World's top sovereign wealth fund to dump oil and gas shares

Irving Hamilton
March 10, 2019

Norway's Ministry of Finance suggested Friday that the country's $1-trillion sovereign wealth fund stop investing in oil and gas companies in an effort to shield the fund from the risk of permanently lower oil prices. While the decision was based exclusively on financial considerations and not on the environment or climate change, a divestment by an investor worth more than $1 trillion was seen as a major blow to polluting fossil fuels.

However, in an announcement, the Norwegian government said it would recommend that the US$1trn fund, which has around US$37bn tied up in oil & gas investments, should focus divestments on firms that explore and produce only, rather than the larger integrated companies.

The fund that is the largest in the world was created to invest in North Sea oil businesses.

Greenpeace campaigner Martin Norman said the government's decision "does not address Norway's exposure to oil and we are not showing the world the way forward".

Norwegian lawmakers will vote on the proposal to divest from oil and gas companies later this year.

Minister of Finance Siv Jensen said Friday in a statement that the move is meant to "reduce the vulnerability of our common wealth to permanent oil price decline". (At the end of a year ago, oil and gas stocks made up about 6 per cent of the fund's stock portfolio.) These companies are making investments in renewables that, while sizable, are modest compared with the amounts of cash they continue to pump into oil and gas.

Norway's US$1-trillion wealth fund, the biggest of its kind in the world, will begin dumping shares in oil and gas companies including some Canadian names, but stopped short of barring major producers like Suncor, ExxonMobil and Chevron.

Finland's centre-right government resigns
The Centre Party chair said that his coalition partners understood his reasons for proposing the government's resignation. The planned health care reform was meant to tackle an aging population and reduce public spending by €3 billion by 2029.

Those stocks would be replaced by investments in other sectors, broadly weighted in proportion under the fund's current mandate, the central bank's deputy governor said in 2017, when the bank made its initial proposal.

The government recommendation must still be approved by the country's parliament before going ahead.

Climate crusaders celebrating Norway's proposal to divest its sovereign wealth fund from oil and gas stocks should pause before popping the carbon-neutral champagne.

While he doesn't think the move will be the end of "Big Oil", Wilson says it is "a sensible long term move" for the fund to wean itself off fossil fuels.

"They take on much bigger investments than renewable companies do".

"However, it does send a clear signal that companies betting on the expansion of their oil and gas businesses present an unacceptable risk, not only to the climate but also to investors".

"By taking the oil and gas shares out of the benchmark index of the Government Pension Fund Global, the Norwegian state's exposure towards one single sector is clearly reduced", he said.

Other reports by

Discuss This Article