An update on the Norwegian Oil Fund

Fund performs well, but the people pose questions

NTB

Once again, the Norwegian Oil Fund has been voted as Europe’s best management organization in an event sponsored by Institutional Investor.

“I am incredibly proud of my colleagues at Norges Bank Investment Management. It means a lot to receive this award for the second year in a row,” said Nicolai Tangen, head of Norges Bank Investment Management, in a press release.

Almost 400 European companies voted on the nominated organizations in connection with the annual “European and Emerging EMEA Equities Awards.” The award was presented in London on Sept. 19.

The companies that vote must select the winners on the basis of who they believe has the best long-term ownership practices, ownership practices across funds, industry knowledge, feedback culture, and transparency.

Tangen sees the award as recognition of the Oil Fund’s relationship work with the companies in which the fund is invested.

Third quarter results

The Oil Fund is the world’s largest government investment fund, with a value of over $1.7 trillion (give or take currency and trading fluctuations), and the fund has stakes in most giant companies. It is the largest sovereign wealth fund in the world.

The Oil Fund had a return of 4.4% in the third quarter, corresponding to NOK 835 billion. The return was, nevertheless, lower than the benchmark index.

“The quarter showed a positive return across all our investment areas. Falling interest rates led to a broad rise in the stock market,” said Deputy Chair Trond Grande of Norges Bank Investment Management in a press release.

The return on the fund’s share investments was 4.5%, the return on interest investments was 4.2%, while investments in unlisted property had a return of 0.8%. The return on unlisted infrastructure for renewable energy was 10.8%.

The fund’s return was 0.1 percentage point weaker than the return on the benchmark index.

The krone exchange rate weakened against several of the main currencies during the quarter, which helped to increase the fund’s value by NOK 191 billion. NOK 99 billion was also added from the state.

At the end of September, the fund had a value of NOK 18,870 billion, which is NOK 1,125 billion more than at the end of the previous quarter.

About 71.4%  of the fund was invested in shares, 26.8% in interest-bearing securities, 1.7% in unlisted property and 0.1% in unlisted infrastructure for renewable energy

The Oil Fund has continued its rise since September, and the market value on Oct. 22 was about  NOK 19,300 billion.

What the Norwegian people think

For the first time since 2013, the Oil Fund has registered a decline in its reputation among the Norwegian population, according to a survey the fund has shared with E24.

This was discussed in an internal meeting of Norges Bank’s supervisory board, which oversees the bank. Here, questions were asked about the reasons for the fall in reputation and the use of resources on the fund’s podcast, writes E24.

Since March 2022, the fund’s podcast has been visited by profiles such as Elon Musk, Sam Altman, and Jensen Huang.

According to Julie Brodtkorb, who heads Norges Bank’s representative board, it was explained during the meeting that the discussions about the use of resources is limited on the podcast.

The fund measures its own reputation in the population through a survey with 1,000 respondents every two years. The board of representatives asked at the meeting, which was in June, what could be behind the fall in reputation.

Central bank Governor Ida Wolden Bache replied that “the level is still high,” although there has been a decline, according to the minutes.

Communications manager Line Aal­tvedt writes in an email to E24 that the fund does not know exactly what is causing the variations, but mentions that several respondents in January 2024 expressed concern about the poorer economy and increased interest rates and that they do not see how the fund is being used for today’s generations.

Ethical considerations

Six out of 10 Norwegian voters think the Oil Fund should avoid companies that invest in occupied areas.

In addition, eight out of 10 believe that the Oil Fund should not invest in companies that fully or partially contribute to violations of human rights, according to the survey Respons Analyse has carried out for the Norwegian Church Aid.

“The investigation shows a solid backing for the Oil Fund to withdraw from all investments that help to maintain the illegal occupation of the Palestinian territories,” said Church Aid’s Secretary General Dagfinn Høybråten.

About 9% of Norwegians believe that the Oil Fund should neither drop investments in companies that invest in occupied areas or that violate human rights.

“After the U.N. Court’s advisory legal opinion this summer that the occupation of the Palestinian territories is illegal, the risk of complicity in gross, and systematic violations in the West Bank are significant,” said Høybråten.

The Ethics Council for the Government Pension Fund Global (the Oil Fund) recently recommended Norges Bank to exclude certain companies that support Israel’s activities in the occupied Palestinian territories. This came as a response to the statement from the U.N. Court of Justice.

About 40% also believe that the Oil Fund must stop buying into companies that invest in coal.

The survey was carried out by Respons Analyse in the period  from  Aug. 28  to  Sept. 9.  A total of 1,056 people responded.

Tangen want to continue

Norges Bank is in the process of preparing to announce the job opening for the head of the Oil Fund, as the current terms comes to a close. Tangen has confirmed that he will apply again.

“It is the executive board of Norges Bank that appoints the managing director of Norges Bank Investment Management  (NBIM) for a term of five years. Tangen’s term of office expires on Sept. 1, 2025, and the position will be advertised well before this date,” said press manager Bård Ove Molberg at Norges Bank to Dagens Næringsliv.

Molberg says that Norges Bank is well underway with preparations for recruitment and that they have started a dialogue with the Ministry of Finance about the requirements for the position.

Compiled by Michael Kleiner, business and sports editor, The Norwegian American.

This article originally appeared in the December 2024 issue of  The Norwegian American.