THE world’s biggest sovereign wealth fund – which is worth $1 trillion (£765 billion) – is to divest its shareholdings in upstream oil and gas companies, which are involved in exploration and production of raw materials.

Norway’s central bank, which manages the fund, suggested the proposal, aimed at making it less vulnerable to a permanent drop in oil prices.

In a statement, the country’s finance ministry said: “The government is proposing to exclude companies classified as exploration and production companies within the energy sector from the [fund] to reduce the aggregate oil price risk in the Norwegian economy.”

The fund invests Norway’s oil and gas production revenues in stocks, bonds and overseas property to benefit future generations and is frequently held up as a model for what Scotland could have done with North Sea oil revenues.

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At the end of last year it held stakes of 2.45% in Shell, 2.31% in BP, 2.02% in Total, 0.99% in Chevron and 0.94% in ExxonMobil, worth a total of around $37bn (£28.2bn).

Divestment is likely to effect companies such as Royal Dutch Shell, in which Norway has a $6bn (£4.59bn) stake.

The fossil fuel sector accounts for a significant proportion of Norway’s wealth – a fifth of gross domestic product (GDP) in a country of 5.3 million people.

Finance Minister Siv Jensen said in a statement yesterday: “The goal is to make our collective wealth less vulnerable to a lasting fall in oil prices.

“The oil business will be a major and important industry in Norway for many years to come.

“Upstream companies are the ones that give us our income on the Norwegian shelf.

“The government’s income from the shelf basically follows the profitability of upstream companies. Therefore this is about spreading the risk.”

She added that fund stakes in integrated groups, such as BP and ExxonMobil, were being retained because they were the most likely to make the main future investments in renewable energy.

“Everything indicates that almost the entire growth in listed infrastructure for renewable energy over the next 10 years will be driven by companies that do not have renewable energy as their main activity,” she said.

“It is a growth the fund should be able to take part in.”

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Norway is the biggest petrol producer in western Europe and the fund has the equivalent of around $7.9bn (£6bn) of shares in producers, and a larger share in the integrated firms which cover all aspects of the business.

However, the proposals hit oil company shares early yesterday in Oslo, with Shell and BP both trading at around 2% lower.

The environmental lobby has given the decision a qualified welcome.

Mary Church, head of campaigns for Friends of the Earth Scotland ((FoES) told The National: “The divestment of Norway’s sovereign wealth fund from oil and gas exploration companies is a hugely symbolic step, which acknowledges the innately risky nature of fossil fuel investments in this time of climate crisis.

“However, the fund, which made its money through decades of state-sponsored fossil fuel extraction, is holding onto 80% of its oil and gas investments including in energy giants Shell, BP and Exxon.

“We cannot rely on the markets, private companies and investors to solve the climate crisis.

“All governments should be planning now for a transition away from fossil fuels in a way that is fair to workers and communities who currently rely upon high carbon sectors.

“It’s time to stop offering tax breaks and subsidies to big oil companies and instead channel this money towards creating plentiful decent jobs in a green economy.”