Europe's oil and gas index hit its lowest level since mid-October on Thursday after Reuters reported that Norway's trillion-dollar sovereign wealth fund had proposed to drop oil and gas companies from its benchmark index. Its biggest holdings include stakes in Royal Dutch Shell, Exxon Mobil, and BP. "It does not reflect any particular view of future movements in oil and gas prices or the profitability or sustainability of the oil and gas sector", he added.
The oil and gas sector now spans a broad range of energy-related activities, including companies classified as integrated oil and gas, oil service and renewable energy.
The recommendation was made in a letter sent by Norges Bank to the Ministry of Finance, which said the government "aims to conclude on this matter in the fall of 2018". That means that the vulnerability of government wealth to a permanent drop in oil and gas prices would be reduced if the fund pulled out of the stocks in that sector, Norges Bank said.
In September, the fund value reached $1 trillion for the first time after being boosted as the world's major currencies strengthened against the USA dollar, combined with strong equity markets.
McKibben compared the bank's recommendation to "the moment when the Rockefellers divested the world's oldest oil fortune" in 2014, when the heirs to Standard Oil said that if founder John D. Rockefeller were alive in the 21st century, "he would be moving out of fossil fuels and investing in clean, renewable energy". The fund was initially set up to invest the proceeds from Norway's oil reserves. It owns owns more than $660bn-worth of shares in over 9,000 companies globally, and reached the $1tn-mark in terms of assets under management in September.
But Norges Bank said that investing money back into the energy sector meant the government's exposure to the price of crude was too high, particularly given the country's majority stakes in Statoil ASA.
The Norwegian government said it would consider the proposal, but a decision should not be expected until next year and a "thorough assessment" was required. Several U.K. pension plans have funds that don't invest in the sector.
Norway relies on oil and gas for about one-fifth of its economic output, and according to the central bank, divesting of oil and gas would make sense.
At the earliest, the ministry's first opportunity could come in the spring, with a vote in parliament in June.