Norway's state fund 'needs to ditch oil and gas investments'

Gladys Abbott
November 17, 2017

"This advice is based exclusively on financial arguments and analyses of the government's total oil and gas exposure", said fund manager Egil Matsen.

The Norwegian fund, officially known as the Government Pension Fund Global, is among the largest investors in a wide range of oil companies, including Royal Dutch Shell, BP, Chevron and Exxon Mobil.

"The investments in the GPFG and the stake in Statoil result in a total exposure to oil and gas equities for the government that is twice as large as would be the case in a broad global equity index", Norges Bank said.

The fund's biggest oil and gas holding at the end of 2016 was $5.36bn in Anglo Dutch firm Shell, followed by $3.06bn in ExxonMobil, $2.04bn in fellow USA oil firm Chevron, $2.02bn in the UK's BP, and $2.01bn in France's Total.

If accepted by the finance ministry and adopted by parliament, the fund would over time divest billions of dollars from oil and gas stocks, which now represent 6 per cent - or around $37-billion - of the fund's benchmark equity index.

"The issues raised by Norges Bank are complex and multifaceted", the finance ministry said.

While the fund says the plan isn't based on any view on the future of oil prices or the industry, it will likely add pressure on oil producers, already struggling in a world where renewable energy is gaining sway. It owns owns more than $660bn-worth of shares in over 9,000 companies globally, and reached the $1tn-mark in terms of assets under management in September.

Wikimedia Commons
Wikimedia Commons

The fund could still invest in the sector if other parts of the fund's mandate are fulfilled by having some investments in some of the companies, he said.

The aim of the proposal is to make Norway's wealth less vulnerable to a permanent drop in oil prices, especially at a time when the fund is increasing the proportion of its portfolio it invests in equities to 70 percent from 60 percent previously. Green campaigners also welcomed the news.

However, ethical investment experts hailed Norges' retreat from fossil fuels.

The proposal to sell oil and gas stocks must be approved by the government. The move would also mean raising its investments in other sectors.

In the White Paper to Parliament on Long-term Perspectives on the Norwegian Economy 2017, the Ministry addressed the sensitivity of Norway's national wealth to a permanent drop in petroleum revenues.

And analysts warned that the central bank's proposal could have a knock-on effect on the sector. Peter Fitzgerald, Aviva Investors head of multi-assets, told Reuters.

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