$1tn Norwegian oil fund plans to ditch oil and gas stocks

$1tn Norwegian oil fund plans to ditch oil and gas stocks

In a letter to the Norwegian Finance Ministry on Thursday, Øystein Olsen, chairman of Norges Bank, and Yngve Slyngstad, chief executive of Norges Bank Investment Management (NBIM), wrote: "In this letter, we conclude that the vulnerability of government wealth to a permanent drop in oil and gas prices will be reduced if the fund is not invested in oil and gas stocks, and advise removing these stocks from the fund's benchmark index".

Going forward, the Ministry of Finance will obtain further information and notify Parliament about the ongoing work in the Report on the Management of the Government Pension Fund, to be submitted in the spring of 2018. The fund could dump up to $40 billion (€33.9 billion) worth of shares in global oil giants such as Royal Dutch Shell, BP, Chevron and Exxon Mobil.

Oil and gas stocks would be replaced by investments in other companies, Matsen said.

"This advice is based exclusively on financial arguments and analyses of the government's total oil and gas exposure", the bank's deputy governor Egil Matsen said in a statement. It invests Norway's revenues from oil and gas production for future generations in stocks, bonds and real estate overseas.

"However, in periods of substantial and prolonged oil price changes, the difference in returns between oil and gas stocks and the broad equity market have been considerable".

The fund has grown so large that even though the Norwegian state is taking less than 3 per cent of the fund's value every year for its fiscal budget in recent years, oil spending now accounts for one in five crowns spent by the state.

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.

Greenpeace Norway welcomed the central bank's intervention, but said Norway must now also cease exploring for oil in the Arctic.

The fund is among the world's biggest investors in stocks, owning $667 billion worth of shares in over 9,000 companies globally.

Norway's trillion-dollar sovereign wealth fund is proposing to sell off all its holdings in oil and gas companies.

"This is the biggest pile of money on the planet, most of it derived from oil-but that hasn't blinded its owners to the realities of the world we now inhabit", said McKibben.

If it decides to back the central bank's proposal, the country's parliament would be able to vote on it in June 2019 at the earliest.

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