Norway’s Grand $1tn Wealth Fund Ditches Investment From Oil & Gas Firms

In March, the government obliged the national wealth fund that keeps “rainy day” funds intact for social welfare use among other things, to take a “diversification” course and sell off some of its oil and gas shares.

The Norwegian finance ministry has stated that the country’s  £765 billion ($1 trillion) sovereign wealth fund, the largest in the world, must assess and work out how to technically phase out gas exploration and production investments, as had been earlier agreed upon.

The finance ministry went on to detail that the central bank, which manages the fund is obliged to present a timeline for the pull-out by 13 September, directly to the finance ministry, which will devise its own scheme. The fund had earlier remarked the transition would take place gradually, with no particular hurry.

In a bid to shift its “rainy day” savings away from oil, or at least not to confine them to the fossil fuel sector, the country’s lawmakers adopted a plan on 12 June to exclude oil and gas explorers and producers, as it was defined by stock market data company FTSE Russell, from the fund’s benchmark index, while the fund may accept investments from oil firms that have own refineries and perform downstream activities – so-dubbed integrated firms like Royal Dutch Shell and ExxonMobil.

Norway said the decision is aimed at reducing the exposure of the country’s welfare system to the risk of a severe and permanent dip in oil prices, however environmentalists have picked up on the move as a case of an investor turning down lucrative business proposals from the oil industry, given that the finance ministry also requested the central bank to assess the climate risk factor across the fund’s portfolio.

In early March, the government declared that Norway’s sovereign wealth fund, with £28.3 billion ($37 billion) in shares tied up in top oil titans like Shell, Total and BP, would start selling off some of its oil and gas holdings, with the move serving the purposes of “diversification" of the wealth fund, the Norwegian Ministry of Finance said in a press release, adding that oil production rates will remain "unchanged". It was claimed at the time that the motion by Western Europe’s major oil and gas producer, Norway, is not directly linked to speculation over future oil prices.

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