World’s largest sovereign wealth fund was created to invest North Sea oil profits
The world’s largest sovereign wealth fund, which manages £1tn of Norway’s assets, is to dump investments in firms that explore for oil and gas, but faced criticism for a policy that will still allow it to own stakes in firms such as BP and Shell that have renewable energy divisions.
The Government Pension Fund Global (GPFG), whose assets dwarf those of rival sovereign wealth funds such as China’s or the United Arab Emirates’, said it would phase out oil exploration from its “investment universe”.
The strategy shift will affect 1.2% of its equity holdings, worth about 66bn Norwegian krone (£5.7bn).
The decision is motivated by a desire to protect the Norwegian economy rather than climate concerns, and GPFG will still be permitted to own stakes in fossil fuel companies as long as they have some involvement in renewable energy. Its investments in large firms with renewable units include stakes of 2.4% in Shell and 2.3% in BP.
The move, which follows advice from the country’s central bank, Norges Bank, could be a prelude to further action on climate change, the government said.
“The objective is to reduce the vulnerability of our common wealth to a permanent oil price decline,” said Norway’s finance minister, Siv Jensen. “Hence, it is more accurate to sell companies which explore and produce oil and gas, rather than selling a broadly diversified energy sector.”
Greenpeace said the move did not go far enough but represented a warning to the big oil firms.
Charlie Kronick, oil campaigner for Greenpeace UK, said: “This partial divestment from oil and gas is welcome, but not enough to mitigate Norway’s exposure to both global oil and gas prices and the wider financial ramifications of climate change.
“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.
“While BP and Shell are excluded from the current divestment proposal, they must now recognise that if they continue to spend billions chasing new fossil fuels, they are doomed.”
The GPFG has amassed about £1tn of wealth, according to its website, by investing the proceeds from Norway’s supplies of North Sea oil.
Divesting oil exploration stocks would help continue its translation of oil wealth into more sustainable assets, Oslo said, insisting it was not necessarily forecasting a price slump or signalling pessimism about the profitability of the petroleum sector.
The government also insisted oil would be an “important and major industry in Norway for many years to come”.
“The state’s revenues from the continental shelf are, as a general rule, a consequence of the profitability of exploration and production activities,” it said.
In a sign that Norway could step up its policy against oil investment, Norges Bank will be asked to perform a review of climate risk in the GPFG.
It said this would be “with a view of strengthening efforts in relation to those individual companies accounting for the largest contributions to the climate risk associated with the fund”.