Norway’s Gargantuan Pension Fund Will Drop Oil Investments

One of the world’s largest asset allocators, Norway’s Government Pension Fund Global, will divest from oil and gas production and exploration companies, the Norwegian Ministry of FinanceannouncedFriday.

The 8,256 billion Krone ($943 billion) pension fund had been considering the move since November 2017, when the nation’s Norges Bank told the Ministry of Finance to exclude the oil and gas sector from the pension fund’s benchmark.

In the announcement Friday, the finance ministry said the exclusion of oil and gas assets from the pension fund’s portfolio would reduce the vulnerability of the Norwegian economy to a “permanent oil price decline.” The pension fund was built on the proceeds from domestic oil drilling, which the Norwegian government has undertaken since 1966.

The divestiture will amount to 66 billion Krone ($7.5 billion), a spokesperson for the fund said via email Friday.

The government pension fund will use index provider FTSE Russell’s classifications to determine which companies to exclude from its investments. According to its website, the pension fund is currently invested in Marathon Oil and Murphy Oil, among a bevy of other companies.

[IIDeep Dive:The World’s Largest Allocator Decided to Abandon Oil. Then the Problems Started.]

The choice to divest from — or to avoid investing in — an asset class or sector is nothing new for Norway’s pension fund.

The fund divested from tobacco companies in 2010, and coal in 2015. By 2017 it had also divested from nuclear weapons producers and companies breaching human rights or causing environmental damage.

The pension fund is also relatively active as a shareholder, even voting against popular companies like Apple and Berkshire Hathaway.

In 2018,Norway’s finance ministrysaid it would not allow the pension fund to invest in private equity, citing fees and a lack of transparency as reasons for avoiding the asset class.