The Government Pension Fund Global was established after Norway discovered oil in the North Sea. The fund was set up to shield the economy from ups and downs in oil revenue. It also serves as a financial reserve and as a long-term savings plan so that both current and future generations of Norway get to benefit from our oil wealth.
In 1969, one of the world’s largest offshore oilfields was discovered off Norway. Suddenly we had a lot of oil to sell, and the country’s economy grew dramatically. It was decided early on that revenue from oil and gas should be used cautiously in order to avoid imbalances in the economy. In 1990, the Norwegian parliament passed legislation to support this, creating what is now the Government Pension Fund Global, and the first money was deposited in the fund in 1996. As the name suggests, it was decided that the fund should only be invested abroad.
Oil revenue has been very important for Norway, but one day the oil will run out. The aim of the fund is to ensure that we use this money responsibly, think long-term and so safeguard the future of the Norwegian economy.
Although revenue from oil and gas production is transferred to the fund, these deposits account for less than half the value of the fund. Most of it has been earned by investing in equities, fixed income, real estate and renewable energy infrastructure.
The fund is now one of the world’s largest funds, owning almost 1.5 percent of all shares in the world’s listed companies. This means that we have holdings in around 9,000 companies worldwide, entitling us to a small share of their profits each year. In addition, the fund owns hundreds of buildings in some of the world’s leading cities, which generate rental income for us. The fund also receives a steady flow of income from lending to countries and companies. By spreading our investments widely, we reduce the risk of the fund losing money.
Each year, the Norwegian government can spend only a small part of the fund, but this still amounts to almost 20 percent of the government budget.
There is a broad political consensus on how the fund should be managed. The less we spend today, the better the position we will be in to deal with downturns and crises in the future. Budget surpluses are transferred to the fund, while deficits are covered with money from the fund. In other words, the authorities can spend more in hard times and less in good times. So that the fund benefits as many people as possible in the future too, politicians have agreed on a fiscal rule which ensures that we do not spend more than the expected return on the fund. On average, the government is to spend only the equivalent of the real return on the fund, which is estimated to be around 3 percent per year. In this way, oil revenue is phased only gradually into the economy. At the same time, only the return on the fund is spent, and not the fund’s capital.
The fund’s role is to ensure that our national wealth lasts for as long as possible. Its investments have an extremely long-term perspective, enabling it to cope with big swings in value in the short term. Our goal as manager of the fund on behalf of the Norwegian people is to generate the highest possible return with only moderate risk so that the fund grows and endures.
The fund is invested in equities, which are ownership interests in companies. Fixed income, which are loans to governments and companies. The fund is also invested in real estate that provides rental income and infrastructure for renewable energy.
Former prime minister Jens Stoltenberg explains how Norway has won international recognition for how we manage our oil and gas revenue. He talks about the broad political consensus on the management of the fund and the fund's central role in the Norwegian economy. Stoltenberg was Norway's Finance Minister from 1996-1997 and Prime Minister from 2000-2001 and 2005-2013.
Companies’ activities have a great impact on surrounding communities and the environment, and society has ever greater expectations for how companies should behave. Over time, this may affect their profitability and the fund’s return. As a long-term investor in around 9,000 companies in 70 countries, we have an interest in investors’ demands for profitability being aligned with society’s broader expectations of companies. We consider environmental and social issues, and publish clear expectations of the companies we invest in.
The Ministry of Finance has set up an independent Council on Ethics to perform ethical evaluations of companies. The Council on Ethics sends its recommendations to Norges Bank’s Executive Board, which then makes the final decision on exclusion, observation or active ownership.
The fund itself may also decide to divest from companies that impose substantial costs on other companies and society as a whole, and so are not considered long-term sustainable.
We own a small part of the world's largest companies. As an investor, we have the right to influence these companies. Read more about how we manage the fund responsibly.
The governance structure ensures that important decisions concerning the level of risk assumed have the support of the fund's owners, represented by the Norwegian government and the Storting. However, it is emphasised that there must be sufficient delegation to ensure that operational investment decisions are made close to the markets the fund is invested in.
Has laid down the formal framework for the fund in the Government Pension Fund Act.
Has overall responsibility for the fund and issues guidelines for its management.
Is responsible for managing the fund. The Executive Board has delegated the operational management of the fund to Norges Bank Investment Management.
Manages the fund with the mission of safeguarding and building financial wealth for future generations.