An expert commission tasked by Norway’s government with evaluating a suggestion that the country’s US$1-trillion sovereign wealth fund divests from all its oil and gas investments has advised against such a divestment.
Bloomberg quotes the report of the three-member commission as saying “If energy stocks are excluded from the fund, the composition of the investments will differ from market weights, and the fund will be expected to either achieve lower return or higher risk.”
The commissioners also noted that divesting from oil and gas will do little to mitigate the sovereign fund’s exposure to oil price volatility, but at the same time, it would change what has until now been a “successful investment philosophy.”
Norway’s Government Pension Fund Global, the largest sovereign wealth fund in the world, recommended the removal of oil and gas stocks—US$35 billion worth of shares—from the fund’s equity benchmark index last November. It said this move would make Norway’s wealth and economy less vulnerable to a permanent drop in oil and gas prices.
Currently, oil and gas equities make up some 6 percent of the fund’s benchmark index, or US$35 billion (300 billion Norwegian crowns). The fund has almost 380 investments in oil and gas equities, including stakes in the top global firms. The fund holds 2.33 percent in Shell, and that stake’s market value alone is US$5.36 billion. The interest in ExxonMobil is 0.82 percent worth US$3.066 billion, in Chevron it’s 0.92 percent worth US$2.04 billion, in BP it’s 1.65 percent worth US$2.028 billion, and in Total its stake is 1.62 percent worth US$2.02 billion.
Now the government of Europe’s biggest local oil and gas supplier will review the conclusions of the commission and pass the issue on to parliament. Lawmakers quoted by Bloomberg seem to differ in their opinions on the merits of the commission’s report, while the fund itself has for now refrained from commenting on the commissions’ conclusions.
By Irina Slav for Oilprice.com
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