Norway’s $1 trillion wealth fund proposes dropping oil and gas stocks
Financial Times, 16 November 2017
Norway’s trillion-dollar sovereign wealth fund has proposed dropping its investments in oil and gas stocks, saying western Europe’s biggest energy producer already has enough exposure to petroleum. The Norwegian central bank, which runs the Oslo-based fund, said its view was that dumping investments – which includes companies like BP, Royal Dutch Shell and ExxonMobil – would make the country’s wealth “less vulnerable to a permanent drop in oil and gas prices”.
While the central bank said the view was not based on any prediction of future oil and gas commodity prices or the “sustainability” of the sector, the move will be closely watched given the fund’s clout in global equity markets.
Oil and gas companies have long-feared divestment on ecological grounds as well as those who have warned about oil demand peaking in the coming decades.
The Norwegian SWF, which has been built through the country’s energy revenues over the past two decades, has about 6 per cent of its money invested in oil and gas stocks.
The Norwegian central bank said the fund, known officially as the Government Pension Fund Global (GPFG), did not need the holdings given the country’s own oil revenue through its stake in state-backed company Statoil. The proposal would need to be approved by government and parliament.
“In the bank’s view, this will make the government’s wealth less vulnerable to a permanent drop in oil and gas prices,” it said in a letter to the Norwegian ministry of finance.
“The Bank’s analyses of the oil price risk in the government’s wealth are based on the government’s future oil and gas revenues, the government’s direct holdings in Statoil and the GPFG. 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.”