Published: Thu, November 16, 2017
Money | By Armando Alvarado

Norway wealth fund plans to drop oil and gas stocks

Norway wealth fund plans to drop oil and gas stocks

The bank that runs the world's biggest sovereign wealth fund has told the Norwegian government it should dump its shares in oil and gas companies, in a move that could have significant consequences for the sector. The fund owns large stakes in most of the world's major oil companies, including a 0.92% stake in Chevron Corp., a 0.82% stake in Exxon Mobil Corp., 1.65% in BP PLC and 2.23% in Royal Dutch Shell PLC as of the end of 2016. It also has shares worth more than $1bn in oil services firm Schlumberger and Italy's Eni, whose share price slumped 0.86%.

Norway relies on oil and gas for about one-fifth of its economic output, and according to the central bank, divesting of oil and gas would make sense. The index has recovered from its summer lows on the back of rising crude prices but it remains down 5 percent year to date and is among the worst sectoral performers in Europe.

The nation will be "less vulnerable" to a drop in oil by not being invested in stocks of companies in the industry, the Oslo-based fund said Thursday. In 2014, Stanford University said it wouldn't invest in coal-mining companies, and under pressure from environmental activists other USA endowment funds have debated whether they should pull out of fossil fuel investments.

Two years of weaker oil prices has cut into the income of numerous world's largest sovereign-wealth funds, which are in largely resource-dependent countries like Saudi Arabia and Kuwait. The fund was initially set up to invest the proceeds from Norway's oil reserves.

BP declined to comment on the fund's proposal.

The bank said its analyses of the oil price risk in the government's wealth are based on the government's future oil and gas revenues, the government's direct holdings in Norwegian multinational oil and gas company Statoil and the GPFG.

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The Finance Ministry said it would study the plan and come to a decision next autumn at the earliest.

Owning close to 1.5% of global stocks, the Norwegian fund largely follows indices, but is allowed some active management of its portfolio.

"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.

Other large investors have launched products that don't invest in fossil fuels.

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.

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