This article is more than 2 years old

This article is more than 2 years old

Government advisers have urged Norway not to ditch oil and gas investments from its $1tn sovereign wealth fund, in a setback for those backing the world’s biggest fossil fuel divestment.

Norway’s central bank last year recommended the fund sell the billions it holds in oil stocks to avoid the risk of a permanent drop in crude prices.

Saudi modernisation drive reflected in Aramco's faltering sale | Larry Elliott Read more

However, a government-appointed commission has rejected the proposal, warning that a less diverse investment strategy would have major consequences for the fund’s returns.



“A sale of energy stocks would challenge the current investment strategy of the fund, with broad diversification of the investments and a high threshold for exclusion,” the commission said on Friday.

The Government Pension Fund Global was built off the oil and gas revenues that have made Norway rich.

It also has major holdings in international oil firms, including $6.14bn in Shell, followed by billions of dollars invested in other oil majors such as BP, Chevron, ExxonMobil and Total.

It has smaller stakes in the Italian oil firm Eni, the US oil firm ConocoPhillips and the US oil services group Schlumberger. Most oil company share prices have climbed in the past year along with crude prices.

Divesting those stocks was “not an effective insurance” against the “substantial” hit Norway faced to its tax take if its oil and gas sector was hurt by an oil price crash, the commission argued.

The commission, headed by the economist Øystein Thøgersen, said the fund’s existing investment strategy was “simple, well founded and has served the fund well”.

Nicolò Wojewoda, the Europe team leader at the climate campaign group 350.org, said: “This summer Nordic heatwaves, wildfires in the Arctic Circle and alarming news of the thickest Arctic sea ice starting to break up, have brought climate change so close to home for Norway. It seems unthinkable to continue to invest in companies that have caused this chaos.”

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

The government said a final decision would be made this autumn.



Siv Jensen, the minister of finance, said: “Together with the advice from Norges Bank [the central bank] and the public consultation of the bank’s advice, this report will constitute a solid foundation for decision-making.”

Norway’s state-owned oil company Statoil earlier this year rebranded itself as Equinor, to reflect what it said was its new role as a “broad energy company”.