Norway has said its $1 trillion sovereign wealth fund, the world’s biggest, should sell stocks in oil and gas exploration companies, in a move that is the biggest divestment from hydrocarbons yet.
The Government Pension Fund Global, which was built off Norway’s oil revenues, should begin phasing out $8 billion held in 134 firms to reduce the fund’s risk from volatile oil prices, the country’s finance ministry said in a statement on 8 March.
But in a major concession, the withdrawal won’t apply to Shell, BP and France’s Total, the three biggest investments in the fund’s total £27.9bn of oil and gas stocks, because they aren’t solely oil production companies.
The finance ministry also said the decision wouldn’t affect the fund’s stake in the country’s state oil firm, Equinor, formerly known as Statoil.
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“This is partial good news, but not fully good news as we expected,” says Yossi Cadan at divestment campaign group, 350.org.
The fossil-fuel divestment movement grew out of university campuses and religious groups, and has seen trillions of shares in companies sold over climate change concerns. Critics say it reduces engagement by responsible shareholders, but proponents argue that it is effective by damaging the “social licence” the companies need to extract oil, gas and coal.
The central bank that manages Norway’s fund recommended two years ago that it ditch oil and gas, not for climate change reasons, but to reduce its exposure to a collapse in the oil price.
That recommendation lead to a pushback from a government-appointed panel, which urged against a sell-off.
In an attempt to please everyone, the finance ministry said that exploration and production companies will be phased out from the fund gradually.
The compromise doesn’t make sense because firms not touched by the measure will still be involved in exploring and drilling, says Cadan. They may hold a stake in an oil and gas licence or operation, for example.
The government’s decision will now need to be passed by Norwegian lawmakers.
Dodaddydont on March 9th, 2019 at 14:16 UTC »
Honest question: will this actually help the environment in some way?
mecm5 on March 9th, 2019 at 13:45 UTC »
This isn't a cause for celebration...
Firstly, this isn't a climate change initiative. They're divesting from oil because the sovereign wealth fund gets its revenue from oil. This means they're overexposed to oil because they're heavily invested in it and their main income is from producing it, they're simply mitigating the risk.
Secondly, all this does is lower the price of the stocks giving a discount to future shareholders it has no affect on their bottom line because they're being traded on a secondary market.
Thirdly, this doesn't even include the oil majors, just primary producers.
muzuzu on March 9th, 2019 at 13:37 UTC »
It’s pretty clear nobody even reads articles anymore. Much less thinks for themselves. From the article itself: BP, Shell, Total, and Equinor are exempt from this action. So, to be clear, three oil behemoths will be unscathed as will the state oil company. Quite the divestment /s
To me this is simply a good (great?) PR machine doing its thing for brand Norway and Norway reducing exposure to O&G price volatility. There is a movement globally to wean off O&G. From Norway’s perspective it doesn’t make sense to have a large state O&G operation AND heavily invest the proceeds of that enterprise in O&G. Right?