Norway's $1 trillion sovereign wealth fund to dump oil and gas shares

Norway's $1 trillion sovereign wealth fund to dump oil and gas shares

By Mikael Holter Norway took a half step toward divesting oil and gas stocks in its massive $1 trillion wealth fund, approving the sale of pure exploration companies while sparing the biggest integrated producers.

Climate crusaders celebrating Norway's proposal to divest its sovereign wealth fund from oil and gas stocks should pause before popping the carbon-neutral champagne.

After more than a year of deliberation, the government on Friday approved excluding 150 companies that are held by the fund and classified as exploration and production companies by FTSE Russell. The fund, somewhat ironically, derives its income from Norway's booming oil and gas industry.

Integrated oil giants were not banned from the fund's investments in part because those companies are considered most likely to invest in green energy - a market the Norwegian government is keen to profit from.

The revenue from state-owned oil and gas companies is placed in the Government Pension Fund Global - as it is officially known - which Oslo then taps to balance its budget.

"We cheer for this decision and the government deserves tribute", says Gaute Eiterjord, leader of Nature and Youth.

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The Norwegian government has recommended that the country's US$1 trillion wealth fund sell its holdings in a group of companies that focus on finding and producing oil and gas. The proposal would see the fund sell about $7.5 billion in stocks.

"Exploration and production companies will be phased out from the fund gradually over time", the government proposal said, without giving a timeline.

Tom Sanzillo, director of finance for the Institute for Energy Economics and Financial Analysis (IEEFA) and former first deputy comptroller for New York State, said oil and gas equities "no longer possess the blue chip status of bygone eras". "It's not a debate about climate, it's about financial risk". "These are the companies making the big investments now in renewables and so on".

"It reflects to a larger extent the risk we ourselves have - the bulk of the state's exposure in Norway is upstream activity", Finance Minister Siv Jensen said. The fund holds $6bn stake in shell alone. The Norwegian government indicated in its release that it expects most of the future growth in renewable energy to come from companies that do not now have renewable energy as their main business.

The Fund that is the world's biggest sovereign wealth fund with more than €900 billion in assets will now get rid of stakes in more than 160 companies from all over the world.

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