Norwegian wealth fund plans to divest of oil and gas

Norwegian wealth fund plans to divest of oil and gas

Norwegian wealth fund plans to divest of oil and gas

In the Bank's view, this will make the government's wealth less vulnerable to a permanent drop in oil and gas prices. The fund now accounts for a much larger share of the government's wealth than before, and is an integral part of fiscal policy via the fiscal rule.

Norway is western Europe's biggest oil and gas producer, pumping just under 1.8 million barrels per day, or roughly double the UK's output.

The recommendation, which is being considered by the government, would mark a symbolic shift from fossil fuel investments and would be particularly pertinent given the fund has grown off the back of Norway's north sea oil operation. "We can do that better by not adding oil price risk through the fund". The fund could dump up to $40 billion (€33.9 billion) worth of shares in worldwide oil giants such as Royal Dutch Shell, BP, Chevron and Exxon Mobil.

The finance ministry said it would decide on the plan next year.

Rachel Kennerley of Friends of the Earth said: "Bravo Norway, and let's hope it gets through because the future of fossil fuel investment is looking shaky indeed".

Therefore, it is the Bank's assessment that the government's wealth can be made less vulnerable to a permanent drop in oil prices if the GPFG is not invested in oil and gas stocks. Oil and gas are seen as increasingly risky investments as more countries turn to cleaner energy sources in order to meet requirements under the Paris climate agreement, which aims to keep global warming under two degrees Celsius above pre-industrial levels.

The fund said it doesn't expect returns or market risk to be affected "appreciably" by its proposal, emphasizing that cutting exposure to the energy industry would allow it to crank up investments in other sectors. It invests Norway's revenues from oil and gas production in stocks, bonds and real estate.

"The problem raised by the central bank is extensive and has many facets", Finance Minister Siv Jensen said in a statement.

"This must be thoroughly assessed, I am not prepared to conclude in advance", said Nikolai Astrup, leader of the finance committee representing the ruling Conservatives.

But environmental groups praised the plan.

Recently, Norway's fund has benefitted from an increase in oil prices.

"The government is responsible for the Norwegian economy in its entirety and has to adopt a broad and comprehensive approach to this question", she added.

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