The decision by a government expert group to recommend that Norway’s $1trn sovereign wealth fund should continue to invest in oil and gas has been slammed by environmental campaigners.
The advice from the expert group contradicted earlier advice from the country’s central bank to remove the sector from its benchmark index
The latest recommendation has been met with dismay by environmental non-profit Greenpeace Nordic, who told RI: “When the entire academia in Norway support the Central Bank’s ask to sell the fund’s oil and gas shares, you start to wonder what the expert group got wrong in their analysis.”
Greenpeace’s spokesperson expressed his hope that the Norwegian government will “take their time to listen to the hearing comments, which all contradict the expert group’s conclusion” referring to an earlier enquiry into the fund’s investments.
The Norwegian government is in the process of assessing whether to remove oil and gas stocks from benchmark index following a recommendation to do so by country’s central bank, Norges Bank last year – with a decision on the issue slated for the autumn.
Norges argued that the Government Pension Fund Global (GPFG), established in 1990 to invest the country’s plentiful oil revenues, should divest its energy stocks as insurance against a permanent decline in the value of Norway’s remaining petroleum resources.An arm of Norges Bank, Norges Bank Investment Management (NBIM), runs the fund’s assets.
The commission was headed by economics professor Øystein Thøgersen, a former executive board member of Norges Bank. The panel delivered its report to the Minister of Finance Siv Jensen today, having been tasked to do so back in February 2018.
“You start to wonder what the expert group got wrong in their analysis.”
Jensen – part of the centre-right coalition which came to power last September – described it as “complex and multifaceted” at the time.
The commission found that despite the “substantial” losses to the government that would follow “a scenario with sustained lower oil prices”, divestment would not be an effective insurance strategy, stating that “only around 1 per cent of such a loss will be covered if the GPFG is not invested in energy stocks”.
The commission, which was directed to base its assessments solely on financial risk and return, added that it would be more effective for the government to reduce its own direct holdings in the fossil fuel sector such as its 67% stake Equinor (formerly Statoil).
GPFG currently holds around NOK315bn (£38bn) in energy stocks, which amounts to about four percent of the total value of the fund (as of 2017) and includes investments in oil majors BP, Exxon and Shell.