Norway's $1 trillion sovereign wealth fund sells oil and gas shares

Move covers 134 exploration and production firms but spares fossil fuel giants like Royal Dutch Shell and Exxon Mobil

Upstream companies will be among the first to be damaged by a move to renewables because their business depends on finding and exploiting new oil and gas fields (Getty Images)

Norway’s $1 trillion (£760bn) sovereign wealth fund will sell off around $7.5bn of oil and gas company shares to cut the risk it faces from a permanent global shift from fossil fuels to renewables.

The move covers 134 companies focused on oil and gas exploration and production but spares giants like Royal Dutch Shell and Exxon Mobil.

Exploration and production firms - known in the industry as upstream - will be the first to be damaged by a move to renewables because their business depends on finding and exploiting new oil and gas fields.

The majority of known reserves must stay in the ground if the world is to avoid catastrophic and irreversible climate change, scientists have warned.

Norway’s vast sovereign fund owns about 1.3 per cent of all listed company shares by value making it the biggest in the world. It has been built up almost entirely on the back of oil and gas production in the North Sea.

That leaves the country exposed if demand for oil falls sharply.

Charlie Kronick, oil campaigner for Greenpeace UK said “This partial divestment from oil and gas is welcome, but not enough to mitigate Norway’s exposure to both global oil and gas prices and the wider financial ramifications of climate change.

“However, it does send a clear signal that companies betting on the expansion of their oil and gas businesses present an unacceptable risk, not only to the climate but also to investors.

“While BP and Shell are excluded from the current divestment proposal, they must now recognise that if they continue to spend billions chasing new fossil fuels, they are doomed.”

After more than a year of deliberation, the Norwegian finance ministry on Friday excluded 134 oil and gas companies, including Anadarko, Chesapeake, Cnooc and Tullow, from its sovereign wealth fund.

“The objective is to reduce the vulnerability of our common wealth to a permanent oil price decline,” Finance Minister Siv Jensen said in a statement.

“Hence, it is more accurate to sell companies which explore and produce oil and gas, rather than selling a broadly diversified energy sector.”

The government has partially fulfilled a plan laid out in 2017 to divest entirely from the oil and gas sector. Norway has sought to project an image as a responsible environmental steward while pumping millions of barrels of oil and gas.

Catherine Howarth, chief executive of ShareAction, said Norway's announcement showed that investors are growing impatient with oil exploration companies.

"Institutional investors are withdrawing their capital from oil and gas companies on the grounds that quicker-than-expected growth in clean energy and associated regulation is making oil and gas business models highly vulnerable.

"This announcement will put pressure on investors to ramp up their engagement with integrated oil majors ahead of the AGM season.”