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Decision on the definition of upstream oil and gas companies in the GPFG

The decision to phase out upstream oil and gas companies from the Government Pension Fund Global (GPFG) shall apply to companies classified as “Oil: Crude Producers” by the index provider FTSE Russell.

The Ministry of Finance has made this decision today, as part of the follow-up of Parliament’s (the Storting’s) endorsement of the proposal to omit upstream oil and gas companies form the Fund’s benchmark and investment universe.

The Ministry of Finance’s decision on the definition of upstream oil and gas companies is in line with Norges Bank’s advice in a letter 11 September 2019.

At the time of Parliament’s deliberation on the white paper on energy stocks in the GPFG in March of this year, upstream oil and gas companies were defined as the companies that the index provider classify in the sub-sector “Exploration and Production”. Since then, the index provider has reviewed its classification rules. This has resulted in, among other changes, that the companies previously classified in the sub-sector “Exploration and Production” mainly being redistributed across two new sub-sectors: “Oil: Crude Producers”1 and “Oil Refining and Marketing”.

The Ministry of Finance has asked for Norges Bank’s assessment of upstream oil and gas companies in light of this change. The Bank’s opinion is that upstream oil and gas companies, as these are discussed in the white paper on energy stocks in the GPFG, only encompass the new sub sector “Oil: Crude Producers”. The Ministry of Finance agrees with Norges Bank’s assessment.

Today the Ministry of Finance has sent a letter to Norges Bank (Norwegian only) with suggested specific changes in the management mandate for the GPFG. The changes will cause equities in companies classified as “Oil: Crude Producers” to no longer be part of the Fund’s benchmark index and investment universe.

By using the index provider’s classification, the GPFG’s benchmark index and investment universe will continuously be delimited towards upstream oil and gas companies, including corporate events, new listings and new information on or changes in companies’ activities over time.

A total of 95 companies were as of mid-September classified as “Oil: Crude Producers” in the Fund’s benchmark. These made up about 0.8 percent of the GPFG’s benchmark for equities, corresponding to about 54 billion Norwegian kroner at the same time. There may be some deviations between the Fund’s benchmark index and actual investments.

The phase out will be made gradually over time.

1 ICB classification «60101010 Oil: Crude Producers».

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