World’s biggest sovereign wealth fund to decide on dumping oil

Norwegian wealth fund CEO Yngve Slyngstad speaks at a news conference in Oslo, Norway, on Febuary 27, 2018. (REUTERS/Gwladys Fouche)
Updated 08 March 2019

World’s biggest sovereign wealth fund to decide on dumping oil

  • Oil and gas represent almost half of Norweay's exports and 20 percent of the state’s revenues
  • All revenue from the state-owned oil and gas companies are placed in the sovereign wealth fund

OSLO: Norway will announce on Friday whether its sovereign wealth fund, which is the world’s biggest and has been fueled by petrodollars, will divest its oil and gas holdings in a decision keenly awaited by climate activists.
While the decision is said to be based solely on financial considerations and not on the environment or climate change, a divestment by an investor worth more than $1 trillion would be a major blow to polluting fossil fuels.
Finance Minister Siv Jensen is expected to present the government’s position at a press conference at 12:15 p.m. (1115 GMT).
Norway’s central bank, tasked with managing the mammoth fund — commonly referred to as the “oil fund” but formally known as the Government Pension Fund — made headlines in November 2017 when it called for the divestment of oil stocks in order to reduce the Norwegian state’s exposure to the volatile oil sector.
“This advice is based exclusively on financial arguments and analyzes of the government’s total oil and gas exposure,” the bank’s deputy governor Egil Matsen said at the time.
It “does not reflect any particular view of future movements in oil and gas prices or the profitability or sustainability of the oil and gas sector,” he added.
In Norway, the biggest hydrocarbon producer in western Europe, oil and gas represent almost half of exports and 20 percent of the state’s revenues.
All revenue from the state-owned oil and gas companies are placed in the sovereign wealth fund, which Oslo then taps to balance its budget.
In order to limit the state’s exposure in the event of a steep drop in oil prices — as was the case in 2014 — the idea would be to no longer allow the fund to invest in oil stocks and sell its existing holdings.
At the end of 2018, the fund had holdings worth around $37 billion in the oil sector, with significant stakes in Shell, BP, Total and ExxonMobil among others.

Global warming
Given the sums involved, a divestment would likely take years, but it would be seen as a clear victory in the fight against global warming at a time when the world is at pains to meet its Paris treaty goals.
While the climate change aspect is not officially part of Norway’s justification for the move, a sell-off would “obviously be very important,” said Greenpeace, which has campaigned for divestment for years.
Norway “could be a role model and show that it is entirely possible to have a fund that both makes money, with moderate risks, and stays out of oil and natural gas,” said Martin Norman of Greenpeace’s Norwegian branch.
Last year, a panel of experts appointed by the government advised against divesting oil stocks, arguing it would only have a marginal impact on Norway’s oil exposure.
But business newspaper Dagens Naeringsliv reported on Thursday that there are indications the rightwing government is nonetheless leaning in that direction.
Friday’s announcement is scheduled just hours before the annual congress for the Liberal party, a junior member of the coalition currently struggling in the polls and in need of a political victory to boost its popularity.
The decision is also important given the fact that the positions taken by the fund — which controls 1.4 percent of global market capitalization — are closely watched by other investors.
In another significant move, the fund has already pulled out of the coal industry, both for environmental and financial reasons.

 


Struggling WeWork mulls bailout deals with SoftBank, JP Morgan

Updated 14 October 2019

Struggling WeWork mulls bailout deals with SoftBank, JP Morgan

TOKYO: Under-pressure start-up WeWork is considering two huge bailout plans including a cash injection that could see Japanese investment titan SoftBank take control of the firm, according to reports.
The office-sharing giant had been on course for a massive initial public offering until last month when questions began to be asked over its governance and profit outlook.
The firm’s valuation plunged from $47 billion in January to less than $20 billion in September and the listing plans have been dropped, while co-founder Adam Neumann stepped down as chief executive.
With New York-based parent company We Co. not expected to push for the IPO this year, the cash-strapped firm is looking for a financial lifeline.
The Wall Street Journal, New York Times and Bloomberg News cited unnamed sources close to the talks as saying SoftBank — the US firm’s biggest shareholder — had drawn up a proposal that gives it full control of WeWork.
The move would dilute the voting power of Neumann, who remains as chairman of the company he started in 2010 and also currently maintains control a majority of voting shares.
They also reported that WeWork is looking at a deal with Wall Street giant JP Morgan to raise $5 billion in debt, with the Times saying directors of We would be meeting as soon as Monday afternoon to discuss that.
“WeWork has retained a major Wall Street financial institution to arrange financing,” the Journal reported a company spokesman as saying.
“Approximately 60 financing sources have signed confidentiality agreements and are meeting with the company’s management and its bankers over the course of this past week and this coming week.”
The New York-based startup that launched in 2010 has touted itself as revolutionizing commercial real estate by offering shared, flexible workspace arrangements, and has operations in 111 cities in 29 countries.
However, the company, which lost $1.9 billion last year, has faced skepticism over its ability to make money, especially if the global economy slows significantly.