The Norwegian central bank, which runs the Oslo-based fund, is recommending the fund be divested of more than $37 billion, or about 6.0 percent of the fund’s benchmark equity index, according to Bloomberg.
In a letter to the Norwegian Finance Ministry on Thursday, Øystein Olsen, chairman of Norges Bank, and Yngve Slyngstad, chief executive of Norges Bank Investment Management (NBIM), wrote: “In this letter, we conclude that the vulnerability of government wealth to a permanent drop in oil and gas prices will be reduced if the fund is not invested in oil and gas stocks, and advise removing these stocks from the fund’s benchmark index.”
NBIM is the arm of the central bank that manages the Government Pension Fund Global (GPFG). The fund was initially set up to invest the proceeds from Norway’s oil reserves. According to Norges Bank, their analysis of the oil price risk in Norway’s overall wealth fund risk was based on future oil and gas revenues, and its direct holdings in Statoil and the GPFG.
Norway relies on oil and gas for about one-fifth of its economic output, and according to the central bank, divesting of oil and gas would make sense. This is actually the second step in getting rid of climate risk taken by the world’s largest investment fund, after it previously sold off most of its coal stocks.
The wealth fund, which controls about 1.5 percent of global stocks, proposes dropping $37 billion of shares in international giants such as BP, Exxon Mobil Corp., Royal Dutch Shell Plc. and other holdings. The Finance Ministry said it will study the proposal and make a decision “in the fall of 2018” at the earliest.
The news of a possible divestment shook Europe’s index of oil and gas shares. SXEP hit its lowest level since mid-October on the news and was trading down 0.27 percent at 1351 GMT, reports Reuters.
