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Trillion-Dollar Norwegian Wealth Fund Announces Fossil Divestment

Norway’s trillion-dollar sovereign wealth fund announced Thursday that it will divest its oil and gas stocks, in a bid to protect itself from the financial risk of falling crude oil prices.

“Our perspective here is to spread the risks for the state’s wealth,” Egil Matsen, the deputy central bank governor responsible for the fund, told Bloomberg. “We can do that better by not adding oil price risk.”

For Norway, which draws about 20% of its GDP from oil and gas, “the divestment would mark the second major step in scrubbing the world’s biggest wealth fund of climate risk, after it sold most of its coal stocks,” the news agency notes. “The plan would entail the fund, which controls about 1.5% of global stocks, dumping as much as US$40 billion of shares in international giants such as Exxon Mobil Corporation and Royal Dutch Shell Plc.

The fund would sell off the stocks next fall at the earliest.

Built on the income that western Europe’s largest energy supplier has generated for more than 20 years, the fund’s investment decisions are guided by ethical rules encompassing human rights, some weapons production, the environment, and tobacco,” Bloomberg notes. “While the fund says the plan isn’t based on any particular view about the future of oil prices or the industry as a whole, it will likely add to pressure on producers already struggling with the growth of renewable energy supplies.

Matsen said “now is a good time” to review the fund’s oil and gas holdings, since it has just received government permission to increase stocks from 60 to 70% of its holdings to boost returns. Its value has doubled in the last five years, but Norway “withdrew cash from the fund for the first time last year to meet spending commitments after oil prices dropped,” writes reporter Sveinung Sleire.

In a separate post picked up by industry news outlet JWN Energy, Bloomberg says the announcement shows the extent to which Big Oil “is under pressure, unloved and on sale”. The world’s biggest fossils are “struggling back to their feet after a three-year oil slump, while also fighting to prove they can survive for decades to come amid an accelerating shift to clean energy. So getting dumped by the world’s biggest investment fund wouldn’t be welcome news.

Bloomberg adds that the Norwegian fund “is among the top 10 shareholders in each of Europe’s biggest oil companies,” holding 2.3% of Shell and 1.7% of Italian fossil giant Eni. So “this would be hugely impactful, depending on how they do it, especially when many people aren’t comfortable with [fossil] energy just yet anyway,” said Elvis Pellumbi, chief investment officer at CF Opportunity Fund.

The plan received praise from Marius Holm, head of the Zero Emission Resource Organization, and former government advisor Sony Kapoor. “The world is changing fast, and it’s very risky to put too many eggs in the same basket,” said Holm. Kapoor called the plan “a belated victory for common sense over the powerful oil and gas lobby in Norway,” and an opportunity to increase the fund’s “green” holdings at least tenfold.

Meanwhile, Greenpeace and Oslo-based Nature and Youth are pursuing a different path, with a lawsuit challenging 10 new licences Norway has issued for oil and gas exploration in the Barents Sea. EcoWatch reports the case is based on a Norwegian law that states: “Everyone has the right to an environment that safeguards their health and to nature where production ability and diversity are preserved. Natural resources must be managed from a long-term and versatile consideration which also upholds this right for future generations.”