How Significant Is Norway’s Fossil Fuel Divestment Announcement?

Last week Norway’s Government Pension Fund Global (GPFG) announced that it would divest certain fossil fuel investments. Today I offer some context for this announcement.

In stark contrast to Venezuela, Norway is probably the poster child for responsible management of oil wealth. Norway has a long history as an oil and gas producer, and the country used its oil wealth to build the world’s largest sovereign wealth fund.

Last week this fund — the Government Pension Fund Global (GPFG) — made headlines by announcing it would divest certain fossil fuel investments. How big a deal is this announcement? It’s certainly symbolically important, given the size of the fund and the fact that the fund itself is a product of Norway’s oil and gas history.  But a little context is in order.

Although this news was widely reported as “Norway divests fossil fuels”, as fellow Forbes contributor Jim Collins pointed out  “stocks of major integrated energy companies — Exxon, Total, Petrobras, Royal Dutch Shell, etc. — will continue to be included in the GPFG fund.” Notably, the fund will keep fossil fuel investments that have renewable energy divisions.

At the end of 2018, the GPFG had a total of $633 billion invested in equities. Of that, the fund listed holdings of 341 companies classified as “Oil and Gas” with a total value of just over $37 billion.

According to a GPFG press release, a total of 114 oil and natural gas exploration and production companies will be divested “gradually over time.” Companies targeted for divestment include major U.S. producers like EOG Resources, Anadarko Petroleum, Apache, Cabot Oil and Gas, Devon Energy, Diamondback Energy, and Occidental Petroleum.

Thus, putting things in context, the fund will retain most of its oil and gas investments. The largest holding they will divest appears to be EOG Resources. At year-end the fund held a total of $488 million in EOG shares, which was just under 1% of the overall market capitalization of the company.

According to the S&P Global Market Intelligence database, publicly traded energy companies are worth about $5.0 trillion globally. That’s 135 times larger than the oil and gas holdings in the GPFG fund (most of which aren’t being divested).