Outlining her plans: Kristin Halvorsen
Oslo eyes oil fund revamp
Norway's Finance Ministry said today it would review the active management of part of its $300 billion wealth fund after it lost Nkr633 billion ($95.77 billion) on its investments last year.
The ministry said it was not planning to change the overall investment strategy of the fund, which invests Norway's oil and gas wealth in foreign stocks and bonds.
The central bank-run Government Pension Fund - Global, commonly known as the "oil fund", is the world's second largest sovereign wealth fund.
Its active management of selected parts of its portfolio has turned sour during the global crisis. Bad investments, mostly in US securitised bonds, led it to underperform the index-linked benchmark set by the government by a record 3.4 percentage points in 2008 and wiped out investment gains from past years.
"It is clear that the financial crisis has uncovered weaknesses in the active management by Norges Bank," Finance Minister Kristin Halvorsen said, announcing an external review of the central bank's risk and active management of the fund.
"This will provide a basis for a broad assessment in the spring of 2010 of whether or to what extent active management is to be continued," Reuters quoted Halvorsen as saying.
Halvorsen stressed that the government did not intend to strip the oil fund completely of its discretionary role.
"The regulations for active management must also provide room for discretion to ensure that the responsibilities vested in the governing bodies of Norges Bank are not transferred to the (finance) ministry in practice," Halvorsen said.
The finance ministry also said it was preparing a new environmental investment programme that would put Nkr20 billion over five years into companies engaged in environmental technologies in emerging markets.
The programme will aim at investments yielding environmental benefits, such as climate-friendly energy; improving energy efficiency; carbon capture and storage; water technology; and waste and pollution management, it said.
"We want to take the initiative ... on how climate challenges have an effect on the financial markets and how investors should react to that," Halvorsen told a news conference.
The fund has resisted the idea of creating a separate category for "green" investment, saying it should stick to its existing mandate to invest for the best possible returns.
The fund's managers have said if the government seeks to promote green energy, it should spend more budget funds on such projects instead of forcing the fund to do so.
The ministry also proposed to exclude tobacco companies from the fund's portfolio.
Norway's oil fund has in past years excluded a number of companies on ethical grounds, for what it sees as environmental or workers' rights abuses or production of dangerous weapons.
The fund's biggest tobacco holding, worth Nkr4.78 billion, was in British American Tobacco , amounting to 1.32% of all shares, according to the fund's annual report.
It also owned Nkr3.34 billion worth of shares in Philip Morris International, Nkr2.43 billion in UK-listed Imperial Tobacco, Nkr1.47 billion in Japan Tobacco and Nkr916 million in Altria Group shares.