Norway eases sovereign fund's boycott of oil giants

Norway eases sovereign fund's boycott of oil giants

Norway eases sovereign fund's boycott of oil giants

After a year of deliberation, the government on Friday approved the removal of 134 companies classified as exploration and production companies by FTSE Russell, while allowing the bigger integrated oil and gas companies to remain in the fund.

Environmentalists claimed the decision as a victory, with founder and environmentalist Bill McKibben tweeting, "Huge huge huge win-Norwegian govt (an oil state) is recommending that the world's largest sovereign wealth fund Fully Divest From All Fossil Fuel".

Jensen defended her decision to keep the big oil companies in the portfolio, citing their increased investments in renewable energy.

"The objective is to reduce the aggregate oil price risk on the whole Norwegian economy", Minister of Finance Siv Jensen told The Associated Press.

Those stocks would be replaced by investments in other sectors, broadly weighted in proportion under the fund's current mandate, the central bank's deputy governor said in 2017, when the bank made its initial proposal. They're doing it because fossil fuel stocks are not producing the value that they have historically.

"However, it does send a clear signal that companies betting on the expansion of their oil and gas businesses present an unacceptable risk, not only to the climate but also to investors". Reports suggested the decision to divest from upstream exploration companies would impact around $7.5bn of shares held in over 130 firms. Activists said it shattered the "illusion" that fossil fuels would continue to be used for decades, despite global warming.

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Oslo said the move is based exclusively on financial considerations and that it does not reflect any particular view of the oil industry's future prospects.

While Shell, BP and other oil majors were spared in Norway's decision on Friday, they may yet be earmarked for divestment in the future. "The state's revenues from the continental shelf are, as a general rule, a outcome of the profitability of exploration and production activities", it said. "Therefore this measure is about diversification". It has been a hot-button issue in Norway, which is seeking to project an image as a responsible environmental steward while pumping oil and gas at a fast clip.

Parliament, which still needs to approve the proposal, is expected to back the plan as the ruling center-right coalition has a majority in the assembly.

"While the fund was initially built on revenue from oil and gas, the Ministry of Finance understands that the future belongs to those who transition away from fossil fuels", said Mark Campanale, founding director of energy researcher Carbon Tracker.

Odd Arild Grefstad, CEO of Norwegian asset manager Storebrand Group, which has $90bn in assets under management, described the divestment decision as "reasonable and forward-looking".

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. One of the world's biggest sellers of coal, Glencore Plc, yielded to investor demands earlier this year by promising to limit production of the fuel and align the business with Paris climate targets.

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