https://www.bloomberg.com/news/articles/2017-11-16/norway-s-1-trillion-wealth-fund-wants-out-of-oil-and-gas-stocks
[Given the bulk of this fund was created from oil and gas revenues, this
is a revealing statement of how one oil and gas producing nation sees
the future of the oil and gas business worldwide.
image in on-line article.]
World’s Biggest Wealth Fund Wants Out of Oil and Gas
By Sveinung Sleire
November 16, 2017, 8:00 AM EST Updated on November 16, 2017, 11:15 AM EST
Fund wants to protect Norway’s economy from oil price risk
Government says will conclude assessment in ‘fall of 2018’
The $1 trillion fund that Norway has amassed pumping oil and gas over
the past two decades wants out of petroleum stocks.
Norway, which relies on oil and gas for about a fifth of economic
output, would be less vulnerable to declining crude prices without its
fund investing in the industry, the central bank said Thursday. The
divestment would mark the second major step in scrubbing the world’s
biggest wealth fund of climate risk, after it sold most of its coal stocks.
“Our perspective here is to spread the risks for the state’s wealth,”
Egil Matsen, the deputy central bank governor overseeing the fund, said
in an interview in Oslo. “We can do that better by not adding oil-price
risk.”
Built on the income that western Europe’s largest energy supplier has
generated for more than 20 years, the fund’s investment decisions are
guided by ethical rules encompassing human rights, some weapons
production, the environment and tobacco. Norway’s fossil-fuel
investments are coming under increasing scrutiny from a public that aims
to be a climate leader without jeopardizing one of the world’s highest
standards of living.
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 percent of its
portfolio from 60 percent to help drive returns. The government, which
also controls Statoil ASA and offshore oil and gas fields, was forced to
withdrew cash from the fund for the first time last year to meet
spending commitments after oil prices dropped.
‘Good Time’
Matsen said “now is a good time” for the proposal because otherwise the
new 70 percent threshold will result in the fund buying even more oil
and gas shares because it tracks indexes that include such stocks. The
fund has a small amount of leeway to make individual investments and
wants to keep oil and gas in its “investment universe,” he said.
The fund said it doesn’t expect returns or market risk to be affected
“appreciably” by its proposal, emphasizing that cutting exposure to the
energy industry would allow it to crank up investments in other sectors.
Finance Minister Siv Jensen said the government will give the plan
careful thought.
“This must be thoroughly assessed, I am not prepared to conclude in
advance,” said Nikolai Astrup, leader of the finance committee
representing the ruling Conservatives. “It’s important that the fund is
managed in a way that’s predictable and long-term.”
But environmental groups praised the plan. “The world is changing fast,
and it’s very risky to put too many eggs in the same basket,” said
Marius Holm, the leader of the Zero Emission Resource Organisation. Sony
Kapoor, a former adviser to Norway’s government, said the plan is “a
belated victory for common sense over the powerful oil and gas lobby in
Norway,” calling on the fund to now boost its “green” investments at
least tenfold.
The recommendation also received backing from the Conservative-led
government’s support parties, the Christian Democrats and Liberals. The
Labor Party, the biggest opposition group, said it would like to study
the proposal before making a decision.
“The government is responsible for the Norwegian economy as a whole and
must take a broad and comprehensive approach to this issue,” Jensen said
in a statement.
The plan would entail the fund, which controls about 1.5 percent of
global stocks, dumping as much as $40 billion of shares in international
giants such as Exxon Mobil Corp. and Royal Dutch Shell Plc. The Finance
Ministry said it will study the proposal and decide what to do in “fall
of 2018” at the earliest.
While the fund says the plan isn’t based on any particular view about
the future of oil prices or the industry as a whole, it will likely add
to pressure on producers already struggling with the growth of renewable
energy supplies. The Stoxx Europe 600 Oil and Gas index reversed gains
after the announcement, sliding 0.3 percent as of 3:47 p.m. in London.