Norway’s $ 1 trillion sovereign wealth fund – the world’s largest – has taken a partial step to dump oil stocks, approving the sale of smaller exploration companies while sparing some of the world’s biggest producers like BP, Exxon Mobil and Royal Dutch Shell.

The strategy shift, based on advice from the country’s central Norges Bank, will affect 1.2 percent of its equity holdings, worth about 66 billion Norwegian kroner, or $7.5 billion.

The move has cheered environmentalists and sent shockwaves through an industry that is struggling to improve its green credentials under pressure from investors.

Forecasts say that global oil demand will peak by 2030, while international climate targets are hastening efforts to reduce dependence on fossil fuels.

In total, the Norwegian fund, known as the Government Pension Fund Global, plans to dispose of oil and gas stocks in 150 companies that are focused primarily on exploration – while maintaining shares in companies that have renewable energy operations.

The fund’s exposure to the fortunes of big oil is profound. As Western Europe’s biggest petroleum producer, Norway’s pension fund has about $37 billion of oil and gas stocks in its portfolio, the Financial Times reported ­– a figure that makes Oslo nervous about a sustained fall in energy prices.

The Sleipner gas field off Norway's northern coast. Credit: Kjetil Alsvik/Statoil

“It reflects to a larger extent the risk we ourselves have – the bulk of the state’s exposure in Norway is upstream activity,” Finance Minister Siv Jensen said in an interview with Bloomberg. “We’re reducing our vulnerability by choosing to withdraw the fund gradually from this segment.”

To that end, companies like Cairn Energy Plc, Anadarko Petroleum Corp., Chesapeake Energy Corp., Murphy Oil and Novatek ­– which the FTSE Russell index classifies as exploration and production operations ­– will find themselves scratched off the fund’s list of stocks.

At the same time, the fund will keep significant stocks in companies like BP and Shell – 2.3 percent and 2.4 percent, respectively ­­– which the fund’s managers believe will play a major roll in developing green energy.

“This partial divestment from oil and gas is welcome, but not enough to mitigate Norway’s exposure to both global oil and gas prices and the wider financial ramifications of climate change,” said Greenpeace UK’s oil campaigner, Charlie Kronick, in a release.

“However, it does send a clear signal that companies betting on the expansion of their oil and gas businesses present an unacceptable risk, not only to the climate but also to investors.”

The fund, which in 2015 dumped stocks in large coal producers, initially rocked oil markets and sparked debate when it suggested in 2017 that it could divest from oil and gas stocks for financial – rather than environmental – reasons. Prime Minister Erna Solberg’s Conservative Party has been a long-time friend to the oil industry. Junior government coalition partner, the Liberals, were supportive of the fund’s move even though they had backed a larger divestment.

Norway’s Labor Party, the biggest in opposition, also expressed support. “They are taking a more cautious step than what Norges Bank advised,” Svein Roald Hansen, a Labor Party legislator, told Bloomberg. “But it’s better than no step at all. There seems to have been a tug of war within the government.”

Indeed, the divestment move highlights a familiar push and pull within the nation’s politics. On the one hand, many environmentalists and some of the country’s foreign business partners accuse Oslo of hypocrisy for backing the Paris agreement on climate change while also drilling for oil in the Arctic – where a swathe of its new oil leases were awarded last year.

On the other hand, oil pays a lot of Norway’s bills. Oil and gas accounts for 12 percent of its gross domestic production and more than a third of its exports. The Government Pension Fund Global owns on average 1.3 percent of every single listed company on earth and petroleum proceeds have for decades buoyed one of the world’s most lavish public health and welfare system.

Despite this, Norway has remained a darling at UN climate talks. This year, one in three cars sold in Norway was purely electric – with substantial sales of hybrids as well – giving the nation a boost toward the goal of eliminating gas car sales by 2040. By the same year, Norway is aiming for all of its domestic air traffic to be electric as well. And Norway aims in its Paris goals to slash its emissions by 40 percent.

But for all of its ambition at home, Oslo’s culture of drilling annually exports the equivalent of ten times its own emissions to other countries. Some studies estimate that the oil leases the Ministry of Petroleum and Energy awarded last year could added another 12 gigatons of carbon to the atmosphere over the next five decades.