By Kjetil Malkenes Hovland
OSLO-Norway's government Friday appointed a committee to assess the most effective strategy for its massive oil fund to combat climate change, including the potential divestment of about $80 billion worth of coal, oil and gas shares.
Norway's parliament is expected to decide in early 2015 whether the $856 billion oil fund should sell its interests in coal and petroleum companies or continue as an owner and assert pressure on the companies to change course and cut carbon emissions. The fund has said that about 10% of its assets are invested in oil, coal and gas companies.
"The expert group will evaluate whether the exclusion of coal and petroleum companies is a more effective strategy for addressing climate issues and promoting future change than the exercise of ownership and exertion of influence," said the Norwegian Ministry of Finance.
The move has been welcomed by environmentalists who warned that a potential global climate deal and a significantly higher price on carbon emissions could force companies to leave some of their resources in the ground.
Oil major Exxon Mobil Corp. (XOM) in a report this week said all its resources would be produced, as it was "highly unlikely" that the world agreed to restrict fossil fuel production in line with a low-carbon scenario.
The Norwegian experts were asked to advise on the criteria for the potential exclusion of such companies, the ministry said. The government had been asked by parliament to prepare the evaluation, in a push to consider whether the fund's financial muscle could contribute to a global transition away from fossil fuels.
"Until now, the prevailing view has been that there is no need for 'negative filtering' to exclude coal and petroleum companies from the fund," the ministry said.
Norway's sovereign wealth fund, the world's largest, invests money from the country's significant oil and gas revenues to benefit future generations. Only a minor fraction of the fund is spent each year.
The expert group will make its recommendations by the end of November this year, the government said.
The committee will be chaired by Martin Skancke, an independent adviser who used to work for the government. Other members are Emeritus Professor Elroy Dimson of the London Business School, Professor Michael Hoel of the University of Oslo and Professor Laura Starks of the University of Texas.
The fund has expanded more than tenfold in the past decade and is expected to be worth more than $1.2 trillion by 2020.
-Write to Kjetil Malkenes Hovland at email@example.com
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