Big Oil Shares Drop as Norway Wealth Fund Plans to Exit Sector

(Bloomberg) -- Eni SpA and Royal Dutch Shell Plc led shares of major energy companies lower as Norway’s $1 trillion sovereign wealth fund proposed dumping about $35 billion in oil and gas stocks.

Norges Bank Investment Management’s biggest exposure in the oil sector is Shell, with a 2.33 percent stake, according to its website. That’s followed by Eni with 1.72 percent, BP Plc with 1.65 percent and Total SA with 1.62 percent.

Shell’s B shares in London, the most widely traded, dropped as much as 2.3 percent and traded 1.9 percent lower as of 1:20 p.m. local time. Eni fell as much as 1.2 percent and BP and Total SA gave up earlier gains to trade lower.

Norway will be “less vulnerable” to a drop in oil prices by not being invested in stocks of companies in the industry, the Oslo-based fund said in a statement on Thursday. The Finance Ministry, and potentially even parliament, will make the final decision on whether to go ahead with the plan.

While the fund says the decision isn’t based on any future view on the industry, it will likely add pressure on oil producers, already struggling in a world where crude prices have slumped and renewable energy is gaining sway.

BP declined to comment on the fund’s proposal. Shell wasn’t immediately able to comment.

The advice constitutes the next major step in scrubbing the world’s biggest wealth fund of climate risk after it largely sold out of coal stocks. Built from Norway’s oil and gas revenue over the past two decades, the fund takes into account ethical rules encompassing human rights, some weapons production, the environment and tobacco when deciding on investments.

Its fossil fuel investments have also come under closer scrutiny as Norwegians increasingly struggle to reconcile their ambition to be a climate leader, while remaining one of the world’s biggest oil and gas nations.

To contact the reporter on this story: Rakteem Katakey in London at rkatakey@bloomberg.net.

To contact the editor responsible for this story: James Herron at jherron9@bloomberg.net.

©2017 Bloomberg L.P.