Published: Fri, November 17, 2017
Economy | By Melissa Porter

$1tn Norwegian oil fund plans to ditch oil and gas stocks

$1tn Norwegian oil fund plans to ditch oil and gas stocks

"Nothing is imminent and even if the advice is fully implemented we believe this will have limited impact on the oil and gas producers, as the holdings of Norges Bank are relatively small and no doubt will be disposed of over an extended time frame", she added.

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.

"This advice is based exclusively on financial arguments and analyses of the government's total oil and gas exposure and does not reflect any particular view of future movements in oil and gas prices or the profitability or sustainability of the oil and gas sector", said Deputy Governor Egil Matsen.

The oil and gas sector now spans a broad range of energy-related activities, including companies classified as integrated oil and gas, oil service and renewable energy.

This is actually the second step in getting rid of climate risk the world's largest investment fund is taking, after selling off most of its coal stocks.

It also held 1.7 per cent of Italy's Eni, 1.6 per cent of France's Total and 0.9 per cent of Sweden's Lundin Petroleum, among others. 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.

The Central Bank of Norway, which runs the fund, sent a proposal to the Ministry of Finance today.

"The return on oil and gas stocks has been significantly lower than in the broad equity market in periods of falling oil prices", the bank explained in a statement.

Government finances in Norway have been hit hard by the drop in oil prices in recent years. The fund was launched to invest the proceeds from Norway's oil reserves.

The pension fund's managers said they remain anxious about the impact of falling oil prices on overall government revenue.

Other large investors have launched products that don't invest in fossil fuels.

Matsen emphasised that the recommendation is to remove oil and gas stocks from its benchmark index but that it wants to keep them as part of its "investment universe".

"This is the biggest pile of money on the planet, most of it derived from oil - but that hasn't blinded its owners to the realities of the world we now inhabit". Several U.K. pension plans have funds that don't invest in the sector. "The straight answer is that all other sectors would be weighted up in proportion". The sector accounts for 14 percent of Norway's gross domestic product (GDP).

The proposal has to be reviewed by the Finance Ministry, which in turn needs to decide whether to propose it to parliament.

At the earliest, the ministry's first opportunity could come in the spring, with a vote in parliament in June.

"It's great to have that luxury, isn't it?"

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