Economy

Norway's $1 Trillion Wealth Fund To Dump All Its Oil & Gas Stocks

Norway's $1 Trillion Wealth Fund To Dump All Its Oil & Gas Stocks

Norway will announce on Friday whether its sovereign wealth fund, which is the world's biggest and has been fuelled by petrodollars, will divest its oil and gas holdings in a decision keenly awaited by climate activists. Return on the fund's investment in oil and gas stocks fell 9.5 percent past year.

"The government is proposing to exclude companies classified as exploration and production companies within the energy sector from the (fund) to reduce the aggregate oil price risk in the Norwegian economy", the country's Finance Ministry said in a statement.

The world's largest sovereign wealth fund is expected to scale back its investments in oil companies, worth nearly $40bn, after ministers backed calls for the fund to turn its back on oil.

This clarification will come as a bit of a reprieve for big UK-listed oilers like BP PLC (LON:BP.), in which the fund holds a 2.3% stake, and Royal Dutch Shell PLC (LON:RDSA), in which it has a 2.5% holding.

The revenue from state-owned oil and gas companies is placed in the Government Pension Fund Global - as it is officially known - which Oslo then taps to balance its budget.

The companies the fund would divest would be phased out gradually, once the policy is approved, the government said.

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"We cheer for this decision and the government deserves tribute", says Gaute Eiterjord, leader of Nature and Youth.

Rather, smaller companies like Marathon Oil and Chesapeake Energy will see their stock sold. "This partial divestment from oil and gas is welcome, but not enough to mitigate Norway's exposure to both global oil and gas prices and the wider financial ramifications of climate change", he told The Guardian.

The proposition to remove energy exploration and production from the fund's portfolio, which now make up around six per cent of the wealth fund's investments, comes on the heels of a 2017 recommendation from Norges Bank. She also highlighted that the decision is based on financial consideration and not climate considerations.

The Norwegian fund derives its income from the country's own oil and gas industry.

Sony Kapoor, managing director of the think tank Redefine, said diluting the central bank's plan "represents a victory of Big Oil lobbying over financial prudence and common sense". That oil and gas have contributed millions and millions of tons of carbon dioxide to the Earth's atmosphere during that time.

Shares in oil and gas companies fell slightly this morning but this move was expected and Norway is hardly likely to sell all the shares immediately or all at once, both of which would probably force down share prices sharply when it wants to get the best possible return on its investment.


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