Norway's $1 trillion wealth fund to remain invested in Big Oil stocks

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Norway will announce on Friday whether its sovereign wealth fund, which is the world's biggest and has been fuelled by petrodollars, will divest its oil and gas holdings in a decision keenly awaited by climate activists.

While the decision is based exclusively on financial considerations and not on the environment, a divestment - even partial - by an investor worth more than US$1 trillion was seen as a major blow to the fossil fuels industry and hailed by the environmental lobby.

Explaining why it was not excluding giant oil companies from the fund, the Finance Ministry said it anticipated that nearly all the growth in renewable energy over the next decade would come from diversified companies that did not focus exclusively on renewables.

The announcement means the fund will remain invested in Big Oil companies such as Shell, BP, Total and ExxonMobil, in which it owns significant stakes.

The Norwegian fund derives its income from the country's own oil and gas industry.

"More and more institutional investors are reviewing their exposure to the oil and gas sector, especially for longer-cycle exploration projects like deepwater or oil sands that may have a payout period measured in decades", said Robert Johnson, managing director with Eurasia Group, U.S-based political risk adviser.

The state, which has built up its wealth on the back of North Sea oil and gas reserves, also has no plans to sell its direct stake in Norwegian energy firm Equinor or its direct holdings in Norwegian oil and gas fields.

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"The goal is to make our collective wealth less vulnerable to a lasting fall in oil prices", the Financial Times quoted Finance Minister Siv Jensen as saying.

The Norwegian Government Pension Fund Global is to sell out of more than 160 companies, among them Swedish oil producer Lundin.

"We were quite surprised to see this and we certainly don't agree with their assertion", said Jon Stringham, manager of fiscal and economic policy for the Canadian Association of Petroleum Producers.

"The government has acknowledged the problem of over exposure to oil", he said.

The advice follows a report from Norway's central bank in 2017 that dropping oil and gas investment would be a good economic move.

"Everything indicates that nearly the entire growth in listed infrastructure for renewable energy over the next 10 years will be driven by companies that do not have renewable energy as their main activity".

"However, it does send a clear signal that companies betting on the expansion of their oil and gas businesses present an unacceptable risk, not only to the climate but also to investors. It is a growth the fund should be able to take part in", Jensen said.

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