Norway’s wealth fund divests

The Norwegian Sovereign Wealth Fund, with over $1tr in assets, is set to dump oil and gas stocks, despite the very foundation of the fund being created from North Sea oil.

The recommendation from the Norwegian ministry comes after Norges Bank’s own 2017 recommendation to divest from the sector.

However, the decision to lose fossil fuels has been dramatic – and the decision marks a major turning point for the energy sector.

The NOK 8,919bn (€905bn) fund has invested about 6 per cent of its equities in the oil and gas sector, about NOK 320bn (€32.5bn). Exploration and production companies will be phased out from the fund gradually over time, and plans will be prepared in consultation with Norges Bank. Aside from environmental issues, the decision was made in terms of the growing concerns around the risk of investment is certain stocks and the susceptibility of oil to market volatility.

At the moment the decision affects ‘pure’ producers rather than integrated companies such as Shell or BP, and only companies classified as exploration and production companies by the index provider FTSE Russell will be excluded from the fund's benchmark index and investment universe. The fund is already prevented from investment in coal

Norway’s parliament will make the final decision on the move in the near future.

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