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World’s biggest sovereign wealth fund to decide on dumping oil
OSLO, March 8, 2019 (BSS/AFP) – Norway will announce on Friday whether its
sovereign wealth fund, which is the world’s biggest and has been fuelled by
petrodollars, will divest its oil and gas holdings in a decision keenly
awaited by climate activists.
While the decision is said to be based solely on financial considerations
and not on the environment or climate change, a divestment by an investor
worth more than $1 trillion would be a major blow to polluting fossil fuels.
Finance Minister Siv Jensen is expected to present the government’s
position at a press conference at 12:15 pm (1115 GMT).
Norway’s central bank, tasked with managing the mammoth fund — commonly
referred to as the “oil fund” but formally known as the Government Pension
Fund — made headlines in November 2017 when it called for the divestment of
oil stocks in order to reduce the Norwegian state’s exposure to the volatile
oil sector.
“This advice is based exclusively on financial arguments and analyses of
the government’s total oil and gas exposure,” the bank’s deputy governor Egil
Matsen said at the time.
It “does not reflect any particular view of future movements in oil and
gas prices or the profitability or sustainability of the oil and gas sector,”
he added.
In Norway, the biggest hydrocarbon producer in western Europe, oil and gas
represent almost half of exports and 20 percent of the state’s revenues.
All revenue from the state-owned oil and gas companies are placed in the
sovereign wealth fund, which Oslo then taps to balance its budget.
In order to limit the state’s exposure in the event of a steep drop in oil
prices — as was the case in 2014 — the idea would be to no longer allow the
fund to invest in oil stocks and sell its existing holdings.
At the end of 2018, the fund had holdings worth around $37 billion in the
oil sector, with significant stakes in Shell, BP, Total and ExxonMobil among
others.
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– Victory for climate fight –
Given the sums involved, a divestment would likely take years, but it
would be seen as a clear victory in the fight against global warming at a
time when the world is at pains to meet its Paris treaty goals.
While the climate change aspect is not officially part of Norway’s
justification for the move, a sell-off would “obviously be very important”,
said Greenpeace, which has campaigned for divestment for years.
Norway “could be a role model and show that it is entirely possible to
have a fund that both makes money, with moderate risks, and stays out of oil
and natural gas,” said Martin Norman of Greenpeace’s Norwegian branch.
Last year, a panel of experts appointed by the government advised against
divesting oil stocks, arguing it would only have a marginal impact on
Norway’s oil exposure.
But business newspaper Dagens Naeringsliv reported on Thursday that there
are indications the rightwing government is nonetheless leaning in that
direction.
Friday’s announcement is scheduled just hours before the annual congress
for the Liberal party, a junior member of the coalition currently struggling
in the polls and in need of a political victory to boost its popularity.
The decision is also important given the fact that the positions taken by
the fund — which controls 1.4 percent of global market capitalisation — are
closely watched by other investors.
In another significant move, the fund has already pulled out of the coal
industry, both for environmental and financial reasons.
BSS/AFP/HR/1015