In a move that climate campaigners say should send a "shockwave" through the global oil and gas industry, the Norwegian Sovereign Wealth Fund—the largest of its kind in the world—has recommended the Norway government divest the entirety of the fund's $40 billion holdings from the fossil fuel industry.

"If [proposal passes through parliament it will produce a shockwave in the market, dealing the largest blow to date to the illusion that the fossil fuel industry still has decades of business as usual ahead of it."

—Yossi Cadan, 350.org

In a statement on Friday, Minister of Finance Siv Jensen explained the decision is meant to "reduce the vulnerability" of the Norwegian fund "to permanent oil price decline." With an estimated $1 trillion in total holdings, Norway's Sovereign Wealth Fund is the largest publicly held investment in the world. According to a spokesperson for the finance ministry, the fund currently has roughly 66 billion Norwegian krone ($7.5 billion) invested in energy exploration and production stocks—approximately 1.2% of the fund's stock portfolio.

The recommendation from the Norwegian fund will now be sent to the nation's parliament for approval.

Climate groups that have pushed aggressively for divestment from the fossil fuel industry in recent years as a key way to decrease the threat of greenhouse gases and runaway global warming celebrated the announcement as a possible crucial turning point.

"We welcome and support this proposal," said Yossi Cadan, senior divestment campaigner at 350.org, "if it passes through parliament it will produce a shockwave in the market, dealing the largest blow to date to the illusion that the fossil fuel industry still has decades of business as usual ahead of it. The decision should sound like a red alert for private banks and investors whose oil and gas assets are becoming increasingly risky and morally untenable."

Bill McKibben, one of the group's co-founders, called it a "huge, huge, huge win."

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In a statement, 350 added:

In order to avoid the most catastrophic impacts of climate change and keep global warming below 1.5°C we have to keep fossil fuels in the ground and shift finance towards sustainable energy solutions for all. Climate impacts are already hitting home and we have no time left to lose. Last year Nordic heatwaves, wildfires in the Arctic Circle and alarming news of the thickest Arctic sea ice starting to break up, showed how climate change is close to home for Norway. It seems unthinkable for Norwegian financiers to continue to invest in companies that are causing this chaos.

Catherine Howarth, chief executive of ShareAction, which provides analysis for investors focused on creating a more sustainable society, said the Norwegian fund's announcement "is further evidence that investors are growing increasingly dissatisfied with oil exploration and production companies."

Institutional investors that manage sovereign wealth funds and pensions funds, she added, "are withdrawing their capital from oil and gas companies on the grounds that quicker-than-expected growth in clean energy and associated regulation is making oil and gas business models highly vulnerable. This announcement will put pressure on investors to ramp up their engagement with integrated oil majors ahead of [annual general meeting] season" when stock holders gather to assess and review company performance and strategies.

While the financial reality of the climate crisis comes into increasing view for global investors and markets, 350.org says that credit belongs to the campaigners from around the world who have bravely stood up to demand an end to the financial and energy hegemony of the fossil fuel industry.

At the heart of the global divestment campaign, the group said, "is a people-powered grassroots movement—it's ordinary people pushing their local institutions to take a stand against the fossil fuel industry —the industry most responsible for the current climate crisis."