industries during 2020, such as aquaculture and maritime, including UK-based Ace Aquatec, a technology developer that opened a new office in Bergen to meet growing demand in the Norwegian market. Chief executive of Ace Aquatec, Nathan Pyne-Carter, said that Norway “is home to some of the largest and most sophisticated farmed salmon producers in the world, as well as the best centres for research and development work”.

This article first appeared in the February/March print edition of fDi Intelligence.