Norway’s government has announced it is selling out of oil exploration. It will continue to invest in energy companies that have refineries and are engaged in distribution and retail sales of oil and gas products – with significant stakes in Shell, BP, Total and ExxonMobil, it’s nowhere near as strong a decision as it could have been. But this is a fund worth US$1 trillion and counting.
That is a market signal with global impact.
While Oslo said the move is based solely on financial considerations and that it does not reflect any particular view of the oil industry’s future prospects, it does provide a context Saudi Arabia’s late 2018 decision not to float shares in its own oil interests. Every major government social fund can see the horizon for investing in oil when your citizens’ future social welfare entitlements depend on it.
These are not signals that will halt climate change. Asian demand for oil appears pretty much insatiable. It’s too late to turn that around much. Even New Zealand demand for transport oil keeps trucking along so to speak. Our overall energy source mix and demand is here.
The New Zealand Superfund policies are all listed here if you’d like to compare.
New Zealand’s own fund currently excludes investments in companies involved in:
The NZSuperfund also states: “We also may decide to exclude individual companies for severe breaches of our responsible investments standards, such as the UN Global Compact, where we consider engagement is unlikely to be effective due to the context of the company’s operations or to a lack of responsiveness from the company to the issue.”
They should be firmer about the UN local Compact, as Norway’s fund is being. (You get even more detail if you are in the Kiwibank Kiwisaver fund, which lists every single company it’s into.)
McKinsey Group’s view of oil is that demand growth will stay healthy through to 2022 at least, demand growth will likely peak around 2030, and there will still be some need for shale and offshore exploration for 4-5% of new oil production sources.
But Norway is sending an almighty big political signal here, and it’s one we should heed. Oil exploration to meet demand may well continue, but governments don’t have to assist.
If in 2019 New Zealand does form a Labour+National agreement on carbon pricing in the upcoming legislation, there should be little argument against stronger direction from the government for NZSuperfund to divest itself from oil investment as a matter of policy, just like Norway. It will take across-House agreement on carbon taxes to do that, but that’s the outcome that Shaw and Ardern simply must deliver.
A policy for NZSuperfund that excluded oil and gas investment would be completely consistent with government policy stopping future blocks from exploration.
What we the public ought to expect from this government is a whole picture about its approach to carbon. We are already seeing the chaos that occurs because this government failed to manage NZSuper and NZTA’s low-oil transport initiative in light rail: NZSuper worked actively against NZTA’s own light rail proposal and stopped all progress this term. That simply can’t happen again.
We need this government to get in to NZSUperfund and get dirty. Send clear signals, and a lot stronger than they did with the Reserve Bank changes.
As part of coherent carbon policy, all our public funds including NZSuperfund, ACC Funds, EQC, and Parliamentary Super, must be part of forswearing investment in petroleum exploration.
The least we can do is be good followers.