Norwegian wealth fund plans to divest of oil and gas

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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.

Norway's trillion-dollar sovereign wealth fund is proposing to drop oil and gas companies from its benchmark index.

At the end of 2016, the fund's equity investments were split between investments in the financial sector (23.3 per cent), industrial companies (14.1 per cent), consumer goods (13.7 per cent), consumer services (10.3 per cent), healthcare (10.2 per cent), technology (9,5 per cent), oil and gas (6.4 per cent), basic materials (5.6 per cent), telecoms (3.2 per cent) and utilities (3.1 per cent).

"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 [sovereign wealth fund] is not invested in oil and gas stocks".

The Norwegian fund, officially known as the Government Pension Fund Global, is among the largest investors in a wide range of oil companies, including Royal Dutch Shell, BP, Chevron and Exxon Mobil.

"Oil price exposure of the government's wealth position can be reduced by not having the fund invested in oil and gas stocks". "We can do that better by not adding oil-price risk". The Finance Ministry said it will study the proposal and make a decision "in the fall of 2018" at the earliest. The proposal has to be reviewed by the Finance Ministry, which in turn needs to decide whether to propose it to parliament. Its fossil fuel investments have also come under closer scrutiny as Norwegians increasingly struggle to reconcile their ambition to be a climate leader, while remaining one of the world's biggest oil and gas nations.

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The fund has doubled in value over the past five years and was given the go-ahead in 2017 to boost its stock holding to 70% of its portfolio to help drive returns.

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.

Thursday's recommendation comes at a "good time because the stock portion will now be increased to 70% and that would also mean that we would buy more oil and gas stocks", Matsen said.

Finance Minister Siv Jensen said in a statement that the concern raised by the central bank was "extensive and has many facets".

"The Government is responsible for the Norwegian economy as a whole and must take a broad and comprehensive approach to this issue", she was quoted as saying in a statement.

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