Norway is western Europe's biggest oil and gas producer and its sovereign wealth fund, known officially as the Government Pension Fund, is used to invest the proceeds of the country's oil industry. The move will focus on companies that trade exclusively in exploration and production rather than the integrated oil giants, that do everything from searching for fossil fuels to selling them to consumers.
"The oil industry will be an important and major industry in Norway for many years to come".
"If the relationship between long-term returns in the broad equity market and oil and gas stocks persists, neither the expected return nor the market risk in the fund will be affected appreciably by whether or not the fund is invested in oil and gas stocks".
"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", she said.
The proposition to remove energy exploration and production from the fund's portfolio, which now make up around six per cent of the wealth fund's investments, comes on the heels of a 2017 recommendation from Norges Bank. "It is a growth the fund should be able to take part in", Jensen said.
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The finance minister insisted that Friday's decision "does not reflect any specific view on the oil price, future profitability or sustainability of the petroleum sector".
"There's nothing of size when you look at the percentage of total shares outstanding", he said, while cautioning that the impact could worsen if other large funds follow the Norwegian fund's lead. The Ministry of Finance will ask Norges Bank to review the fund's climate risk, which could lead to it culling non eco-friendly companies.
"Exploration and production companies will be phased out from the fund gradually over time", the government proposal said, without giving a timeline for the divestment.
The review suggests the fund could become more proactive in engaging with those oil and gas giants that are pivoting investments towards renewables and other low-carbon activities.
Its investments in integrated firms at the end of 2018 included stakes of 2.45% in Shell, 2.31% in BP, 2.02% in Total, 0.99% in Chevron and 0.94% in ExxonMobil. It now owns around $37bn of shares in oil companies such as BP, Shell and Total. These include Cairn Energy Plc, Anadarko Petroleum Corp., Chesapeake Energy Corp., Cnooc Ltd. and Tullow Oil Plc.
"They have been reducing the curtailment volumes, so nothing has changed, and to me it seems to be on track and positive", McKay said.