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June 11, 2019

Update: The Latest on Norway’s Calls for Diversification

Update (June 11, 2019): The Norwegian Parliament is expected to vote tomorrow, June 12, to mandate the country’s pension fund, known as the Oil Fund or Government Pension Fund Global, to sell off holdings in a selection of natural gas, and coal companies while increasing investments in renewable energy companies.  The move follows a March 2019 announcement from Minister of Finance Siv Jensen regarding the decision as a means to “reduce the vulnerability” of the Norwegian fund.

Following the March announcement, divestment activists – as they likely will again tomorrow – hailed the news as a massive win for the otherwise struggling campaign. Yet the facts remain starkly different.

  • Norway is a dominant energy economy, relying on oil and natural production for roughly 21 percent of government revenues, the employment of an estimated 6 percent of its workforce, and for supplying half of its national exports.


  • The move expected to be ratified tomorrow only impacts select companies and does not include integrated companies, meaning over $25 billion in investments in the oil and gas industry remain in its portfolio as the $1 trillion fund owns “$37bn of shares in oil companies such as BP, Shell and France’s Total.”


  • The fund is not divesting from integrated oil and gas companies in large part because, as Minister Jensen states, “The integrated companies will most probably be the companies that will increase their investments in a much broader spectrum of the energy industry going forward. These are the companies making the big investments now in renewables and so on. [Exiting from this] would in reality have constricted the fund’s chance to take part in these types of investments.”


  • Third parties have spoken out to provide clarity on the move. New York Comptroller Thomas DiNapoli, the fiscal manager behind New York’s public pension fund, called Norway’s decision to sell holdings in exploration and production companies “more nuanced and complex than divestment advocates recognize or are willing to admit.” As stated in Forbes, “putting things in context, the fund will retain most of its oil and gas investments.”


  • This is about diversification, not divestment. Norway’s Oil Fund is just that – a fund that helps support the country and its pensioners from revenues it generated from oil development. Diversifying its investments of this money may change up its portfolio a bit, but it does nothing to change the fact that this is a resource driven and fueled by the country’s long legacy of energy development. As Minister Jensen states, “It reflects to a larger extent the risk we ourselves have — the bulk of the state’s exposure in Norway is upstream activity. We’re reducing our vulnerability by choosing to withdraw the fund gradually from this segment.”


Bottom line: Norway’s empty gesture decision to divest its Oil Fund from select fossil fuel companies is hypocritical at worst and limited at best.  The decision impacts a small portion of the fund’s broader energy portfolio, and actively rejects divestment of the largest companies due to the critical role they play in supporting the future of all forms of energy development and technology. Meanwhile, the country remains a critical energy economy, with oil and natural production providing continued funding to the government, employing an estimated 6 percent of its workforce, and accounting for over half of its national exports. This decision may appease a few divestment activists, but it keeps Norway’s Oil Fund invested in over $25 billion in the energy companies driving both its own economy and the future of global energy development.

***Original Post: March 8, 2019***

After more than a year of deliberation, Norway’s Finance Ministry has recommended a partial step in selling select oil and gas stocks from its trillion-dollar wealth fund, the largest publicly held investment in the world. In a statement on Friday, Minister of Finance Siv Jensen explained the decision is meant to “reduce the vulnerability” of the Norwegian fund “to permanent oil price decline.”

Here’s what you need to know to clarify this decision to diversify the portfolio outside the frame of a traditional divestment:

  1. This decision is not final. The recommendation for the Norwegian fund will now be sent to the nation’s parliament for approval.
  1. This decision does not impact the fund’s investments in international integrated companies. The sovereign wealth fund owns $37 billion shares in oil companies of various breadths and Norway’s Finance Ministry has only approved the sale of pure exploration and production companies. The large integrated firms, such as BP, Royal Dutch Shell, Total and ExxonMobil, will not be impacted by this decision. This nuance in their recommendation is indicative of Norway’s motivation – diversification, not denouncement.
  1. That means only roughly one fifth of the fund’s oil and gas investments are impacted. Of the $37 billion shares currently held, the proposal would only see the fund sell approximately $7.5 billion. It is, at its core, a compromise that meets the 2017 proposal from the fund’s Investment Management (NBIM) halfway. While the original plan was hailed as a huge moment by climate activists, with nearly 80% of the fund’s fossil fuel holdings intact, this plan simply cannot be colored the same.
  1. The fund highlights the key role large energy companies play in supporting an array of energy resources. Pointing out the significant investments in low-emission technology already sourced from the fossil fuel industry, Minister Jensen defended her decision to keep major oil companies in the portfolio.

“The integrated companies will most probably be the companies that will increase their investments in a much broader spectrum of the energy industry going forward. These are the companies making the big investments now in renewables and so on. [Exiting from this] would in reality have constricted the fund’s chance to take part in these types of investments.”

In a latter Bloomberg interview, Jensen added:

“It would be sad if the pension fund would not be able to invest in those companies in the future.”

  1. Norway still relies on oil and gas for nearly all of the state funding. Diversification has long been a contentious issue in Norway. Though Jensen assured the move did not reflect the government’s views on the price of oil or the sustainability of the petroleum sector, it’s ironic that a state so heavily dependent on oil, a state that used the proceeds of its massive energy wealth to line the coffers of the very fund now in debate, is suddenly inclined to give up select holdings in fossil fuels; albeit, in a token way.

With only 1.2% of the fund’s stock holdings affected, the proposed plan rates minimally on the scale of divestment. However, the decision still smacks of hypocrisy. No doubt divestment activists will hail this as a victory, and Norway can placate those opposed to its robust energy development, but the facts remain far different. Norway is still a critical energy economy that recognizes the only path forward includes working with energy companies with the resources and technology to find solutions, not empty gestures.