Norway’s US$1 trillion wealth fund to drop oil and gas stocks
OSLO: Norway’s trillion-dollar sovereign wealth fund is proposing to drop oil and gas companies from its benchmark index, which would mean cutting its investments in those companies, the deputy central bank chief supervising the fund told Reuters, sending energy stocks lower.
If adopted by parliament, the fund would over time divest billions of dollars from oil and gas stocks, which now represent 6% – or around US$37bil – of the fund’s benchmark equity index.
The aim is to make the Norwegian government’s wealth less vulnerable to a permanent drop in oil prices.
Europe’s index of oil and gas shares hit its lowest level since mid-October on the news and was trading down 0.27% at 1351 GMT.
The proposal came in a letter sent by the central bank to the finance ministry and signed by its governor, Oeystein Olsen, and the chief executive of the fund, Yngve Slyngsad, deputy central bank governor Egil Matsen said in an interview.
“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.
“That would mean all companies that the FTSE has classified with the sector, should be removed from our reference index.”
The fund is the world’s largest sovereign wealth fund. It invests Norway’s revenues from oil and gas production for future generations in stocks, bonds and real estate abroad.
It is among the largest investors in a wide range of oil companies, holding stakes at the end of 2016 of 2.3% in Royal Dutch Shell, 1.7% of BP, 0.9% of Chevron and 0.8% of Exxon Mobil .
“The risk for the oil sector is how many investment funds will downsize their exposure to extractive industries,” said Jason Kenney, oil analyst at bank Santander.
The fund also held 1.7% of Italy’s Eni, 1.6% of France’s Total and 0.9% of Sweden’s Lundin Petroleum, among others.
At the end of the third quarter, Royal Dutch Shell was the fund’s third-biggest equity investment overall, worth around US$5.34bil and exceeded only by its ownership in Apple and Nestle.