Norwegian wealth fund plans to divest of oil and gas

17 November, 2017, 01:13 | Author: Terri Saunders
  • Norwegian wealth fund plans to divest of oil and gas

Paul Fisher, former deputy head of the Bank of England's Prudential Regulation Authority, said: "It is not surprising that we see the world's largest sovereign wealth fund managers no longer prepared to take the increasing risk associated with oil and gas assets, which do not have a long-term future".

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.

It said the step would make the country "less vulnerable to a permanent drop in oil and gas prices", and its advice was not based on a price forecast or the sector's sustainability.

The Scandinavian country is western Europe's biggest oil and gas producer.

"The issues raised by Norges Bank are complex and multifaceted", the finance ministry said.

The Government Pension Fund of Norway, which recently surpassed one trillion dollars in value, is the world's largest sovereign wealth fund.

The fund's biggest oil and gas holding at the end of 2016 was $5.36bn in Anglo Dutch firm Shell, followed by $3.06bn in ExxonMobil, $2.04bn in fellow U.S. oil firm Chevron, $2.02bn in the UK's BP, and $2.01bn in France's Total.

The Oslo-based fund, which began investing in 1996, has 6% of its money invested in oil and gas stocks.

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The pension fund's managers said they remain anxious about the impact of falling oil prices on overall government revenue. Norges Bank Investment Management is the part of the Norwegian central bank responsible for managing the fund.

Government finances in Norway have been hit hard by the drop in oil prices in recent years.

"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.

"This is astonishing - as astonishing as the moment when the Rockefellers divested the world's oldest oil fortune", said Bill McKibben, founder of the campaign group.

Oil and gas stocks would be replaced by investments in other companies, Matsen said. The move would also mean raising its investments in other sectors. The sector accounts for 14 percent of Norway's gross domestic product (GDP).

The proposal has to be reviewed by the Finance Ministry, which in turn needs to decide whether to propose it to parliament. The Government aims to conclude on this matter in the fall of 2018.

And analysts warned that the central bank's proposal could have a knock-on effect on the sector.

"It's great to have that luxury, isn't it?"



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