The Norwegian central bank, which manages Norway’s sovereign wealth fund – commonly referred to as the “oil fund,” the world’s biggest sovereign wealth fund – is advising its government to drop investments in gas and oil.
“The return on oil and gas stocks has been significantly lower than in the broad equity market in periods of falling oil prices,” said the bank. “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.”
But the wealth fund says it’s not proposing the divestment for the environment’s sake. Norway is western Europe’s biggest oil and gas producer, and fluctuations in crude prices has a powerful effect on the fund’s investments, which Norway depends on to balance its budget.
“This advice is based exclusively on financial arguments and analyses of the government’s total oil and gas exposure,” said Egil Matsen, the central bank’s deputy governor.
Other’s believe the move is motivated by the belief that fossil fuels are on their way out. Paul Fisher, former deputy head of the Bank of England’s Prudential Regulation Authority and senior associate at the Cambridge Institute for Sustainability Leadership said:
“It is not surprising that we see the world’s largest sovereign wealth fund managers no longer prepared to take the increasing risk associated with oil and gas assets, which do not have a long-term future.”
No matter what the reason is, the central bank’s proposal blazes a trail to fossil fuel divestment for the rest of the world. Bob Massie, a longtime climate activist and a founder of the Investor Network on Climate Risk said:
“It lays the groundwork for the transformation of cultural and political views in a major topic that people would rather avoid. This requires people to say, ‘What are we going to do? What are our choices? What do we believe in?’”
The finance ministry said it would consider the bank’s proposal and present its conclusions in the autumn of 2018 after “thorough assessment.”