Norwegian wealth fund plans to divest of oil and gas

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

Norway's trillion-dollar sovereign wealth fund is proposing to drop oil and gas companies from its benchmark index, which would mean cutting its investments in those companies, the deputy central bank chief supervising the fund told Reuters.

Norway is a major oil producer, and it has plowed its energy earnings into the fund in order to fund pensions and other government expenses.

"This advice is based exclusively on financial arguments and analyses of the government's total oil and gas exposure", said fund manager Egil Matsen. "We can do that better by not adding oil price risk through the fund".

The sovereign wealth fund, fuelled by the state's oil revenues which have dropped sharply in recent years, is now worth around 8.24 trillion kroner (854 billion euros, $1 trillion), invested primarily in shares (65.9 percent) as well as bonds and real estate.

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

The Norwegian central bank, which runs the Oslo-based fund, is recommending the fund be divested of more than $37 billion, or about 6.0 percent of the fund's benchmark equity index, according to Bloomberg.

"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.

The fund's biggest oil and gas holding at the end of 2016 was $5.36bn in Anglo Dutch firm Shell, followed by $3.06bn in ExxonMobil, $2.04bn in fellow U.S. oil firm Chevron, $2.02bn in the UK's BP, and $2.01bn in France's Total. Its fossil fuel investments have also come under closer scrutiny as Norwegians increasingly struggle to reconcile their ambition to be a climate leader, while remaining one of the world's biggest oil and gas nations.

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The move will have significant ramifications for oil and gas companies.

The fund has doubled in value over the past five years and was just given the go-ahead to boost its stock holdings to 70% of its portfolio from 60% to help drive returns.

The proposal to sell oil and gas stocks must be approved by the government. The fund's exposure to fossil fuel markets is now double that of a standard global fund, the Central Bank said.

"The issues raised by Norges Bank are complex and multifaceted", the finance ministry said. The finance ministry said it would study the plan and decide at the earliest in "autumn 2018".

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"Furthermore, the Government is responsible for the Norwegian economy as a whole and must take a broad and comprehensive approach to this issue", she added.

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