Norway's oil fund wants to divest from ... oil

Norway's oil fund wants to divest from ... oil

The bank recommended the removal of oil stocks from the fund's benchmark index, which would still give it a little leeway to invest modestly in the sector.

The sovereign wealth fund, fuelled by the state's oil revenues which have dropped sharply in recent years, is now worth around 8.24 trillion kroner (854 billion euros, $1 trillion), invested primarily in shares (65.9 percent) as well as bonds and real estate.

"Our advice is to simply remove the oil and gas sector, as it is defined in the FTSE reference index, from the fund's reference index", Matsen said. The fund's exposure to fossil fuel markets is now double that of a standard global fund, the Central Bank said.

"Our perspective here is to spread the risks for the state's wealth", Egil Matsen, the deputy central bank governor overseeing the fund, said in an interview in Oslo.

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The fund, formally known as the Government Pension Fund Global (GPFG), is ranked as the world's biggest sovereign wealth fund. In periods of stable oil prices, the returns on oil and gas stocks have largely moved in tandem with the broad equity market.

If accepted by the finance ministry and adopted by parliament, the fund would over time divest billions of dollars from oil and gas stocks, which now represent 6 per cent - or around $37-billion - of the fund's benchmark equity index.

The fund also held 1.7 percent of Italy's Eni, 1.6 percent of France's Total and 0.9 percent of Sweden's Lundin Petroleum, among others. It owns owns more than $660bn-worth of shares in over 9,000 companies globally, and reached the $1tn-mark in terms of assets under management in September. The government, which also controls Statoil ASA and offshore oil and gas fields, was forced to withdrew cash from the fund for the first time past year to meet spending commitments after oil prices dropped.

"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".

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Nicolò Wojewoda of 350.org Europe was also hopeful about the implications of Norges Bank's decision, calling it "yet another nail in the coffin of the coal, oil, and gas industry".

Any proposal by the finance ministry must be approved by Parliament. However, it made clear that its recommendation involved divesting from existing oil and gas shares as well as ruling out future investments.

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.

And analysts warned that the central bank's proposal could have a knock-on effect on the sector.

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