Norway’s oil fund is closing its one office in China.
Norway’s main sovereign wealth fund, normally just known as the oil fund, is the fund into which the Norwegian state puts the surplus revenues it receives from the oil and gas sector in Norway (or, more accurately, under Norwegian waters). The money is invested internationally (there is a smaller domestic-wealth fund which invests mainly in Norway), partly to stop too much money pouring into the country’s otherwise small economy and creating a Scandinavian version of “Dutch disease” (the development of North Sea gas fields off the Netherlands severely distorted the Dutch economy, and by pushing up the guilder turned out to be a major blow to Dutch competitiveness). In addition, Norway’s oil fund was originally seen as a cushion against the day when the oil and gas ran out and it is now also regarded as reserve to help the country weather a turn away from fossil fuels.
The fund has about $1.4 trillion under management (or about $250,000 per Norwegian citizen), and is one of the largest investors in the world. It owns 1.5 percent of the world’s publicly quoted shares. It is now closing its one office in China.
Norway’s $1.4 trillion sovereign wealth fund has started winding down its office in Shanghai as Singapore takes over as its hub in Asia.
The fund is initiating the process to close its representative office in the city due to “operational considerations,” Norges Bank Investment Management said on Thursday. The move doesn’t affect the investment strategy in China, it said.
That mirrors a shift among other international investors, with banks including Goldman Sachs Group Inc. and Morgan Stanley scaling back ambitious expansion plans in China amid a deteriorating geopolitical climate. Goldman Sachs recently revised projections on its five-year plan and has let go more than a 10th of its workforce on the mainland after doubling headcount to over 600.
Given the way that China is run, it is understandable that the fund should want to move its investment offices out of the reach of Beijing (Shanghai was its only office in China).
But it’s somewhat strange that it is not accompanying this move by divesting its holdings in Chinese assets. If China is no longer the sort of country where the fund feels it can have an office, it ought not to be a country where it invests.
According to Reuters, the fund held “some $42 billion across 850 Chinese and Hong Kong companies at the end of 2022, down from a peak of $47 billion in 2020, according to fund data.”
Scandinavians being Scandinavians, the oil fund excludes a number of companies on “ethical” grounds, while other miscreants are placed under “observation.” Among those being observed is Berkshire Hathaway. Its suspect behavior? “Production of coal or coal-based energy.” Other companies active in the same sector are excluded altogether. Something tells me that the oil fund’s sense of irony may be underdeveloped. Boeing is excluded. Its offense? Production of nuclear weapons. Norway is a member of NATO, and relies on NATO’s nuclear deterrent.
This preachiness is not confined to its portfolio selection.
The Financial Times (August 15):
The head of the world’s largest sovereign wealth fund has expressed concern that political resistance to climate and environmental measures is spreading from the US to the UK. Nicolai Tangen, chief executive of Norway’s $1.4tn oil fund, told the Financial Times:
“A new thing this summer is the ESG [environmental, social, governance] backlash in the UK, on the back of that one Uxbridge vote . . . That’s bad. You have a big country in Europe that is slowing down the work on climate at a time where it’s more important than ever.”
“Slowing down the work.”
The FT:
Tangen said climate change was an increasing financial risk and should not be a matter of politics. “To me, climate is about as political as gravity. It’s just not political. I don’t understand how you can turn this into politics.”
If he doesn’t, he is too dim or too blinkered to hold the job he currently has. But while he may be the latter, he is certainly not the former. Even if climate change (with all its variables) is a matter of science, the question of what to do about it is profoundly political. Tangen’s failure to acknowledge that fact may suggest that he is not much of a fan of democracy.
And so this was no surprise:
Under Tangen, [the fund] has been putting more pressure on companies it owns shares in to take action on climate change. This has included filing its first shareholder proposals at an annual meeting in a decade, and publicly speaking out against an ESG backlash that first started in the US.
ESG is, of course, in certain areas, an attempt to bypass democracy by using corporate power and money to advance an agenda that is best decided by democratic legislatures.
But then again, Tangen, the man who presides over an institution funded by fossil-fuel revenues but sees himself as some sort of climate activist, is also someone who presides over an “ethical” fund that had (at least at year-end) $42 billion invested in a country run by a genocidal dictatorship.
If Tangen wants to start giving sermons, he should ensure first that the fund divests from China, or he should choose another job.