Fossils ‘Dodge a Bullet’ as Norway Opts for Limited Divestment
Norway is receiving decidedly mixed reviews for its decision to dump some oil and gas stocks from its US$1-trillion sovereign wealth fund, but hold onto its shares in colossal fossils like Royal Dutch Shell and ExxonMobil.
“After more than a year of deliberation, the government on Friday approved excluding 150 companies that are held by the fund and classified as exploration and production companies,” Bloomberg reports. “The proposal would see the fund sell about $7.5 billion in stocks,” including companies like Cairn Energy PLC, Andarko Petroleum, Chesapeake Energy, and China’s CNOOC Ltd.
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“It reflects to a larger extent the risk we ourselves have—the bulk of the state’s exposure in Norway is upstream activity,” said Finance Minister Siv Jensen. “We’re reducing our vulnerability by choosing to withdraw the fund gradually from this segment.”
The announcement “goes part of the way in meeting a 2017 proposal from the fund, which rattled global markets by arguing for a full divestment of the sector to limit Norway’s overall exposure to oil,” Bloomberg notes. “Jensen defended her decision to keep the big oil companies in the portfolio, citing their increased investments in renewable energy. Norway’s own oil company, Equinor ASA, is also increasing renewable energy investments, and even recently changed its name from Statoil.”
Recent analyses show major fossils’ renewable energy investments well below 10% of their total capital expenditure. Jensen still maintained that “it would be sad if the pension fund would not be able to invest in those companies in the future.”
Norway’s move earned positive reviews from solar entrepreneur and investor Jeremy Leggett, who calls the announcement “a significant landmark in the global battle” against climate change. “If oil and gas companies can’t see this particular piece of writing on the wall, they will deserve the bankruptcy that will ultimately face them,” he writes. “The fact that big oil companies were not included in this divestment because they have renewable energy assets in a way only emphasizes the direction of travel.”
But Bloomberg casts the partial divestment as an instance of the fossil industry dodging a bullet. Re-Define Managing Director Sony Kapoor said the limited divestment “‘represents a victory of Big Oil lobbying over financial prudence and common sense.”
Bloomberg says the decision reflects rising opposition to oil and gas exploration in Norway. “Prime Minister Erna Solberg’s Conservative Party has been a long-time friend to the oil industry,” the news agency notes. “Junior government coalition partner, the Liberals, were supportive even though they had backed a larger divestment,” and the opposition Labour party also agreed with the measure.
“They are taking a more cautious step than what Norges Bank advised,” said legislator Svein Roald Hansen. “But it’s better than no step at all. There seems to have been a tug of war within the government.”