Norway's plan to drop oil stocks rattles equity markets

NEW YORK • Norway's proposal to sell off US$35 billion (S$47.5 billion) in oil and gas stocks brings sudden and unparalleled heft to a once-grassroots movement to enlist investors in the fight against climate change.

The Nordic nation's US$1 trillion sovereign wealth fund said on Thursday that it is considering unloading its shares of ExxonMobil, Royal Dutch Shell and other oil giants to diversify its holdings and guard against drops in crude prices. European oil stocks fell.

Norges Bank Investment Management would not be the first institutional investor to back away from fossil fuels. But until now, most have been state pension funds, universities and other smaller players that have limited their divestments to coal, tar sands or some of the other dirtiest fossil fuels. Norges is the world's largest equity investor, controlling about 1.5 per cent of global stocks. If it follows through on its proposal, it would be the first to abandon the sector altogether.

"This is an enormous change," said Ms Mindy Lubber, president of Ceres, a non-profit that advocates for sustainable investing. "It's a shot heard around the world."

The proposal rattled equity markets. While Norwegian officials say the plan is not based on any particular view about future oil prices, it is apt to ratchet up pressure on fossil fuel firms already struggling with the growth of renewable energy.

Norway's Finance Ministry, which oversees the fund, said it will study the proposal and take at least a year to decide what to do. Norges has already sold off most of its coal stocks.

"People are starting to recognise the risks of oil and gas," said Mr Jason Disterhoft of the Rainforest Action Network, which pushes banks to divest from fossil fuels.

The fossil fuel divestment movement began on college campuses about five years ago and has gained momentum since. The argument is simple: Climate change has exponentially increased the risk of backing coal, oil and gas, so investors should put their money elsewhere for the sake of both the planet and their own fortunes.

The Rockefeller Family Fund announced last year that it sold its stake in Exxon and would dump all other fossil fuel investments. The California State Teachers' Retirement System board voted to divest from United States coal companies. AXA, the French insurance giant, said it would sell €500 million (S$800 million) in coal holdings.

Norges dwarfs them all.

"The divestment movement just got some new juice," said Mr Jamie Webster, a fellow at the Centre on Global Energy Policy at Columbia University.

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A version of this article appeared in the print edition of The Straits Times on November 18, 2017, with the headline 'Norway's plan to drop oil stocks rattles equity markets'. Print Edition | Subscribe