Tuesday, 21 May, 2019


Norway wealth fund to cut oil and gas investment

Offshore oil rig Norway wealth fund to cut oil and gas investment
Conrad Doyle | 11 March, 2019, 10:36

Norway's sovereign wealth fund will exit all investments in oil and gas production acting on a government recommendation in line with a more cautious approach to energy investments by the world's largest sovereign wealth fund worth about US$1 trillion.

The Norwegian government, which gets 20 percent of its revenue from the petroleum sector, said Friday it wants to reduce its vulnerability to a permanent decline in the price of oil. The fund, somewhat ironically, derives its income from Norway's booming oil and gas industry.

The government will also recommend selling off roughly £6.12bn ($8bn) in small oil firms and will instead rely on large oil production corporations such as Exxon, Shell, and Total.

The Government Pension Fund Global, managed by Norges Bank, is built on the revenues from Norway's oil industry. "This advice is based exclusively on financial arguments and analyses of the government's total oil and gas exposure", the Bank's Deputy Governor Egil Matsen said at the time.

Integrated stocks, like Royal Dutch Shell (RDS.A), will not be sold.

The decision is also likely to embolden activists that are continually pushing for other funds, and even fossil fuel companies themselves, to move away from so-called "dirty" fuel and toward renewable energy.

Mark Campanale, executive director of the Carbon Tracker Initiative, a think-tank on climate issues, says Friday's decision is more significant than when the fund sold off its shares in coal companies.

"Everything indicates that nearly the entire growth in listed infrastructure for renewable energy over the next 10 years will be driven by companies that do not have renewable energy as their main activity". It now owns around $37bn of shares in oil companies such as BP, Shell and Total.

The stocks to be sold are from a group of 134 companies labeled exploration and production firms by the London-based index provider FTSE Russell, a list that includes USA oil producer Occidental Petroleum and shale driller Pioneer Natural Resources.

While the climate change aspect is not officially part of Norway's justification for the move, a sell-off would "obviously be very important", said Greenpeace, which has campaigned for divestment for years.

"When one of the biggest sovereign funds in the world concludes that it can yield high returns on its investments with moderate risk by reducing its exposure to oil and gas, investors take note", Jan Erik Saugestad, head of asset management at Norwegian insurer Storebrand said.

350.org includes Norway's sovereign wealth fund on its divestment list, but the country is not divesting from fossil fuels as McKibben claimed.

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