Norwegian Sovereign Wealth Fund To Divest From Oil & Gas Exploration Stocks
Norway’s Government Pension Fund Global is the largest sovereign wealth fund in the world, with investments totaling $1 trillion under management. On March 8, it announced that it will phase out oil and gas exploration companies from its portfolio. To accomplish that goal, it will sell its holdings in 134 companies, according to The Guardian. In total, the shift in strategy will affect about 1.2% of the fund’s holdings.
Those of us who care about the Earth overheating will be thrilled to hear this news, but Siv Jensen, Norway’s finance minister, made it clear in a statement that the change in investment strategy has little to do with climate change. “The objective is to reduce the vulnerability of our common wealth to a permanent oil price decline. Hence, it is more accurate to sell companies which explore and produce oil and gas, rather than selling a broadly diversified energy sector.”
The fund will continue to own shares in major oil companies like Shell and BP that are making an effort to diversify into renewable energy. Still, people like Bill McKibben applauded the move.
Huge huge huge win–Norwegian govt (an oil state) is recommending that the world's largest sovereign wealth fund Fully Divest From All Fossil Fuel. Financial Times: "this will send shockwaves through the energy sector."https://t.co/PbVWPWOZrE
— Bill McKibben (@billmckibben) March 8, 2019
Charlie Kronick, oil campaigner for Greenpeace UK, offered grudging approval for the plan. “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,” he told The Guardian. “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 recognize that if they continue to spend billions chasing new fossil fuels, they are doomed.” (Emphasis added.)
It is ironic that Norway’s sovereign wealth fund has relied on profits made by extracting oil from the continental shelf under the North Sea over a period of several decades. That oil and gas have contributed millions and millions of tons of carbon dioxide to the Earth’s atmosphere during that time. The government insists oil will continue to 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.
Tom Sanzillo, director of finance for the Institute for Energy Economics and Financial Analysis, tells The Guardian, “These are very important statements from a big fund. They’re doing it because fossil fuel stocks are not producing the value that they have historically. It’s also a warning to the integrated oil companies that investors are looking at them to move the economy forward to renewable energy.” He adds the new investment strategy “underscores that the fracking business model is unsustainable.”
The news is not a slam dunk for those concerned about a rapidly warming planet but it is a sign that attitudes are changing, especially when it comes to assumptions about the long term financial prospects for the petroleum industry. For that we should be grateful while continuing to urge financial institutions like GPFP to do more.
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