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Norway’s Parliament is expected to approve later on Wednesday plans by the government’s US$1-trillion fund—the world’s biggest sovereign wealth fund—to divest from oil and gas exploration companies in a landmark decision that could impact future investor attitude toward fossil fuels.
After months of deliberations, Norway’s government proposed in March that the Government Pension Fund Global, as the so-called ‘oil fund’ is officially known, divest from 134 companies classified by the index provider FTSE Russell as belonging to the exploration and production subsector. As at the end of 2018, the Norwegian fund held stakes in E&P companies—under FTSE Russell’s classification for such—with an approximate value of US$7.6 billion (66 billion Norwegian crowns). This corresponds to 1.2 percent of the fund’s holdings in equities.
The move by the fund, which has amassed its vast wealth on the back of Norway’s oil and gas revenues, comes at a time when investors are increasingly pressing major oil companies to start taking climate change seriously and to prepare their business portfolios for a world of peak oil demand, whenever that may come.
Norway, however, is motivating its decision with financial reasons, aiming to cut exposure to the oil price risk. More importantly, the fund will not be divesting from any of the integrated Big Oil firms.
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According to Bloomberg, there is broad support in the Norwegian Parliament to approve today changes to the investment criteria of the sovereign wealth fund, including dumping pure exploration and production oil companies and tightening the rules for investing in coal.
According to Germany-based environment and human rights NGO Urgewald, the Norwegian Parliament is expected to vote in favor of the government’s proposal to tighten the coal exclusion criteria of the sovereign fund.
The more stringent criteria expected to be passed by Parliament are “all companies which are operating over 10 GW of coal-fired capacity or producing over 20 million tons of coal annually will be blacklisted by the Norwegian Government Pension Fund.” This would affect eight major companies, including Glencore, Anglo American, Enel, RWE, and BHP Billiton, according to research from NGOs Urgewald and Framtiden i våre hender (Future in our hands).
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.