The Norwegian government has given official instructions to the manager of the country’s NOK11.6trn (€1.2trn) sovereign wealth fund (SWF) to come up with an action plan for divesting all its Russian assets, with a 15 March deadline.
The finance ministry sent a letter yesterday to Norges Bank, whose arm Norges Bank Investment Management (NBIM) runs the Government Pension Fund Global (GPFG), regarding the fund’s investments in Russia.
According to NBIM’s website, at the end of 2020, the GPFG had NOK23.3bn invested in Russian equities and NOK6.7bn in Russian bonds – holdings which then amounted to 0.3% of the fund.
In yesterday’s letter, the ministry wrote that the Norwegian government had decided to join a comprehensive set of sanctions against Russian state interests as a result of the situation in Ukraine.
These EU measures would have a legally binding effect in the EU, and it was expected that similar rules would shortly be enforced in Norwegian law, it said.
“The Ministry of Finance has decided that all Government Pension Fund Global investments in financial instruments issued by Russian companies, state or entities affiliated with Russian state will be frozen with immediate effect and until further notice,” the ministry wrote.
It said it had also decided that the GPFG’s investment universe would no longer include Russia, and that this applied to financial instruments, real estate, infrastructure as well as the fund’s cash balance, which meant the Russian stock market would be taken out of the SWF’s benchmark index.
“The Ministry of Finance requests that Norges Bank prepare a proposal for a plan for completion of the sale, including times for adjustment of the benchmark index and changes in the investment universe,” it said.
The implementation of this measure had to take the current sanctions into account and look at the fund’s interests in general, the ministry said.
“The plan must be sent to the ministry by 15 March 2022,” the ministry wrote, adding that if the situation changed significantly, that deadline could be shortened.
Minister of Finance Trygve Slagsvold Vedum said yesterday that the decision to exit all the SWF’s Russian investments was a clear signal to Russia.
“We strongly condemn the serious violation of international law they are now committing,” he said.
But the ministry said the sale of shares might take some time since Russia had announced a unilateral ban on the sale of shares on the Moscow Stock Exchange.
According to a report from Reuters, with effect from yesterday morning, Russia’s central bank ordered professional stock market participants to suspend the execution of all orders by foreign legal entities and individuals to sell Russian securities.
“It is important for the legitimacy of both Norway and the fund that we, together with the international community, demonstrate a clear position by withdrawing the Norwegian savings from the Russian market,” Slagsvold Vedum said.
NBIM is holding a press conference on Thursday morning on its responsible investment activities in 2021, at which the organisation’s leaders are set to comment on the current market environment.
The SWF’s 2021 holdings list will be published on the same day, which will give a more up-to-date picture of the fund’s Russian investments.