Published on November 23rd, 2017
by James Ayre
Norway, which is still a monarchy, has two sovereign wealth funds. The Government Pension Fund Global, also known as the Oil Fund, was established in 1990 to invest the profits from the country’s petroleum sales. As of September of this year, it was valued at more than $1 trillion, equal to $192,307 per Norwegian citizen. The other is Government Pension Fund Norway and is much smaller.
By law, the managers of the funds are prevented from investing in certain companies deemed not to meet the high ethical standards the country considers appropriate. Now, the deputy central bank chief who supervises the Oil Fund has told Reuters it is recommending to Parliament that oil and gas stocks be deleted from its portfolio. How ironic that a fund which owes its existence to fossil fuel profits now deems fossil fuel companies to be inappropriate investments.
Divestment in Norway is just one more sign that fossil fuels are facing the end of the line. Fossil fuel executives try to put a brave face on things, but the signs are everywhere — the world is moving quickly to end it love affair with petroleum and coal. It won’t be tomorrow but it will be within the lifetime of most people alive today.
The prices of renewables — both wind and solar — are plunging, putting fossil fuels at a competitive disadvantage. The world’s nations are not yet doing nearly enough to control global warming but they are at least talking about phasing out coal powered generating plants as soon as possible. Since 40% of global carbon emissions come from burning coal, that’s important progress. Siemens this week announced it is cutting nearly 7,000 jobs in its oil and gas divisions.
Oil and gas stocks currently account for about 6% of The Norwegian Oil Fund or about $37 billion. If the Norwegian Parliament approves the move, divestment will reduce the fund’s exposure to falling energy prices in the future. Deputy central bank governor Egil Matsen explains, “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. That would mean all companies that the FTSE has classified with the sector, should be removed from our reference index.”
“The risk for the oil sector is how many investment funds will downsize their exposure to extractive industries,” says Jason Kenney, oil analyst at bank Santander.
“This news will be scrutinized very closely by funds around the world who are already looking closely at the climate risks in their portfolios and which sectors and companies will fare best in the low-carbon transition,” adds Stephanie Pfeifer, head of the Institutional Investors Group of Climate Change. It represents 140 investors that work on global warming and with combined assets of more than 20 trillion Euros. “Investors will look even more carefully at which companies are aligning their business strategies to the transition to a low-carbon energy system and which ones are not. Investors then have a range of options for managing the risks they perceive,” she told Reuters.
The news was downplayed by other financial analysts, but climate activist Bill McKibben, founder of 350.org, was enthusiastic about the news. “This is astonishing — as astonishing as the moment when the Rockefellers divested the world’s oldest oil fortune. This is the biggest pile of money on the planet, most of it derived from oil — but that hasn’t blinded its owners to the realities of the world we now inhabit.”
“Bravo Norway, and let’s hope it gets through because the future of fossil fuel investment is looking shaky indeed,” adds Rachel Kennerley, climate campaigner at Friends of the Earth.
About the Author
‘s background is predominantly in geopolitics and history, but he has an obsessive interest in pretty much everything. After an early life spent in the Imperial Free City of Dortmund, James followed the river Ruhr to Cofbuokheim, where he attended the University of Astnide. And where he also briefly considered entering the coal mining business. He currently writes for a living, on a broad variety of subjects, ranging from science, to politics, to military history, to renewable energy. You can follow his work on Google+.