World’s largest wealth fund to divest from oil and gas

Norway’s $1 trillion sovereign wealth fund could divest from its oil and gas stocks by mid-2018. The Norwegian central bank recommends the move, arguing it would make the fund less vulnerable to dropping oil and gas prices.

The Norwegian central bank, which runs the country’s sovereign wealth fund, wrote a letter on Thursday to the Ministry of Finance, recommending the removal of oil and gas stocks from the fund. It argues that divestment will make the world’s largest wealth fund less vulnerable to the dropping oil and gas prices.

“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 central bank has been advising the government on the fund’s investment strategy since it was established. The fund now accounts for a much larger share of the government’s wealth than before.

According to recent analysis, about 6 per cent of its fund is invested in the oil and gas sector or about $35 billion dollars, including shares in Shell, ExxonMobil, BP, Chevron and Total. Given the three-year downturn in energy prices, the bank believes that the wealth fund can be made “less vulnerable to a permanent drop in oil prices” if it is not invested in oil and gas stocks.

The bank’s recommendation was welcomed by conservationists around the world.

“This is an enormous change. It’s a shot heard around the world,” Mindy Lubber told Bloomberg. The president of Ceres, a non-profit that advocates for sustainable investing, added: “It’s an enormously important statement. Once one major player does it, others will follow.”

Truls Gulowsen, head of Greenpeace Norway, called the announcement “a victory for common sense”, saying it would help lower the country’s “financial carbon risk”.

The bank’s proposal still needs to be approved by the government and parliament, and a decision is not expected until mid-2018.

Image credit: Statoil

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