The Norwegian Parliament has ordered the world’s largest sovereign wealth fund to divest from around 150 upstream oil and gas companies and a number of large coal mining firms.
The trillion-dollar Oil Fund will have to divest around $12 billion (£9.44bn) from these businesses and plough up to $20 billion (£15.7bn) in solar, wind and other renewables.
Norges Bank Investment Management manages the fund on behalf of the Ministry of Finance, which owns the fund on behalf of the country’s citizens.
The fund currently holds shares in more than 9,000 companies, and owns an average of 1.3% of every listed company in the world.
Going forwards, clean energy will make up around 2% of the fund, starting with projects in mature markets – it will have to withdraw around $8 billion (£6.2bn) from upstream oil and gas firms and $4.2 billion (£3.3bn) from coal companies, with approximately $32 billion (£25.1bn) remaining in oil majors for now.
Other companies are not named but will be screened out based on the new exclusion criteria, which dictates businesses than mine more than 20 millions tonnes of coal each year or use 10GW of operating coal may not make up part of the fund.
The rationale for divestment is based on the financial warnings about a permanent drop in oil and gas prices and the Norwegian economy’s vulnerability to this happening.
Tom Sanzillo, Director of Finance at the Institute for Energy Economics and Financial Analysis (IEEFA), said: “Norway’s decision to remove around 150 upstream oil companies from its trillion fund has clear global consequences that will send shudders down the spines of institutional investors and leaders in other oil and gas producing states such as Russia, China, Argentina, Qatar and Organization of the Petroleum Exporting Countries states.
“Norway’s pivot away from oil and gas puts into practice the growing worldwide consensus that oil prices will remain low and volatile for decades to come due to clean energy innovation, increased competition over hydrocarbon exploration, and political instability. As the Oil Fund now will plough billions of dollars into solar and wind infrastructure, it shows the rest of the world that fossil fuel investment is no longer worth the risk.”
Source: Energy Live News
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