Norway has reached a critical point in how its oil wealth is managed. There is now an active debate not just on the investment strategy of the Oil Fund, but also on the governance mechanisms by which this oil wealth is managed.
Solutions to the first debate include selling out of fossil fuels, investing in the green economy, seeking out illiquid assets such as infrastructure and investing half the portfolio outside OECD economies. The solution to the second is to set up a Parliamentary Council for the Oil Fund “Stortingets Råd for Oljefondet” (SRO).
While the debates have originated independent of each other, they are intimately related. The Oil Fund is owned by Norway’s Parliament on behalf of Norwegian citizens. The Parliament defines the investment objective of the Fund as “maximising the purchasing power of the fund capital, given a moderate level of risk.” Under the present governance arrangements, this objective is translated into investment guidelines by the Ministry of Finance that are then followed by Norges Bank Investment Management, which actually invests the funds.