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

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

In a move 350.org co-founder Bill McKibben called "astonishing", Norges Bank, which oversees the world's largest sovereign wealth fund, advised the Norwegian government to dump all of its shares in oil and gas companies, leaving those entities out of its $1 trillion fund.

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. "We can do that better by not adding oil-price risk".

"The investments in the GPFG and the stake in Statoil result in a total exposure to oil and gas equities for the government that is twice as large as would be the case in a broad global equity index", Norges Bank said.

Built from Norway's oil and gas revenue over the past two decades, the fund takes into account ethical rules encompassing human rights, some weapons production, the environment and tobacco when deciding on investments.

"But clearly the direction is that. if the ministry and the politicians think it is good advice and they say yes to it, clearly the investments in the oil and gas sector will decrease over time", he added. The wealth fund, which controls about 1.5 percent of global stocks, proposes dropping %37 billion of shares in worldwide giants such as BP, Exxon Mobil Corp., Royal Dutch Shell Plc. and other holdings.

The finance ministry said it would present its conclusions in the autumn of 2018. 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.

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"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.

The fund has doubled in value over the past five years and was given the go-ahead in 2017 to boost its stock holding to 70% of its portfolio to help drive returns.

Any proposal by the finance ministry must be approved by Parliament.

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.

Norwegian Minister of Finance Siv Jensen said the issues raised by Norges Bank "are complex and multifaceted" and its advice requires a thorough assessment.

Thursday's recommendation comes at a "good time because the stock portion will now be increased to 70% and that would also mean that we would buy more oil and gas stocks", Matsen said.

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