Norway's $1tn wealth fund proposes ditching oil and gas investments
- Author: Anthony Vega Nov 17, 2017,
Nov 17, 2017, 0:24
In a move 350.org 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.
"That would mean all companies that the FTSE has classified with the sector, should be removed from our reference index".
In September, the fund value reached $1 trillion for the first time after being boosted as the world's major currencies strengthened against the USA dollar, combined with strong equity markets.
If adopted by parliament, the fund would over time divest billions of dollars from oil and gas stocks, which now represent 6 percent - or around US$37 billion - of the fund's benchmark equity index. It also has shares worth more than $1bn in oil services firm Schlumberger and Italy's Eni, whose share price slumped 0.86%. In 2014, Stanford University said it wouldn't invest in coal-mining companies, and under pressure from environmental activists other USA endowment funds have debated whether they should pull out of fossil fuel investments.
"Norway is already heavily invested in oil and gas resources, so selling off the oil fund's fossil stocks will clearly help reduce our financial carbon risk", said Truls Gulowsen, head of the group.
The bank said its 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 Norwegian multinational oil and gas company Statoil and the GPFG.
Norway's trillion-dollar sovereign wealth fund is proposing to sell off all its holdings in oil and gas companies.
The fund has grown so large that even though the Norwegian state is taking less than 3 per cent of the fund's value every year for its fiscal budget in recent years, oil spending now accounts for one in five crowns spent by the state.
"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", said McKibben. Several U.K. pension plans have funds that don't invest in the sector.
At the earliest, the ministry's first opportunity could come in the spring, with a vote in parliament in June.
Oil and gas are seen as increasingly risky investments as more countries turn to cleaner energy sources in order to meet requirements under the Paris climate agreement, which aims to keep global warming under two degrees Celsius above pre-industrial levels.