Norway’s pension fund burns profits from fossil fuel sales on bad oil and gas investments

Norway’s ‘Government Pension Fund’, known colloquially as ‘the oil fund’, uses revenue derived from Norway’s sizeable oil and gas extraction industry to create a range of diverse investments around the world. Most of the fund is directed toward ownership intersts in companies, spanning 74 countries and 9,202 companies, most recently weighted towards technology companies.

Recently, the managers of the fund, Norges Bank, announced their 2020 results. A massive return of 1,070 billion kroner (around 162 billion Australian dollars) was mostly thanks to high performance on technology stocks, particularly Apple. “Technology companies had the highest return in 2020, with a return of 41.9 percent. This is mainly due to the pandemic resulting in a massive increase in the demand for products for online working, education, trade and entertainment”, said CEO of Norges Bank Investment Management Nicolai Tangen. The fourth largest single contribution to absolute return in 2020 was Tesla, contributing 36 billion kroner.

In 2020, the money poured into the fund from the sale of oil and gas products is around 87 billion kroner. And curiously enough in the report on the fund’s investments, slightly more than that was lost as the value of fossil fuel investments plummeted. It was the second worst performing category in their database, followed only by ‘financials’.

Unfortunately, the fund’s detailed database of investments hasn’t been updated to include 2020’s data, so we can’t drill down into which investments caused this drop. The oil fund remains heavily invested in Australian oil and gas companies, and utilities. In May last year, the fund’s managers dropped their investment in AGL Energy over the company’s high coal exposure.

The decline in value of fossil fuel investments seems likely to continue. Though the oil fund’s managers have promised to rapidly exit coal investments, they have made little commitment about oil and gas – and it’s likely to work against the fund’s managers when it comes to managing returns.