Norway's $1T pension fund wants out of oil stocks

Norway and the Long Term Future of Oil Investing
Norway and the Long Term Future of Oil Investing
Author

17 November, 2017

The fund was initially set up to invest the proceeds from Norway's oil reserves.

Norway's central bank said Thursday it has recommended the removal of oil and gas stocks from the country's sovereign wealth fund to make the government's wealth "less vulnerable to a permanent drop in oil and gas prices".

"Oil price exposure of the government's wealth position can be reduced by not having the fund invested in oil and gas stocks", said Matsen.

"However, in periods of substantial and prolonged oil price changes, the difference in returns between oil and gas stocks and the broad equity market have been considerable".

Oil and gas stocks would be replaced by investments in other companies, Matsen said.

Oil and gas equities now account for around 6 percent of the GPFG's benchmark index, or just over 300 billion kroner (36.6 billion US dollars), according to the bank.

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In September, the fund value reached $1 trillion for the first time after being boosted as the world's major currencies strengthened against the US dollar, combined with strong equity markets.

The fund's biggest oil and gas holding at the end of 2016 was $5.36bn in Anglo Dutch firm Shell, followed by $3.06bn in ExxonMobil, $2.04bn in fellow USA oil firm Chevron, $2.02bn in the UK's BP, and $2.01bn in France's Total. In 2014, Stanford University said it wouldn't invest in coal-mining companies, and under pressure from environmental activists other USA endowment funds have debated whether they should pull out of fossil fuel investments. It also held stakes in Italy's Eni, France's Total and Sweden's Lundin Petroleum.

"That would mean buying more stocks in the oil and gas sector", said Matsen.

Norges Bank manages Norway's $1 trillion (£758bn) sovereign wealth fund on behalf of the government.

At the end of 2016, the fund's equity investments were split between investments in the financial sector (23.3 percent), industrial companies (14.1 percent), consumer goods (13.7 percent), consumer services (10.3 percent), healthcare (10.2 percent), technology (9,5 percent), oil and gas (6.4 percent), basic materials (5.6 percent), telecoms (3.2 percent) and utilities (3.1 percent). Furthermore, the Government is responsible for the Norwegian economy as a whole and must take a broad and comprehensive approach to this issue, says Finance Minister Siv Jensen.

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


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