Shaking up the world of petroleum and the Oil & Gas industry. The Norwegian Sovereign Fund is considering a possible exit from investments in the shares of companies operating in the sector. The news, communicated by the Fund itself, is doubly significant. On the one hand because Norway, through the state-owned company Statoil, is a major producer of oil and gas in the North Sea. On the other hand, because the Norwegian Sovereign Fund, with a firepower of 1000 billion, through its investments in the hydrocarbon sector controls around 1,7% of the world market. Its investments in Oil & Gas now represent 6% of total investments, or about $36 billion.
Norway's central bank, which uses the fund to reinvest proceeds from the country's oil industry, explained that reinvesting the funds in the energy sector amplifies the government's exposure to changes in crude prices given that the Oslo government controls a majority stake in Statoil Asa. The proposal to exit energy sector stocks was formally presented Thursday by the Norwegian central bank to the finance ministry. The Fund itself gave the news. "Our view is to simply drop the oil and gas sector, as defined in the FTSE index, from the fund's benchmark index," central bank deputy governor Egil Matsen said in an interview on Thursday.
Oil reacted with a swing and then rallied while the Stoxx Europe 600 Oil & Gas index was down 0,53% by mid-morning. To get an idea of the repercussions that the news may have in perspective, it is worth remembering that the Norwegian fund (Government Pension Fund Global, GPFG) is Eni's second largest shareholder after the Italian government, with a 1,7 %. At the end of 2016 it owned 2,3% of Royal Dutch Shell, 1,7% of BP, 1,6% of Total, 0,9% of Chevron, 0,8% of ExxonMobil.
The decision of the Norwegian Fund must also be framed in a broader strategic plan and is part of the energy revolution underway, with the transition to renewable sources. It is not only the Norwegian Fund - Norway is launching the electric car and is among the most determined European Union countries on the green turn despite the fact that it derives a large part of its income from fossil fuels - that has taken the path of disinvestment from the Oil sectors & Gas. One of the first to move in this direction was the Rockefeller Brothers Fund which, together with the Norwegian Sovereign Fund, is a member of #divestment, an international movement that has gathered the support of universities and foundations, investors of various types and among these many religious entities including the Church of England, that of Sweden and so on. Commitments to divest from fossil fuels have reached 5,57 trillion dollars from 800 institutional investors (27% religious institutions): And now the Italian Bishops' Conference has also decided to take the field with the issue of an ETF linked to a low carbon index, currently being defined, which will open a new chapter of the Italian Church in the fight against climate change, after the ecyclical "Laudato sii" issued by Pope Francis.
Returning to Norway, for now the fuse has been triggered. Now the Norwegian Parliament will have to decide on the choice of divestment but it will probably be discussed again in the second half of 2018.
