Norway wealth fund plans to drop oil and gas stocks

Norway’s $1 trillion sovereign wealth fund proposed an exit from nearly $35 billion in oil and gas stocks

Norges Bank's proposal must now be reviewed by Norway's Finance Ministry, which has said it will announce its own view in the autumn of next year.

Around six percent of the fund's holdings, or $37 billion, consist of oil- and gas stocks such as BP, Royal Dutch Shell and ExxonMobil.

Oil and gas equities now account for around 6% of the Government Pension Fund Global's benchmark index, or just more than 300 billion Norwegian kroner ($36.49 billion).

"This advice is based exclusively on financial arguments and analyses of the government's total oil and gas exposure", the bank's deputy governor Egil Matsen said in a statement.

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The Norwegian central bank, which uses the fund to invest the proceeds of the country's oil industry, said that investing money back into the energy sector amplifies the government's exposure to the price of crude, particularly given the country's majority stake in Statoil ASA.

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".

Norway's fund was established to harness the country's oil and gas income while also giving the government room for maneuver in fiscal policy should oil prices drop, the mainland economy contract and as its oil eventually runs out.

The fund is among the world's biggest investors in stocks, owning $667 billion worth of shares in over 9,000 companies globally.

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Built from Norway's oil and gas revenue over the past two decades, the fund takes into account ethical rules encompassing human rights, some weapons production, the environment and tobacco when deciding on investments.

The aim of the proposal is to make Norway's wealth less vulnerable to a permanent drop in oil prices, especially at a time when the fund is increasing the proportion of its portfolio it invests in equities to 70 percent from 60 percent previously.

Thursday's recommendation comes at a "good time because the stock portion will now be increased to 70% and that would also mean that we would buy more oil and gas stocks", Matsen said.

The sovereign wealth fund is the world's largest. "We can do that better by not adding oil price risk through the fund".

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

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