Norway's $1T pension fund wants out of oil stocks

Marcus Newton
November 17, 2017

In a move co-founder Bill McKibben called "astonishing", Norges Bank, which oversees the world's largest sovereign wealth fund, advised the Norwegian government to dump all of its shares in oil and gas companies, leaving those entities out of its $1 trillion fund.

In September, the fund value reached $1 trillion for the first time after being boosted as the world's major currencies strengthened against the US dollar, combined with strong equity markets.

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.

McKibben compared the bank's recommendation to "the moment when the Rockefellers divested the world's oldest oil fortune" in 2014, when the heirs to Standard Oil said that if founder John D. Rockefeller were alive in the 21st century, "he would be moving out of fossil fuels and investing in clean, renewable energy". In periods of stable oil prices, the returns on oil and gas stocks have largely moved in tandem with the broad equity market. At the end of the third quarter, Royal Dutch Shell was the fund's third-biggest equity investment at more than $5bn.

"Oil price exposure of the government's wealth position can be reduced by not having the fund invested in oil and gas stocks", said Matsen.

The wealth fund, which controls about 1.5 percent of global stocks, proposes dropping %37 billion of shares in worldwide giants such as BP, Exxon Mobil Corp., Royal Dutch Shell Plc. and other holdings.

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"This news will be scrutinised very closely by funds around the world who are already looking closely at the climate risks in their portfolios and which sectors and companies will fare best in the low-carbon transition", said Stephanie Pfeifer, head of the Institutional Investors Group of Climate Change, which groups 140 investors that work on global warming and represent assets of more than 20 trillion euros.

Government finances in Norway have been hit hard by the drop in oil prices in recent years. "We can do that better by not adding oil price risk through the fund".

The proposal to sell oil and gas stocks must be approved by the government. The sector accounts for 14 percent of Norway's gross domestic product (GDP).

The Norwegian government said it would consider the proposal, but a decision should not be expected until next year and a "thorough assessment" was required.

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

Other reports by MaliBehiribAe

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