Norwegian Government Pension Fund to be reviewed
Feb 14, Oslo: The Ministry of Finance has today appointed an expert group to review whether the Government Pension Fund Global (GFPG) should invest in energy stocks. The move follows up on advice from Norges Bank in November 2017 to remove the oil and gas sector from the Fund’s equity benchmark index. Furthermore, the Ministry is today seeking views on Norges Bank’s advice in a public consultation and requesting additional information from Norges Bank.
– The Government seeks a broad basis for its decision. The issue must be thoroughly examined, as is the case for all important matters in the management of the GPFG, says Siv Jensen, Minister of Finance.
The index provider FTSE Russel has announced that the sector advised on by Norges Bank will be named the energy sector from January 1, 2019. The sector spans a broad range of energy-related activities, including companies classified as integrated oil and gas, oil service and renewable energy. The GFPG’s stock investments in this sector represents around 4 per cent of the total value of the Fund, or around 300 billion NOK.
The advice from Norges Bank is based on assessments of the exposure to oil price risk in the wealth of the Norwegian government. The Bank states that the advice does not reflect any particular view of future movements in oil and gas prices nor the profitability or sustainability of the oil and gas sector.
The expert group appointed today will consider whether the GPFG should be allowed to invest in stocks in the energy sector. The group will be chaired by Øystein Thøgersen, professor and rector at NHH Norwegian School of Economics. Other members will be chief economist Harald Magnus Andreassen and former chief executive officer Olaug Svarva.
Mandate for the expert group
The Ministry is also sending a follow-up letter to Norges Bank. In the letter, the Ministry asks for further information on some aspects on the advice received, including the basis for recommending a larger deviation between the benchmark index and the investment universe..
Letter to Norges Bank – Norwegian only
The Ministry is also seeking views on the advice from Norges Bank through a public consultation. The consultation is motivated by the fact that the advice builds on a broader perspective that the GPFG in its assessment of risk.
Consultation letter – Norwegian only
The energy sector, which is the subject of Norges Bank’s advice, spans a broad range of energy-related activities, with sub-categories that include:
Integrated oil and gas companies,
companies that provide services and equipment to oil and gas companies,
companies within renewable energy, including producers of wind turbines and solar cells.
The sub-category integrated oil and gas companies contain some of the world’s largest listed companies. In addition to oil and gas extraction, these companies have many other lines of business, for example refinement, distribution, technology, retail, and renewable energy. The classification of companies by the index provider in sectors and sub-categories entails some degree of discretion and will not necessarily capture the full range of, or changes in, the business lines of a company.
Information from the index provider FTSE Russell
The Government aims to conclude on this matter in the fall of 2018. The Parliament will be informed about the ongoing work in the Report on the Government Pension Fund, to be submitted in the spring of 2018.
The Oslo Times International News Network