Decision made
Norway's trillion dollar fund to dump oil and gas investments.
https://www.ft.com/content/d32142a8-418f-11e9-b896-fe36ec32aeceNorway recommends sovereign wealth fund divest from oil and gas
The $1tn oil fund should sell out of the sector, government says
Richard Milne in Oslo 6 MINUTES AGO Print this page
Norway’s $1tn oil fund should sell out of upstream oil and gas shares, the country’s government has recommended, in a move that will send shockwaves through the energy sector.
The world’s largest sovereign wealth fund, which owns about $37bn in oil and gas shares, should sell out of companies that solely explore and produce oil and gas in a bid to reduce the risk to the Norwegian economy, according to the country’s finance minister.
“The goal is to make our collective wealth less vulnerable to a lasting fall in oil prices,” said Siv Jensen, finance minister of western Europe’s largest petroleum producer.
The move is likely to be seized upon by environmentalists as a template for other big global investors and marks the biggest proposed divestment of fossil fuel assets.
The oil fund, which is already barred from investing in large coal producers or consumers, itself sparked the debate and jolted markets when it recommended 18 months ago that it divest from oil and gas for purely financial reasons rather than environmental ones. It argued that Norway could reduce its sensitivity to the oil price without hurting returns.
Norway is facing growing questions about its own oil industry, the largest in western Europe and the source of wealth for the oil fund as well as the main contributor to its rise to one of the richest countries in the world.
Oil companies have pushed for decades for new acreage around the picturesque Lofoten Islands in the Arctic Circle to be opened up but it looks increasingly as political parties will reject this. Some politicians have also begun to query Norway’s generous tax regime to oil explorers.
Oil and gas shares accounted for 5.9 per cent of the oil fund’s $623m equities portfolio at the end of 2018 with it owning stakes of more than 2 per cent each in BP, Royal Dutch Shell and Total and about 1 per cent each in Exxon Mobil and Chevron.
A government-appointed commission recommended that the fund should keep its oil and gas stocks, arguing that divestment was not an effective insurance against a permanent decline in petroleum prices.
Norway has faced cries of hypocrisy over its attempts to balance being one of the world’s largest petroleum producers and an environmentally-engaged country, pushing the likes of Indonesia and Brazil to protect their rainforests and becoming the leading nation for electric cars.